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DATATEC LIMITED - Audited provisional results for the year ended 28 February 2019

Release Date: 16/05/2019 08:00
Code(s): DTC     PDF:  
 
Wrap Text
Audited provisional results for the year ended 28 February 2019

Datatec Limited: Incorporated in the Republic of South Africa 
Registration number: 1994/005004/06 
Share code JSE: DTC 
ISIN: ZAE000017745 


AUDITED PROVISIONAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019

Datatec Limited ("Datatec", the "Company" or the "Group", JSE DTC), the international information 
and communications technology (ICT) group, is today publishing its audited provisional results 
for the year ended 28 February 2019 ("the Period" or "FY19").

Highlights

- Improved operational execution                     - Westcon International       
  in all divisions                                     turnaround objectives achieved
  
- Group revenue US$4.33 billion up 10.4%             - EBITDA US$86.8 million
  (FY18: US$3.92 billion)                              (FY18: US$26.7 million)

- Underlying* earnings per share 6.6 US cents        - Share repurchases of US$50.8 million
  (FY18: loss per share 17.2 US cents                  (US$43.9 million during FY19;
  from continuing operations)                           US$6.9 million subsequently)      

Commentary
Jens Montanana, Chief Executive of Datatec, commented: 
"The Group delivered on the commitments set in the prior year, resulting in a much improved financial and 
operational performance across all divisions.

"Logicalis produced strong results despite emerging market currency headwinds, especially in its key Latin 
America region. 

"Westcon International's recovery is now established, having met the principal objectives around shared 
services and central cost reductions, with further improvements expected.

"Building on the successful turnaround of FY19, we are confident that our operations are well positioned 
to improve their performances further and support our Group strategy."

Group activities 
Datatec is an international ICT solutions and services group operating in more than 50 countries across 
North America, Latin America, Europe, Africa, Middle East and Asia-Pacific. The Group's offerings span the 
technology distribution, integration and consulting sectors of the ICT market.

Datatec operates two main divisions
- Integration and managed services - Logicalis: ICT infrastructure solutions and services; and
- Technology distribution - Westcon International: distribution of security, collaboration, networking and 
  data centre products and solutions.

The specialist activities of Consulting and Datatec Financial Services are included with the corporate head 
office functions in the "Corporate, Consulting and Financial Services" segment of the Group.

Strategic overview
Datatec's strategy remains to deliver long-term, sustainable and above average returns to shareholders through
portfolio management and the development of its principal subsidiaries providing technology solutions and 
services to targeted customers in identified markets around the world.

Logicalis is the largest profit contributor to the Group. The division also has the widest geographical 
exposure and Datatec intends to continue to develop and grow Logicalis globally, through organic and 
acquisition activities. 

In FY19, Logicalis delivered a strong performance while executing on its strategy. Revenue grew by 11.3% and 
EBITDA by 8.4% in relation to the financial year ended 28 February 2018 ("FY18").

Westcon International is 90% owned by Datatec and 10% by SYNNEX Corporation ("SYNNEX"). In line with the commitment
made at the beginning of the year, the division has returned to EBITDA profitability and the central cost base 
has been reduced. Further central cost reduction targets previously published are expected to be met in FY20.

The ERP system is now operating effectively after a long and disruptive multi-year implementation process. A full
Business Process Outsourcing ("BPO") reversal was completed with in-house shared service centres established in the
Philippines and South Africa. 

The earn-out payment relating to the disposal of Westcon Americas to SYNNEX has not yet been determined and the parties
are currently engaged in an arbitration process. Datatec expects that the ruling by the arbitrator will be issued
shortly and will update shareholders accordingly. Further details are provided in the "Group results" section below.

Group revenues were US$4.33 billion in FY19, up 10.4% on the US$3.92 billion revenues recorded in FY18. EBITDA for
FY19 was US$86.8 million, more than three times higher than FY18: US$26.7 million.

Underlying* earnings per share ("UEPS") was 6.6 US cents in FY19 compared to an underlying* loss per share of 
17.2 US cents from continuing operations for FY18 (Combined underlying* loss per share FY18: 5.6 US cents). 

The comparative results for FY18 are reported in the form of "continuing operations". These exclude the Westcon
Americas and Logicalis SMC businesses which were classified as a "Disposal Group" in accordance with IFRS 5 in 
the prior year. Where comparative figures are stated as "Combined", they include the Disposal Group.

During FY19, the Company undertook three general share repurchases under separate shareholder mandates provided at 
a general meeting on 24 July 2018, at the AGM on 20 September 2018 and at a general meeting on 15 January 2019. 
These repurchases amounted to US$43.9 million and totalled 23.8 million shares which have been cancelled, reducing 
the Company's shares in issue to 219.2 million at 28 February 2019. From 1 March to 14 May 2019, the Company 
repurchased a further 3.1 million shares at a cost of US$6.9 million.

Current trading and outlook
Despite global economic uncertainty, the Board expects a continued improvement in the financial performance for FY20.

Logicalis' performance is expected to strengthen over the next financial year with its results potentially impacted by
currency movements, especially in Latin America. 

Building on the successful turnaround of FY19, Westcon International is expected to deliver a significant improvement
in its operational performance and further central cost reductions.

Group results
Revenue
Group revenues for the period were US$4.33 billion (FY18: US$3.92 billion) and are shown in the graphs below.

Contribution to Group revenue
                                              FY19      FY18
Logicalis                                      40%       40% 
Westcon International                          59%       59%
Consulting and Financial Services               1%        1%
                                              100%      100%

Revenue contribution by geography
                                              FY19      FY18
North America                                   9%       10%
Latin America                                  15%       14%
Europe                                         48%       49%
Asia-Pacific                                   20%       18%
Middle East & Africa (MEA)                      8%        9%
                                              100%      100%

Group gross margins in FY19 were 15.9% (FY18: 16.2%). Gross profit was US$687.7 million 
(FY18: US$636.0 million).

Contribution to gross profit
                                              FY19      FY18
Logicalis                                      59%       61% 
Westcon International                          38%       36%
Consulting and Financial Services               3%        3%
                                              100%      100%

Gross profit contribution by geography
                                              FY19      FY18
North America                                  16%       17%   
Latin America                                  19%       19%   
Europe                                         40%       40%   
Asia-Pacific                                   19%       19%      
MEA                                             6%        5%
                                              100%      100%

Overall operating costs were US$600.9 million (FY18: US$609.3 million). Included in the operating costs 
are total restructuring costs of US$17.5 million (FY18: US$16.9 million). EBITDA was US$86.8 million 
(FY18: US$26.7 million) and EBITDA margin was 2.0% (FY18: 0.7%).

Operating profit was US$48.4 million contrasting with a US$81.0 million operating loss in FY18. 

The net interest charge increased to US$22.6 million (FY18: US$18.4 million), mainly as a result of 
increased interest expense in Logicalis Latin America to fund the working capital associated with the 
large multi-year contract in that region. Profit before tax was US$24.2 million (FY18: US$99.4 million 
loss before tax). 

A tax charge of US$21.0 million has arisen on pre-tax profits for the year of US$24.2 million. The effective tax rate
of 86.6% continues to be adversely affected by losses arising in Westcon International's UK, Africa and Asia operations
for which deferred tax assets recognition has been limited. As at 28 February 2019, there are estimated tax loss carry
forwards of US$186.8 million with an estimated future tax benefit of US$40.0 million, of which only US$16.3 million has
been recognised as a deferred tax asset. 

Underlying* earnings per share were 6.6 US cents (FY18 loss per share: 5.6 US cents from combined operations and 
17.2 US cents from continuing operations). Headline earnings per share were 0.7 US cents (FY18 loss per share: 
19.1 US cents from combined operations and 29.9 US cents from continuing operations). 

SYNNEX earn-out
The earn-out payment relating to the disposal of Westcon Americas to SYNNEX has not yet been determined and the parties
are currently engaged in an arbitration process. Datatec expects the ruling by the arbitrator to be issued shortly and
will advise shareholders accordingly. The FY19 results contain an estimate of the minimum earn-out payment receivable 
of US$11.7 million after costs, which is included in profit from discontinued operations in accordance with IFRS 5. 
The profit of US$11.7 million is included in basic earnings per share, but not in underlying earnings per share.
The Group has recognised an asset for the minimum earn-out receivable and disclosed a contingent asset for any 
additional earn-out above the minimum which may be receivable if so determined by the arbitration.

Cash
The Group generated US$69.0 million of cash from operations during FY19 (FY18: US$17.6 million) and ended the 
year with a net debt of US$100.8 million (FY18: US$6.4 million). The net debt has been calculated as: cash of 
US$40.4 million (FY18: US$161.3 million); short-term borrowings and current portion of long-term debt of 
US$109.8 million (FY18: US$106.0 million); and long-term debt of US$31.4 million (FY18: US$61.7 million).

Acquisitions
On 17 July 2018, Analysys Mason Limited acquired 100% of the issued share capital of Access Markets
International-Partners ("AMI-Partners") based in the United States for US$3.5 million. AMI-Partners is a Small 
and Medium Business ("SMB") ICT-focused global research and consulting firm that specialises in go-to-market 
("GTM") opportunity assessment, tracking buying behaviour, customer segmentation, channel partner ecosystem 
dynamics and sales enablement enhanced with predictive analytics.

Effective 3 September 2018, Logicalis acquired 100% of the issued share capital of Clarotech, an internet protocol
telephony ("IPT") cloud and managed services business based in Cape Town. The 100% interest was acquired for a cash
consideration of US$3.4 million. This acquisition enables Logicalis to combine a focused managed services operation 
with its existing business in South Africa, to support SMBs as well as larger corporates.

With effect on 3 September 2018, Logicalis completed the acquisition of 100% of the issued share capital of Coasin
Chile S.A., a Chilean ICT services and solutions provider, which also owns 100% of C2 Mining Solutions S.A.C. based 
in Peru. This interest was acquired for a cash consideration of US$17.3 million from Logicalis' resources. Coasin's 
experience in the mining and financial services verticals creates opportunities for Logicalis to better serve its 
multinational clients while broadening its services scope to new customer groups.

On 8 October 2018, Logicalis acquired 100% of the issued share capital of Corporate Network Integration (Pty) Ltd
("CNI") for a cash consideration of US$3.9 million. CNI is a Microsoft-certified gold partner based in Melbourne, 
Australia and this acquisition brings Logicalis a full suite of leading Microsoft cloud service capabilities, 
significantly strengthening the Groups' position in this growing market segment and enabling Logicalis to deliver 
a broader scope of services to new and existing customers.

As a result of these acquisitions, goodwill and other intangible assets increased by US$13.1 million and US$8.9 million
respectively. None of the goodwill recognised is expected to be deductible for income tax purposes. The revenue and
EBITDA included from the acquisitions in FY19 are US$55.2 million and US$4.1 million respectively; profit after tax
included from these acquisitions was US$2.9 million. Had the acquisition dates been 1 March 2018, revenue attributable 
to these acquisitions would have been approximately US$110 million. It is not practical to establish EBITDA and profit 
after tax that would have been contributed to the Group if they had been included for the entire year. All identifiable
intangible assets have been recognised and accounted for at fair value. 

Acquisition-related costs of the above acquisitions of US$0.3 million are included in operating costs in the
summarised consolidated statement of comprehensive income.

Liquidity
The Group is expected to generate sufficient cash to settle liabilities as they fall due. Working capital remains well
controlled across the Group and net working capital days improved markedly in Westcon International as detailed in the
Divisional review below. Trade receivables and inventory are of a sound quality and adequate provisions are held 
against both.

Shareholder distributions: dividend policy and share repurchases 
The Group's policy is to maintain a fixed three times cover relative to underlying* earnings when declaring dividends.
The level of underlying* earnings in FY19 would only support a small dividend under this policy and as a result, the
Board has decided not to declare a dividend for FY19.

The Board has instituted a structured programme of general share repurchases in order to return cash to shareholders.
During FY19 the Company undertook three separate general share repurchase exercises under separate shareholder mandates:
- General meeting on 24 July 2018 - 4.97 million shares
- AGM on 20 September 2018 - 11.89 million shares
- General meeting on 15 January 2019 - 6.90 million shares up to 28 February 2019. 

These repurchases amounted to US$43.9 million and totalled 23.8 million shares which have been cancelled, reducing the
Company's shares in issue to 219.2 million at 28 February 2019.

The repurchase under the shareholder mandate given at the general meeting on 15 January 2019 has continued during 
the Company's closed period ending today under a fixed mandate to the Company's broker in accordance with paragraph 
5.72 (h) of the JSE Listings Requirements and following notification to the JSE prior to the start of the closed 
period. From 1 March to 14 May 2019, the Company's broker repurchased 3.1 million shares under the fixed mandate 
at a cost of US$6.9 million.

The Company has limited the shareholder mandates for repurchases to 5% of the issued share capital having obtained
legal advice that section 48(8) of the South African Companies Act ("Companies Act") would be applicable to a general
repurchase of shares undertaken in accordance with the JSE Listings Requirements.

Section 48(8) of the Companies Act stipulates that any decision by the board of directors of a company that involves
the repurchase of more than 5% of the company's issued securities of a particular class must be approved by a special
resolution of the shareholders of the company compliant with sections 114 and 115 of the Companies Act, which require,
inter alia, an Independent Expert Report on the repurchase.

The Department of Trade and Industry in South Africa has recently proposed changes to the Companies Act among which 
is a proposal to specifically exclude share repurchases undertaken on a recognised stock exchange from the scope of
section 48(8). The proposed changes to the Companies Act will align the Companies Act to the JSE Listings Requirements 
in this regard, which will allow general share repurchases up to 20% of the issued share capital. 

Foreign exchange translation
Losses of US$54.7 million (FY18: gains of US$13.9 million) arising on translation to presentation currency are
included in total comprehensive loss of US$36.0 million (FY18: income US$124.1 million). The majority of these 
losses arise from weakening in the Rand/US$ exchange rate from 11.76 at 28 February 2018 to 13.94 at 
28 February 2019 and weakening in the Brazilian Real/US$ exchange rate from 3.25 at 28 February 2018 to 
3.73 at 28 February 2019.

DIVISIONAL REVIEWS

Logicalis 
Logicalis accounted for 40% of the Group's revenues (FY18: 40%). 

Logicalis is an international multi-skilled IT provider that designs, plans and supports impactful digital
transformation solutions.

Revenue from operations increased by 11.3% to US$1.7 billion (FY18: US$1.6 billion). Services revenues were up 
15% with growth in both professional services and annuity revenue. Revenue contribution by geography is 
shown below:

Logicalis revenue contribution % by geography
                                              FY19      FY18
North America                                  23%       24%
Latin America                                  37%       34%
Europe and MEA                                 26%       28%
Asia-Pacific                                   14%       14%
                                              100%      100%

Revenue increased across all regions in absolute terms with growth in Europe driven mainly by Germany and Spain. 
Latin America showed improvements notably in Brazil which benefited from a large multi-year deal despite currency 
headwinds. Asia-Pacific also improved largely because of the contribution of the Packet Systems Indonesia 
acquisition for the full year, as well as a number of territories in the region experienced high growth.

Revenues from product sales were up 9% driven by Latin America, with increases in Cisco, partially offset by 
decreases in HPE.

Logicalis' gross margins were 23.6% (FY18: 25.0%). This reduction was partly due to the large multi-year
Latin-American contract which included a large product component as well as a disappointing performance 
in the UK. 

Gross profit was up 4.7% to US$410.1 million (FY18: US$391.7 million). 

Logicalis' gross profit contribution by geography is shown below: 

Logicalis gross profit % contribution by geography
                                              FY19      FY18
North America                                  27%       27%
Latin America                                  32%       31%
Europe and MEA                                 26%       28%
Asia-Pacific                                   15%       14%
                                              100%      100%

EBITDA was US$93.4 million (FY18: US$86.2 million), with a corresponding EBITDA margin of 5.4% (FY18: 5.5%). 
Operating profit was US$65.9 million (FY18: US$59.5 million).

Argentina entered into a period of hyperinflation during the year. The impact on the FY19 financial statements 
was not material. 

The net interest charge increased by US$4.0 million, largely as a result of higher working capital utilisation in
Latin America on the large multi-year project.

Net debt of US$109.2 million (FY18: US$139.5 million) consisted of: net cash of US$16.4 million (FY18: US$7.1 million); 
short-term borrowing and current portion of long-term debt of US$94.4 million (FY18: US$102.4 million); and long-term 
debt of US$31.2 million (FY18: US$44.2 million). The decrease in net debt compared to FY18 was driven by seasonal 
outflows associated with the Americas and the reduction in working capital requirements associated with the large 
multi-year Latin-American contract. The working capital requirements linked to this contract are expected to unwind 
as the project advances.

Logicalis continues to have a contingent liability in respect of a possible tax liability at its subsidiary in Brazil.

In September 2018, Logicalis completed the acquisition of Coasin Group, a Chilean ICT system integrator offering
technological solutions to industries such as mining, financial services, telecommunications and retail, with 
operations both in Chile and Peru. Logicalis also acquired Clarotech, a South African Open Source IPT cloud and 
managed services business. In October 2018, Logicalis' Australian operation, Thomas Duryea Logicalis acquired CNI, 
a Microsoft-certified gold partner.

Logicalis will maintain its strategy of making smaller bolt-on acquisitions financed using its own balance sheet and
external credit lines as appropriate.

Digital innovation is accelerating; business technology is undergoing a major shift. With a clear focus on
understanding its customer business priorities in areas such as risk and compliance, operational costs, data 
governance and innovation, Logicalis is helping customers succeed by ensuring its transformation outpaces the 
momentum of change in its sector.

Logicalis' investments in flexible consumption models, lifecycle management services to maximize business outcomes 
and innovative solutions to unlock new possibilities, all contribute to delivering a better customer experience. 

Logicalis continues to enhance its capabilities in cloud, IoT, software, security, data management and intelligent
networks to promote long-term value and insight-led transformation to its customers.

Logicalis remains confident about the prospects for the industry and its positioning within it. Emerging markets
currencies are expected to remain volatile over the short term.

Westcon International
Westcon International accounted for 59% of the Group's revenues (FY18: 59%). 

Westcon International is a value-added specialty distributor of industry leading cyber security and network
infrastructure, unified communications products, data centre solutions and channel services with a global 
network of service providers, systems integrators and speciality resellers. Westcon International has operations 
in 50-plus countries. The company goes to market under the Westcon and Comstor brands. Westcon International's 
portfolio of market-leading vendors includes: Cisco, Avaya, Juniper, Check Point, F5, Palo Alto and Symantec.

Westcon International's revenues increased by 9.8% to US$2.54 billion (FY18: US$2.32 billion) supported by higher
revenues in Europe and Asia-Pacific. 

Westcon International's gross profit increased by 14.5% to US$260.4 million (FY18: US$227.4 million) with improved
results across all regions. Gross margins increased 40 basis points to 10.2% (FY18: 9.8%) with higher margins in 
EMEA slightly offset by lower margins in Asia-Pacific.

Westcon revenue contribution % by geography
                                              FY19      FY18
Europe                                         64%       64%
Asia-Pacific                                   23%       21%
MEA                                            13%       15%
                                              100%      100%        
        
Westcon gross profit % contribution by geography
                                              FY19      FY18
Europe                                         61%       60%
Asia-Pacific                                   26%       27%
MEA                                            13%       13%
                                              100%      100%

Revenue contribution % by technology category
                                              FY19      FY18
Security                                       31%       29%
Networking                                     28%       31%
Unified communications                         24%       24%
Data centre and other                          17%       16%
                                              100%      100%

Operating expenses decreased to US$254.8 million (FY18: US$275.5 million) with lower expenses across all regions
except Europe. The 7.5% decrease was primarily driven by lower central costs as well as a reduction in foreign exchange
and bad debt expense in MEA. In both H2 FY18 and H1 FY19 operating expenses benefited from US$15.0 million of central 
costs in each six-month period (total of US$30 million) which were accrued against the profit on disposal of Westcon 
Americas to SYNNEX in the prior year, representing costs incurred in terms of the transitional service obligations to 
SYNNEX during that period. Central costs (before the respective US$15.0 million reallocations) were US$43 million 
(FY18: US$61 million) against the target of US$45 million for FY19.

Restructuring expenses of US$17.4 million (FY18: US$11.5 million) were incurred, mainly as a result of costs
associated with the reverse transition of the BPO arrangement in Europe, MEA and Asia-Pacific coupled with continued 
cost cutting initiatives in EMEA and the central cost base. EBITDA was US$5.6 million (FY18: US$48.1 million loss) 
with improved results across all regions.

Westcon International has completed the reverse transition of all previously outsourced functions to its own shared
services centres during FY19. The decision to exit the BPO, which was announced in last year's report, has resulted in 
a clear improvement in customer service and transaction execution. The improving financial performance and regained 
market share are evidence that not only was the decision necessary but has proved pivotal to the turnaround. 

Net working capital days decreased to 28 days (FY18: 35 days) primarily due to improved DSO across all three regions.
The improvement in net working capital days, partially offset by US$15.6 million of capital expenditures, resulted 
in a decrease in net debt to US$109.5 million (FY18: US$131.8 million). 

The net debt consisted of: net overdrafts of US$94.4 million (FY18: US$113.8 million); short-term borrowing and
current portion of long-term debt of US$15.0 million (FY18: US$0.9 million); and long-term debt of US$0.1 million 
(FY18: US$17.1 million). 

The reshaping of Westcon International is going according to plan and the business is now operating profitably.
Management is confident that improvements will continue.

Corporate, Consulting and Financial Services
This segment accounted for 1% of Group's revenues (FY18: 1%).

The Consulting unit comprises Analysys Mason, a provider of strategic, trusted advisory, modelling and market
intelligence services to the telecoms, media and technology industries.

Consulting revenues were US$45.7 million (FY18: US$42.0 million) and EBITDA was US$2.8 million 
(FY18: US$2.5 million).

The Datatec Financial Services business, which provides financing/leasing solutions for ICT customers, remains in 
a development phase. The business recorded revenues of US$0.9 million in FY19 (FY18: US$1.4 million) and an 
EBITDA loss of US$1.7 million (FY18: US$1.4 million).

Corporate includes the net operating costs of the Datatec head office entities which were US$16.8 million 
(FY18: US$13.5 million). These costs include the remuneration of the Board and head office staff, consulting and 
audit fees. The main reason for the increase in central costs in FY19 is increased share-based payments expense. 
In FY19, foreign exchange gains were US$3.5 million (FY18: US$1.0 million). 

As at 28 February 2019, Datatec head office entities held cash of US$112.9 million of which US$37.8 million (the
equivalent of R526.8 million) is held in South Africa and subject to the South African Reserve Bank regulations. 

SUBSEQUENT EVENTS 
Between 1 March and 14 May 2019, the Company repurchased 3.1 million shares at a cost of US$6.9 million, under the
terms of a fixed mandate to its broker, for cancellation. 

On 1 March 2019, Analysys Mason Limited acquired Stelacon Holding AB ("Stelacon"), a Swedish consulting company. 
This is an important further step in building a pan-Scandinavian presence, after Analysys Mason's successful 
expansion into Norway. Stelacon brings experience including smart cities, regional development, digital services, 
policy and regulation, and telecoms and digital communications.

CHANGES TO THE BOARD (previously announced) 
Two new independent non-executive directors were appointed to the Board during FY19: Ekta Singh-Bushell on 
1 June 2018 and Maya Makanjee on 1 November 2018.

On 20 September 2018, Chris Seabrooke and Nick Temple retired from the Board and Olufunke Ighodaro resigned 
from the Board with effect from 31 October 2018.

BASIS OF PREPARATION 
The provisional summarised consolidated financial statements are prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS") in effect 
for the Group at 28 February 2019, and further comply with the SAICA Financial Reporting Guides as issued by the 
Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards 
Council, at a minimum contain the requirements of IAS 34 Interim Financial Reporting, as well as the requirements 
of the Companies Act 71 of 2008 of South Africa and the JSE Limited's Listings Requirements. 

The accounting policies are in terms of IFRS and consistent with those applied in the audited consolidated annual
financial statements for FY18, except for IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with 
Customers which became effective on 1 March 2018 for the Group.

The Group has applied both IFRS 9 and IFRS 15 using the modified retrospective approach, by recognising the cumulative
effect of initially applying IFRS 9 and IFRS 15 as an adjustment to the opening balance of equity at 1 March 2018. The
adoption of the above standards had an immaterial impact on the Group's financial results for FY19 as well as on the
opening reserves as at 1 March 2018.

The preparation of these summarised financial statements and consolidated financial statements for FY19 was supervised
by the Chief Financial Officer, Mr Ivan Dittrich, CA(SA).

ADOPTION OF IFRS 16 IN FY20
Implementation 
The Group has elected to adopt IFRS 16 when it becomes effective and this amendment will have an impact on the
financial statements for FY20.

The new standard addresses the definition of a lease, recognition and measurement of leases and establishes principles
for reporting useful information to users of financial statements about the leasing activities of both lessees and
lessors.

The principal impact of IFRS 16 will be to change the accounting treatment by lessees of leases currently classified
as operating leases. Lease agreements will give rise to the recognition by the lessee of an asset, representing the right
to use the leased item, and a related liability for future lease payments.

Lease costs will be recognised in profit and loss in the form of depreciation of the right-of-use asset over the lease
term, and finance charges representing the unwinding of the discount on the lease liability. Certain exemptions from
recognising leases on the balance sheet are available for leases with terms of 12 months or less or where the underlying
asset is of low value.

Expected impact
The most significant impact on the Group applying IFRS 16, based on contractual arrangements in place at 28 February
2019, will be the recognition of lease liabilities of between US$110 million and US$125 million, along with right-of-use
assets with a similar aggregate value. This liability corresponds to the minimum lease payments under operating leases
adjusted for the effects of discounting. 

Lease liabilities principally relate to property where the Group is a lessee under an operating lease arrangement. 
The impact of the standard on underlying earnings and profit before tax following the adoption is not expected to be
material although the income statement presentation of the cost of leases will be allocated between the depreciation
of right-of-use assets, and a finance charge representing the unwinding of the discount on the leases.

The Group will not be applying the recognition and measurement requirements of IFRS 16 to short-term leases less than
12 months and low-value leases.

The Group has elected to apply the modified retrospective approach on transition. The cumulative effect on transition
to IFRS 16 will be recognised in retained earnings at 1 March 2019 and is not expected to be material. The comparative
period will not be restated.

INDEPENDENT AUDITORS' REPORT
The independent auditors, Deloitte & Touche, have issued their unmodified audit opinions on the consolidated financial
statements and on these summarised consolidated financial statements for the year ended 28 February 2019 in accordance
with International Standards on Auditing. These summarised consolidated financial statements have been derived from the
audited consolidated annual financial statements and are consistent in all material respects, with the Group's
consolidated financial statements. The consolidated financial statements and the auditors' unmodified reports on 
the consolidated financial statements and on these summarised consolidated financial statementare available for 
inspection at the Company's registered office.

The auditors' reports do not necessarily report on all of the information contained in this announcement/financial
results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors'
engagement they should obtain a copy of the reports together with the accompanying financial information from the
Company's registered office. 

Any reference to future financial performance included in this announcement, has not been reviewed or reported on by
the Company's auditors.

DISCLAIMER 
This announcement may contain statements regarding the future financial performance of the Group which may be
considered to be forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty, 
and although the Group has taken reasonable care to ensure the accuracy of the information presented, no assurance 
can be given that such expectations will prove to have been correct. 

The Group has attempted to identify important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements and there may be other factors that cause actions, 
events or results not to be as anticipated, estimated or intended. It is important to note, that:
(i)   unless otherwise indicated, forward-looking statements indicate the Group's expectations and have not been
      reviewed or reported on by the Group's external auditors; 
(ii)  actual results may differ materially from the Group's expectations if known and unknown risks or uncertainties
      affect its business, or if estimates or assumptions prove inaccurate; 
(iii) the Group cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are
      cautioned not to place undue reliance on these forward-looking statements; and 
(iv)  the Group disclaims any intention and assumes no obligation to update or revise any forward-looking statement
      even if new information becomes available, as a result of future events or for any other reason, other than 
      as required by the JSE Limited Listings Requirements.
      
On behalf of the Board
SJ Davidson
Chairman

JP Montanana
Chief Executive Officer 

IP Dittrich
Chief Financial Officer

16 May 2019

DIRECTORS 
# SJ Davidson (CHAIRMAN), # JP Montanana (CEO), IP Dittrich (CFO), M Makanjee, + JF McCartney, 
MJN Njeke, + E Singh-Bushell
+ American, # British 

* Excluding impairments of goodwill and intangible assets, profit or loss on sale of investments and assets,
  amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments,
  fair value movements on acquisition-related financial instruments, restructuring costs relating to fundamental 
  reorganisations and the taxation effect on all of the aforementioned.

The underlying earnings measure is specific to Datatec and is not required in terms of International 
Financial Reporting Standards or the JSE Listings Requirements.



Summarised consolidated statement of comprehensive income
for the year ended 28 February 2019
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
CONTINUING OPERATIONS                                                                                  
Revenue                                                                4 332 381          3 923 715    
  Continued operations                                                 4 277 186          3 881 547    
  Revenue from acquisitions                                               55 195             42 168    
Cost of sales                                                         (3 644 637)        (3 287 670)    
Gross profit                                                             687 744            636 045    
Operating costs                                                         (569 896)          (571 016)    
Net impairment of contract assets and financial assets                    (3 817)           (15 261)    
Restructuring costs                                                      (17 506)           (16 873)    
Share-based payments                                                      (9 764)            (6 198)    
Operating profit before interest, tax, depreciation 
and amortisation ("EBITDA")                                               86 761             26 697    
Depreciation                                                             (25 889)           (27 548)    
Amortisation of capitalised development expenditure                         (972)           (11 375)    
Amortisation of acquired intangible assets and software                  (11 477)           (12 640)    
Impairment of investment in joint venture                                      -             (1 000)    
Impairment of capitalised development expenditure                              -            (55 112)    
Operating profit/(loss)                                                   48 423            (80 978)    
Interest income                                                            9 568              8 670    
Finance costs                                                            (32 145)           (27 073)    
Share of equity-accounted investment losses                               (1 403)              (276)    
Acquisition-related fair value adjustments                                   (35)                48    
Other income                                                                  62                257    
Loss on disposal of investment                                              (255)                 -    
Profit/(loss) before taxation                                             24 215            (99 352)    
Taxation                                                                 (20 959)           (18 465)    
Profit/(loss) for the year from continuing operations                      3 256           (117 817)    
DISCONTINUED OPERATIONS                                                                                
Profit for the year from discontinued operations                          11 694            159 608    
Profit for the year                                                       14 950             41 791    
Other comprehensive (loss)/income                                                                      
Items that may be reclassified subsequently to profit or loss                                          
Exchange differences arising on translation to 
presentation currency                                                    (54 735)            13 942    
Translation of equity loans net of tax effect                              2 874              8 795    
Translation reserve reclassified to profit on 
disposal of foreign operation                                                  -             57 345    
Transfers and other items                                                    948              2 265    
Total comprehensive (loss)/income for the year                           (35 963)           124 138    
Profit attributable to:                                                                                
Owners of the parent                                                      13 134             44 359    
Non-controlling interests                                                  1 816             (2 568)    
                                                                          14 950             41 791    
Total comprehensive (loss)/income attributable to:                                                     
Owners of the parent                                                     (30 734)           130 480    
Non-controlling interests                                                 (5 229)            (6 342)    
                                                                         (35 963)           124 138    
Earnings/(losses) per share ("EPS") (US cents)                                                         
Basic                                                                        5.5               20.5    
  Continuing operations                                                      0.6              (53.3)    
  Discontinued operations                                                    4.9               73.8    
Diluted basic                                                                5.5               20.3    
  Continuing operations                                                      0.6              (52.6)    
  Discontinued operations                                                    4.9               72.9    


Salient financial features                                      
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
Headline earnings/(losses)                                                 1 658            (41 337)    
  Continuing operations                                                    1 658            (64 604)    
  Discontinued operations                                                      -             23 267    
Headline earnings/(losses) per share (US cents)                                                        
Headline                                                                     0.7              (19.1)    
  Continuing operations                                                      0.7              (29.9)    
  Discontinued operations                                                      -               10.8    
Diluted headline earnings/(losses) per share (US cents)                      0.7              (18.9)    
  Continuing operations                                                      0.7              (29.5)    
  Discontinued operations                                                      -               10.6    
Underlying* earnings/(losses)                                             15 728            (12 156)    
  Continuing operations                                                   15 728            (37 135)    
  Discontinued operations                                                      -             24 979    
Underlying* earnings/(losses) per share (US cents)                                                     
Underlying*                                                                  6.6               (5.6)    
  Continuing operations                                                      6.6              (17.2)    
  Discontinued operations                                                      -               11.6    
Diluted underlying* earnings/(losses) per share (US cents)                   6.5               (5.6)    
  Continuing operations                                                      6.5              (17.0)    
  Discontinued operations                                                      -               11.4    
Net asset value per share (US cents)                                       297.5              297.0    
KEY RATIOS                                                                                             
Gross margin - continuing operations (%)                                    15.9               16.2    
EBITDA margin - continuing operations (%)                                    2.0                0.7    
Effective tax rate - continuing operations (%)                              86.6              (18.6)    
Exchange rates                                                                                         
Average Rand/US$ exchange rate                                              13.6               13.0    
Closing Rand/US$ exchange rate                                              13.9               11.8    
Number of shares issued (millions)                                                                     
Issued                                                                       218                243    
Weighted average                                                             238                216    
Diluted weighted average                                                     240                219
The underlying* earnings measure is specific to Datatec and is not required in terms of International 
Financial Reporting Standards or the JSE Listings Requirements.
* Underlying earnings exclude impairments of goodwill and intangible assets, profit or loss on sale 
  of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange 
  movements, acquisition-related adjustments, fair value movements on acquisition-related financial 
  instruments, restructuring costs relating to fundamental reorganisations and the taxation effect 
  on all of the aforementioned.
  

Summarised consolidated statement of financial position
as at 28 February 2019
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
ASSETS                                                                                                 
Non-current assets                                                       437 786            417 370    
Property, plant and equipment                                             60 306             59 731    
Goodwill                                                                 234 551            227 321    
Capitalised development expenditure                                       12 711              1 665    
Acquired intangible assets and software                                   37 615             40 661    
Investments                                                               22 382             26 613    
Deferred tax assets                                                       52 134             41 104    
Finance lease receivables                                                 13 363             12 283    
Other receivables and contract costs                                       4 724              7 992    
Current assets                                                         2 284 521          2 244 228    
Inventories                                                              332 256            238 537    
Trade receivables                                                      1 258 853          1 192 237    
Prepaid expenses and other receivables                                   232 965            322 241    
Contract assets and contract costs                                        98 798                  -    
Current tax assets                                                        11 442              9 492    
Finance lease receivables                                                  5 807              5 479    
Cash and cash equivalents                                                344 400            476 242    
                                                                                                       
Total assets                                                           2 722 307          2 661 598    
EQUITY AND LIABILITIES                                                                                 
Equity attributable to equity holders of the parent                      648 927            721 603    
  Stated capital                                                         172 998            258 461    
  Non-distributable reserves                                              85 614             45 331    
  Foreign currency translation reserve                                  (102 527)           (58 378)    
  Share-based payment reserve                                              7 828              4 883    
  Distributable reserves                                                 485 014            471 306    
Non-controlling interests                                                 63 303             69 217    
Total equity                                                             712 230            790 820    
Non-current liabilities                                                  100 805            120 685    
Long-term interest-bearing liabilities                                    31 383             61 723    
Liability for share-based payments                                         1 888              1 517    
Amounts owing to vendors                                                   1 393                211    
Deferred tax liabilities                                                  28 616             30 240    
Deferred revenue                                                          26 506             16 309    
Provisions                                                                11 019             10 685    
Current liabilities                                                    1 909 272          1 750 093    
Trade and other payables                                               1 358 928          1 199 384    
Short-term interest-bearing liabilities                                  109 751            105 999    
Contract liabilities                                                       3 476                  -    
Deferred revenue                                                          98 788             97 194    
Provisions                                                                17 548             16 026    
Amounts owing to vendors                                                     936              1 029    
Current tax liabilities                                                   15 826             15 561    
Bank overdrafts                                                          304 019            314 900    
Total equity and liabilities                                           2 722 307          2 661 598    
* The Group has initially applied IFRS 15 and IFRS 9 at 1 March 2018. These standards have been 
  applied using the cumulative effect method, under which the comparative information is 
  not restated.
  

Condensed consolidated statement of cash flows
as at 28 February 2019
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
Operating profit before working capital changes                           88 931             91 275    
Working capital changes                                                  (21 228)           (60 184)    
  (Increase)/decrease in inventories                                     (95 518)            28 831    
  Increase in receivables                                                (90 937)          (258 056)    
  Increase in payables                                                   171 592            169 041
  Increase in revenue-related assets                                     (17 234)                 - 
  Increase in revenue-related liabilities                                 10 869                  -  
Other working capital changes                                              1 287            (13 466)    
Cash generated from operations                                            68 990             17 625    
Net finance costs paid                                                   (22 434)           (24 784)    
Taxation paid                                                            (38 531)           (43 446)    
Net cash inflow/(outflow) from operating activities                        8 025            (50 605)    
Cash outflow for acquisitions                                            (25 450)           (10 749)    
Net cash inflow from disposal of discontinued operations                       -            744 832    
Decreases in investments                                                  10 201                  -    
Increases in investments                                                  (7 283)            (3 002)    
Additions to property, plant and equipment                               (23 769)           (26 004)    
Additions to capitalised development expenditure                         (11 264)           (20 043)    
Additions to software                                                     (1 853)            (2 668)    
Proceeds on disposal of property, plant and equipment                        132                821    
Net cash (outflow)/inflow from investing activities                      (59 286)           683 187    
Proceeds on disposal of 10% of Westcon International      
without loss of control                                                        -             30 000    
Share repurchases                                                        (43 881)           (34 629)    
Dividends paid to non-controlling interests                                  (53)                 -    
Dividends paid to shareholders                                                 -           (244 193)    
Amounts paid to vendors                                                     (927)              (609)    
Proceeds from short-term liabilities                                      65 203             93 282    
Repayment of short-term liabilities                                      (77 830)           (39 185)    
Proceeds from long-term liabilities                                       13 366             51 398    
Repayment of long-term liabilities                                       (10 462)           (31 551)    
Net cash outflow from financing activities                               (54 584)          (175 487)    
Net (decrease)/increase in cash and cash equivalents                    (105 845)           457 095    
Cash and cash equivalents at the beginning of the year                   161 342           (299 852)    
Translation differences on cash and cash equivalents                     (15 116)             4 099    
Cash and cash equivalents at the end of the year*                         40 381            161 342    
Cash flows from discontinued operations                                                   
Net cash outflow from operating activities                                  (606)           (49 747) 
Net cash outflow from investing activities                                     -             (2 700)    
Net cash inflow from financing activities                                      -              8 240    
Net decrease in cash and cash equivalents                                   (606)           (44 207)   
* Comprises cash resources, net of bank overdrafts.                                                   


Summarised consolidated statement of changes in total equity
for the year ended 28 February 2019
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
Balance at the beginning of the year                                     790 820            906 875    
Transactions with equity holders of the parent                                                         
Comprehensive (loss)/income                                              (30 734)           130 480    
Special dividend                                                                           (244 193)    
Share repurchases                                                        (43 881)           (34 629)    
Share-based payments                                                       1 836              1 784    
Other                                                                        103                 -    
Disposal of 10% of Westcon International without loss of control               -             13 175    
Transactions with non-controlling interests                                                            
Comprehensive loss                                                        (5 229)            (6 342)    
Acquisitions of subsidiaries                                                (459)             6 845    
Disposal of 10% of Westcon International without loss of control               -             16 825    
Disposal of subsidiary                                                      (173)                 -    
Other                                                                        (53)                 -    
Balance at the end of the year                                           712 230            790 820    


Determination of headline and underlying earnings                
for the year ended 28 February 2019                              
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
Profit attributable to the equity holders of the parent                   13 134             44 359    
Headline earnings adjustments                                            (11 375)           (80 080)    
  Impairment of capitalised development expenditure                            -             55 112    
  Impairment of investment in joint venture                                    -              1 000    
  Profit on disposal of investment/discontinued operations†              (11 439)          (136 341)    
  Loss on disposal of property, plant and equipment                           93                170    
    Tax effect                                                               (29)               (21)    
  Non-controlling interests                                                 (101)            (5 616)    
Headline earnings/(losses)                                                 1 658            (41 337)    
Continuing operations                                                      1 658            (64 604)    
Discontinued operations                                                        -             23 267    
                                                                                                       
DETERMINATION OF UNDERLYING EARNINGS                                                                   
Underlying* earnings adjustments                                          15 587             31 896    
  Unrealised foreign exchange (gains)/losses†                             (7 467)            11 131    
  Acquisition-related fair value adjustments                                  35                (48)    
  Restructuring costs†                                                    17 506             18 701    
  Amortisation of acquired intangible assets†                             10 217             12 061    
Tax effect                                                                (4 704)            (9 949)    
Non-controlling interests                                                 (1 517)            (2 715)    
Underlying* earnings/(losses)                                             15 728            (12 156)    
Continuing operations                                                     15 728            (37 135)    
Discontinued operations                                                        -             24 979    
† Prior year figures comprise both continuing and discontinued operations.


Summarised segmental analysis
for the year ended 28 February 2019

For management's internal purposes the Group is currently organised into three operating divisions which 
are the basis on which the Group reports its primary segmental information.
Principal activities are as follows:
- Westcon International - distribution of security, collaboration, networking and data centre products;
- Logicalis - ICT infrastructure solutions and services; and
- Corporate, Consulting and Financial Services: includes strategic and technical consulting, capital/leasing 
  business, Group head office companies and Group consolidation adjustments.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief 
operating decision maker. The chief operating decision maker, who is responsible for allocating resources 
and assessing performance of the operating segments, has been identified as the executive directors that 
make strategic decisions.
                                                                                           Corporate, Consulting
                                  Westcon International             Logicalis             and Financial Services     Datatec Group Total
                                    Audited      Audited       Audited      Audited       Audited      Audited      Audited      Audited          
                                 Year ended   Year ended    Year ended   Year ended    Year ended   Year ended   Year ended   Year ended          
                                   February     February      February     February      February     February     February     February          
US$'000                                2019         2018          2019         2018          2019         2018         2019         2018          
Revenue                           2 544 774    2 316 650     1 741 064    1 563 714        46 543       43 351    4 332 381    3 923 715          
Revenue from product sales        2 479 407    2 205 713     1 086 789      993 916             -            -    3 566 196    3 199 629          
Revenue from sales of hardware    1 772 579    1 625 816       991 657      915 932       (30 231)     (26 850)   2 734 005    2 514 898          
Revenue from sales of software      688 036      558 411        95 483       76 486       (10 147)     (10 406)     773 372      624 491          
Revenue from vendor                                                                                                           
resold services and                                                                                                           
product maintenance sales            57 819       58 742         1 000        1 498             -            -       58 819       60 240          
Inter-segmental revenue             (39 027)     (37 256)       (1 351)           -        40 378       37 256            -            -          
Revenue from services                65 367       66 129       269 074      193 213        46 543       43 351      380 984      302 693          
Revenue from                                                                                                                  
professional services                64 428       22 149       269 074      196 431        46 543       40 133      380 045      258 713          
Revenue from other services             939       43 980             -            -             -            -          939       43 980          
Inter-segmental revenue                   -            -             -       (3 218)            -        3 218            -            -          
Revenue from annuity services             -       44 808       385 201      376 585             -            -      385 201      421 393          
Revenue from cloud services               -       44 808        44 049       35 484             -            -       44 049       80 292          
Revenue from other                                                                                                            
annuity services                          -            -       341 152      341 101             -            -      341 152      341 101          
                                                                                                                                                  
EBITDA                                5 565      (48 123)       93 366       86 165       (12 170)     (11 345)      86 761       26 697          
Reconciliation of operating                                                                                                   
(loss)/profit to (loss)/profit                                                                                                
after taxation                                                                                                                
Operating (loss)/profit              (4 226)    (127 934)       65 949       59 483       (13 300)     (12 527)      48 423      (80 978)          
Interest income                       1 491        1 609         1 693        1 444         6 384        5 617        9 568        8 670          
Finance costs                       (13 683)     (12 833)      (18 455)     (14 227)           (7)         (13)     (32 145)     (27 073)          
Share of equity-accounted                                                                                                     
investment (losses)/earnings         (2 143)        (440)          468          (51)          272          215       (1 403)        (276)          
Acquisition-related fair                                                                                                      
value adjustments                         -            -           (35)          48             -            -          (35)          48          
Other (expenses)/income                 (97)           -             -            -           159          257           62          257          
Loss on disposal of investment         (255)           -             -            -             -            -         (255)           -          
(Loss)/profit before taxation       (18 913)    (139 598)       49 620       46 697        (6 492)      (6 451)      24 215      (99 352)          
Taxation                             (3 271)      (7 649)      (12 317)      (7 311)       (5 371)      (3 505)     (20 959)     (18 465)          
(Loss)/profit for the year                                                                                                    
from continuing operations          (22 184)    (147 247)       37 303       39 386       (11 863)      (9 956)       3 256     (117 817)          
(Loss)/profit for the year                                                                                                    
from discontinued operations              -     (433 629)            -       26 340        11 694      566 897       11 694      159 608          
(Loss)/profit for the year          (22 181)    (580 876)       37 303       65 726          (169)     556 941       14 950       41 791          
Total assets                      1 226 057    1 088 316     1 318 226    1 253 824       178 024      319 458    2 722 307    2 661 598          
Total liabilities                 1 046 305)    (957 802)     (943 441)    (890 820)      (20 331)     (22 156)  (2 010 077)  (1 870 778)          
                                            
Sales and purchases between Group companies are concluded at arm's length in the ordinary course of business. 
The inter-group sales of goods and provision of services for the year ended 28 February 2019 amounted to 
US$40.4 million (FY18: US$40.5 million). US$113.1 million (FY18: US$40.3 million) of inventory was purchased 
from SYNNEX Corporation Limited.


Financial instruments
as at 28 February 2019
The table below sets out the Group's classification of each class of financial instrument at their fair 
values. The carrying amount of these financial instruments approximates their fair values. The different 
fair value levels are described below.
Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities 
          that the entity can access at the measurement date;
Level 2 - inputs are inputs, other than quoted prices included within Level 1, that are observable for 
          the asset or liability, either directly or indirectly; and
Level 3 - inputs are inputs for the asset or liability that are not based on observable market data 
          (unobservable inputs).
          
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                    Level   February 2019      February 2018    
Financial assets                                                                                       
Loans and receivables at amortised cost                                                                
Gross trade accounts receivable                                        1 290 514          1 226 377    
Less: Expected credit loss allowances                                    (31 661)           (34 140)    
Bonds                                                                     18 960             21 885    
Loans granted to third parties and other                          
long-term assets due                                                       4 638              7 992    
Finance lease receivables                                                 19 170             17 762    
Other receivables                                                         63 038            111 802    
Earn-out receivable                                                       11 694                  -    
Cash and cash equivalents at financial institutions                      344 400            476 242    
Financial assets at fair value through profit or loss                                                  
Derivative financial assets                                    2           2 318              2 373    
                                                                       1 723 071          1 830 293    
Financial liabilities at amortised cost                                                                
Trade payables                                                        (1 056 451)          (894 192)    
Other payables and other financial liabilities                          (174 234)          (154 120)    
Long-term interest-bearing liabilities and finance leases                (76 388)           (81 608)    
Short-term interest-bearing liabilities                                  (64 746)           (86 114)    
Bank overdrafts                                                         (304 019)          (314 900)    
Financial liabilities at fair value through profit or loss                                             
Amounts owing to vendors                                       3          (2 329)            (1 240)    
Derivative financial liabilities                               2          (2 407)            (3 368)    
                                                                      (1 680 574)        (1 535 542)    
The earn-out receivable is a material Level 3 financial instrument at fair value through profit or loss. 
The fair value of the earn-out receivable is estimated to be US$11.7 million after costs, which is 
estimated to be the minimum amount receivable. The fair value of the earn-out receivable was determined 
based on unobservable data, after taking into consideration the probabilities of various outcomes.


Capital expenditure and commitments
as at 28 February 2019
                                                                         Audited            Audited    
                                                                      Year ended         Year ended    
US$'000                                                            February 2019      February 2018    
Capital expenditure incurred in the current period     
(including capitalised development expenditure)                           36 886             48 715    
Capital commitments at the end of the year                                46 779             23 129    
Lease commitments at the end of the year                                 123 725            128 789    
Payable within one year                                                   32 692             31 711    
Payable after one year                                                    91 033             97 078    


Acquisitions made during the period
as at 28 February 2019

The following table sets out the assessment of the fair value of assets and liabilities acquired 
in the acquisitions made by the Group during the period. The fair value assessments of assets and 
liabilities acquired and the amounts recognised as goodwill and intangible assets have only been 
determined provisionally due to the timing of the acquisitions and future amendments may impact 
classification in these categories.
                                                                                            US$'000    
ACQUISITIONS MADE IN FY19                                                                              
Assets acquired                                                                                        
Non-current assets                                                                            6 733    
Current assets                                                                               30 142    
Non-current liabilities                                                                      (6 676)    
Current liabilities                                                                         (24 473)    
Net assets acquired                                                                           5 726    
Intangible assets                                                                             8 070    
Capitalised development expenditure and software                                                795
Goodwill                                                                                     13 090    
Non-controlling interest                                                                        459    
Fair value of acquisition                                                                    28 140    
Purchase consideration                                                                                 
Cash                                                                                         25 840    
Deferred purchase consideration                                                               2 300    
Total consideration                                                                          28 140    
Cash outflow for acquisitions                                                                          
Cash and cash equivalents acquired                                                             (390)    
Cash consideration paid                                                                      25 840    
Net cash outflow for acquisitions                                                            25 450    

On 17 July 2018, Analysys Mason Limited acquired 100% of the issued share capital of Access Markets 
International-Partners ("AMI-Partners") based in the United States for US$3.5 million. AMI-Partners 
is a Small and Medium Business ("SMB") ICT-focused global research and consulting firm that specialises 
in go-to-market ("GTM") opportunity assessment, tracking buying behaviour, customer segmentation, channel 
partner ecosystem dynamics and sales enablement enhanced with predictive analytics.                   

Effective 3 September 2018, Logicalis acquired 100% of the issued share capital of Clarotech, an internet 
protocol telephony ("IPT") cloud and managed services business based in Cape Town. The 100% interest was 
acquired for a cash consideration of US$3.4 million. This acquisition enables Logicalis to combine a 
focused managed services operation with its existing business in South Africa, to support SMBs as well 
as larger corporates.                   

With effect on 3 September 2018, Logicalis completed the acquisition of 100% of the issued share capital 
of Coasin Chile S.A., a Chilean ICT service and solutions provider, which also owns 100% of C2 Mining 
Solutions S.A.C. based in Peru. This interest was acquired for a cash consideration of US$17.3 million 
from Logicalis' resources. Coasin's experience in the mining and financial services verticals creates 
opportunities for Logicalis to better serve its multinational clients while broadening its services scope 
to new customer groups.                   

On 8 October 2018, Logicalis acquired 100% of the issued share capital of Corporate Network Integration 
(Pty) Ltd ("CNI") for a cash consideration of US$3.9 million. CNI is a Microsoft-certified gold partner 
based in Melbourne, Australia and this acquisition brings Logicalis a full suite of leading Microsoft cloud 
service capabilities, significantly strengthening the Group's position in this growing market segment and 
enabling Logicalis to deliver a broader scope of services to new and existing customers.                 
  
As a result of these acquisitions, goodwill and other intangible assets increased by US$13.1 million and 
US$8.9 million respectively.

----------------------

Registered office: Ground Floor, Sandown Chambers, Sandown Village, 16 Maude Street, Sandton, Johannesburg

16 May 2019

Sponsor 
RAND MERCHANT BANK (A division of FirstRand Bank Limited)



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