| Wed 14 Nov 2007, 9:00 | | DDT - Dimension Data Holdings Plc - Preliminary re |
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DDT
DIDDT
DDT - Dimension Data Holdings Plc - Preliminary results year ended 30
September 2007
Dimension Data Holdings Plc
("Dimension Data")
(Incorporated in the United Kingdom)
(Registration number 3704278)
Issuer code: DIDDT
JSE Share Code: DDT
ISIN Code: GB0008435405
Preliminary Results
Year ended 30 September 2007
Dimension Data Holdings plc (`Dimension Data` or the `Group`) today announced
its results for the year ended 30 September 2007. The results have been
prepared in accordance with International Financial Reporting Standards.
Highlights
* Total revenues up by 23.0% to $3.8 billion
* Services revenue up 25.8% to $1.5 billion
* Gross margin 21.5% (2006: 21.1%)(1)
* Operating profit (1) up 55.0% to $131.0 million (2006: $84.5 million)
* Operating margin (1) up by 0.7% to 3.5%
* Earnings per share (1) up by 180.0% to 5.6 cents (2006: 2.0 cents)
* Proposed dividend of 1.5 cents per share (2006: 1.0 cent)
* Cash generated from operating activities $177.1 million (2006: $12.5
million)
Financial Summary
$`000 2007 Restated 2006 (2)
Revenue 3,773,156 3,067,962
Operating profit 123,867 80,222
Margin 3.3% 2.6%
Operating profit (before exceptional items) 130,994 84,496
Margin (before exceptional items) 3.5% 2.8%
Effective tax rate 23.9% 12.7%
Effective tax rate (before exceptional items) 25.9% 37.7%
Profit attributable to equity shareholders
of the parent 92,528 40,602
Profit attributable to equity shareholders
of the parent (before exceptional items) 86,096 30,179
Earnings per ordinary share (US cents) 6.0 2.7
Earnings per ordinary share (before
exceptional items)(US cents) 5.6 2.0
Proposed dividend per ordinary share (US cents) 1.5 1.0
Notes:
(1) Before exceptional items. See reconciliation in Note 3 to the financial
information.
(2) Restated for the adoption of IFRIC 4
Chief Executive Officer`s Review
Strategic Direction becomes Operational Results
Our accomplishments in 2007 were achieved by successfully executing our
business strategy and harnessing growth opportunities created by major changes
in the market. The four components of our business strategy - driving
profitable growth, offering a world class client experience, delivering
operational excellence to our clients, and investing in our people and our
culture - have propelled us forward. Our focus, coupled with strong
execution across all geographies and client segments, resulted in exceptional
growth and progress in our business.
The cornerstone of our profitable growth strategy is to ensure we identify and
then aggressively target growth opportunities in the market. Several years ago
we identified a number of emerging market trends that we believed would be
significant for the industry, our clients and our business. We summarised
these
trends into three main opportunities for Dimension Data. We refer to these
opportunities as the converged network, the converged client and
multisourcing.
The converged network provides us the opportunity to exploit the convergence
of
multiple services including data, voice and video onto a common Internet
Protocol (IP)-based technology platform. The converged client opportunity is
about how we take advantage of the emerging trends of unified communications
and collaboration, while multisourcing offers clients new flexibility in IT
sourcing. We aligned our business strategy, investment strategy, competencies,
and execution capabilities to capitalise on these market opportunities. Today,
it is rewarding to look back on our consistent growth and the rapid market
share gains we have made by focusing on these three opportunities. The record
revenues and financial performance of 2007 continue to validate our strategic
direction.
Capitalising on Market Trends
In 2007 we have once again been successful in converting the converged network
opportunity. Several factors are driving our growth. The basic corporate
communications network is in an investment cycle where a refresh of many of
its foundation technologies such as routers and switches is occurring. The
increasing adoption of IP as a standard is enabling our clients to drive
standardisation of their IT architectures, and thus enable substantial
consolidation and centralisation of their overall IT infrastructure, providing
improved effectiveness and substantial ROI for their business. In addition, we
see our clients preparing their infrastructure for convergence and embedding
security into their IT infrastructure.
Convergence of voice onto the data network has been driven by the increasing
adoption of voice over IP (VOIP). We have over the past few years been
positioning our business to secure this opportunity. The exceptional growth we
have achieved in our Converged Communications line of business is clear
evidence that the promise of the IP-based converged network is becoming a
reality. The operational cost savings and productivity improvements of
integrating voice, video and data onto one infrastructure are now leading our
clients to large scale deployment of converged communications-related
technologies - particularly IP telephony.
We are starting to see early evidence of success associated with clients
adopting unified communication and collaboration technologies. Consumers are
becoming more mobile and are increasingly demanding access to any application,
using any device, from anywhere in the world to be more productive. They bring
their personal productivity expectations into the workplace and create new
requirements for the corporate IT infrastructure. Market experts refer to this
trend as the `consumerisation of IT`. In order to provide end users with a
seamless experience we are focused on providing our clients with services and
solutions that enhance, integrate and optimise their network, operating
systems and messaging infrastructures.
While the converged network is in a growth phase, the converged client is
still in an early phase of market adoption. Our business is focused on
exploiting these opportunities.
Our Service revenues expanded dramatically this year reflecting increased
market uptake of our Managed and Professional Services. We are succeeding in
our intent to be more services-led. In addition, changes are occurring in how
clients source IT infrastructure and services. Traditionally, many clients
either managed IT in-house or outsourced to an IT service provider. Currently,
clients are opting for a multisourcing approach to IT sourcing. Multisourcing
involves a blended model where selected IT functions are outsourced to
specialists, while other functions are maintained in-house. While the adoption
of this model is at an early stage, the business drivers that gave rise to the
need for new sourcing strategies, like the ongoing skills shortage and the
need for IT to show greater alignment with business needs and outcomes, are
here to stay. Exploiting this opportunity is a key opportunity for Dimension
Data and we are starting to see greater momentum on this front.
Playing in Markets that Matter
In every market category - geography, client segment , or vertical market -
Dimension Data performed exceptionally well this year.
From a geographic perspective we performed strongly across all five Regions,
with revenue growth and expanded operating margins across the board. Dimension
Data`s presence in over 40 countries around the world differentiates us from
our competitors. Having grown our business out of developing markets into
developed markets, Dimension Data is often the partner of choice for global
and multinational clients.
Robust revenue growth from our global and multinational client segment during
2007 was associated with international expansion, convergence and
standardisation projects. Our differentiation is not merely in our footprint,
but in our ability to provide local, in-country expertise and delivery
capabilities that few competitors can match.
The mid-sized market also contributed to growth. While large enterprises have
significant IT departments in-house, our mid-sized clients rely on us to
support them more extensively in the building and management of their IT
infrastructure. A lack of internal resources and difficulty in attracting and
retaining IT professionals were factors which often contributed to mid-sized
enterprises` drive to partner with Dimension Data.
Service providers including telecommunications providers, mobile operators,
internet service providers (ISPs), and cable operators continued to represent
a large segment for the Group across most of our regions. In 2007, Dimension
Data helped service providers build and develop their revenue-generating
networks to support new services and applications for their consumer and
business customers. Our expertise across the service provider market is
diverse. In Africa we deployed and integrated a 120 site, turnkey GSM
infrastructure. For a Korean ISP, we took responsibility for the maintenance
of their entire IP backbone. In Europe, we helped a large cable operator
implement a Euro-DOCSIS 2.0 platform. We also partnered with international
telecommunications providers to provide IT implementation and support services
for their global enterprise customers in geographies where the providers have
little or no presence of their own. And elsewhere in Africa, our additional
capabilities through Internet Solutions and Plessey drove growth associated
with the expanding market opportunity driven by deregulation and increased
telecommunications spend.
Dimension Data`s long-standing relationships with many of the world`s leading
financial services companies have helped us grow revenues across multiple
lines of business within this segment. In 2007, financial services companies
focused their IT investments on expanding and securing their core network,
consolidating and migrating data centres, and driving improved customer
experience in the contact centre. Globalisation, the implementation of
environmentally-friendly IT practices, and a move toward increasing client
intimacy led these investments in IT solutions and services. We refreshed the
core network across ten countries in Asia for one of the world`s largest
banks. We implemented a storage area networking solution and disaster recovery
plan for a US-based financial services company. In Africa, we renewed an
operations maintenance and support contract for a fully outsourced financial
services network.
We made strong progress in providing services to the public sector. In South
Africa, we built an emergency and disaster response centre to support
provincial response on a 24 X 7 X 365 basis. In Australia, we helped the
government expand their capabilities to deliver emergency mental health
services to residents in rural locations. Within a large city in the US, we
enhanced the information-sharing capabilities of the criminal justice
department to improve judicial service delivery to the citizenry. We believe
strong investments in IT by governments across the globe will continue to
provide opportunities for the Group. Government`s pursuit to deliver
innovative services, improve government accessibility, and gain cost
efficiencies, requires a partner with diverse yet deep domain expertise across
all aspects of IT infrastructure.
Executing with Excellence
Focused execution paves the way to exceptional financial performance. In 2007
our revenues increased 23%, operating profit grew 55% and earnings per share
rose 180%. This performance could only be achieved through the dedication and
teamwork of our 10,600 talented employees. Our annual client satisfaction
survey echoes this sentiment, with many clients commenting on the exceptional
calibre of committed Dimension Data employees. Attracting and retaining the
right employees who reflect our values and the winning Dimension Data spirit
was a priority during the year. Our employees` persistence to exceed client
expectations continued to set us apart in the marketplace.
Constantly striving to improve our execution also brings excellence to our
business. Extracting operational improvements and efficiencies continued to be
a focus during the year. Several areas were priorities for investment
including our quote to delivery cycle, sales automation, and the systems
supporting service delivery.
Driven by the globalisation trend within many large enterprises, Dimension
Data`s expertise and capabilities to configure, source, ship, deliver, install
and maintain IT technology around the world remains a key differentiator.
Dimension Data Direct, the Group`s e-procurement solution, experienced
exponential growth resulting in quotes to clients and in purchase orders
processed. Dimension Data Direct simplifies the quote to invoice process
through integration and automation. It increases productivity and reduces
quote and order administration. Dimension Data Direct also supports services
revenues by incorporating quotes for Professional, Support and Managed
Services into every product sale. Although it is still completing a global
roll-out, Dimension Data Direct has already delivered large operational
efficiencies to the Group.
To enhance clients` order fulfillment, we improved our systems to provide
global visibility of the real-time status and movement of orders from order
placement to the point of delivery. We also added features to provide clients
with better visibility of global purchase patterns and to track the
international shipment documentation process. To simplify and streamline
communication about technology shipment status, we also established a Client
Services Centre.
From an internal perspective, our efforts to automate our sales processes also
advanced. All sales employees now operate off one sales pipeline management
tool, allowing us to gain consistent visibility across accounts and regions.
We are now able to track and align key sales performance metrics across our
regional businesses and to enhance collaboration enabling cross-sell and
international opportunities. These improvements have also allowed us to
establish a platform for a globally consistent client database.
To improve our clients support we enhanced our services platform with two
upgrades to the Global Service Operating Architecture (GSOA). These upgrades
improved functionality and platform stability, and allowed us to offer new
managed services.
A Winning Future
Our continued success in the marketplace is all about our employees; their
expertise and their determination to deliver a world class client experience.
At Dimension Data, it is critical for us to attract and retain the right
individuals, who will succeed in our high performance culture. During the year
we made several investments to improve the employee experience at Dimension
Data. We built new systems to better attract candidates. Our induction
programmes were improved so that employees can become more effective early in
their careers. The continued education of employees to improve their skills
and gain new technical competencies and certifications was a priority. A new
programme, to further develop the top leaders across the globe and assist with
succession management, was also implemented. The yearly increase in our annual
employee survey scores indicate that, while there are still areas for
improvement, overall our employees are very happy with their employee
experience at Dimension Data.
We work hard at building and enhancing our partnerships with the market
leading IT technology manufacturers whose technologies we integrate into our
clients` IT infrastructures. Building winning relationships with the market
leaders and other specialised manufacturers allows us to deepen our technical
competencies and integration experience. Partnering with the leaders positions
us to capture the integration opportunities associated with market changes.
The opportunity provided by convergence and, in the future, unified
communications requires integration across many disparate components of IT
infrastructure and technology. During 2007, we were recognised for our breadth
of technical expertise and experience with over 80 awards from our partners.
We look to the future with eagerness and optimism. For Dimension Data, 2007
represented a year of significant progress and success on many fronts. Our
geographic footprint and ability to provide technical expertise to our clients
in their local markets continues to provide robustness and a significant
competitive advantage for the Group. But the market opportunities before us
such as the deregulation and expansion of telecommunication services
throughout Africa, the adoption of a converged, IP-based IT infrastructure,
and the emergence of unified communications, continue to invigorate and excite
us. We believe we are still at the beginning of a multi-year journey of
improved performance which requires near-term execution and focus to reach our
long term goals and true potential as a business.
Outlook
This financial year was one of significant progress and success on many
fronts. Our diversified geographic footprint and ability to provide technical
expertise to our clients in their local markets, continue to provide
significant competitive advantage for us. The Group is benefiting from
favourable macro IT industry trends, and we continue to see a number of
exciting opportunities before us, such as the deregulation and expansion of
telecommunication services, the adoption of a converged IP-based IT
infrastructure, and the emergence of unified communications.
We have not been adversely impacted to date by current macro economic
uncertainties, although we continue to monitor developments closely. We expect
to deliver strong organic revenue growth in the financial year ahead, albeit
at rates that are expected to moderate somewhat from the exceptional growth
achieved in 2007. Supported by ongoing investment and a strong balance sheet,
we expect to achieve growth across all lines of business and remain confident
that the Group is well positioned to drive further operational leverage and
profitable growth.
Chief Financial Officer`s Review
To review the underlying performance of the business, the following
adjustments have been made below:
* Unless otherwise indicated, exceptional items are excluded from the
analysis.
* Growth percentages over FY2006 are adjusted for the impact of currency
movements.
* No adjustment is made in the comparisons for acquisitions made during the
current or prior period as these are not considered material to the
comparisons.
* Revenue growth percentages are reflected before adjusting for inter-
company revenue.
Income Statement Summary
Revenue for the year to 30 September 2007 was $3,773.2 million, an increase of
19.5% over the prior year. This growth was predominantly organic, with
acquisitions having no material impact during the period. Revenue growth from
Asia, Europe and Middle East & Africa was particularly strong.
Gross profit for the year was $813.0 million, up 23.4%, displaying a 0.4%
improvement in gross margin to 21.5%. Strong growth in Services revenues was
the main reason for the improved blended gross margin. In the regions, gross
margins in Asia and the Americas strengthened, while Europe`s gross margins
also recovered compared to the prior year.
Overhead growth of 18.7% to $682.0 million was partly the result of the
increased volumes in the business, and also continued investment by the Group
in skills, systems and the expansion of its global footprint. Variable
overheads, including bonuses and sales commission, were up by 28.2% to $118.5
million, while fixed overheads grew by 16.8% to $563.5 million.
Operating profit was strongly up on the prior period to $131.0 million - a
year on year increase of 56.2% - and the operating margin improved from 2.8%
to 3.5%.
The share of results from associates was up by 60.7% to $6.2 million while net
interest costs reduced to $14.9 million.
Property revaluation and other gains and losses included a gain of
$22.2 million relating to the revaluation of a portion of the South African
property asset.
The Group tax charge was $37.2 million, an effective tax rate on profit before
tax of 25.9% (2006: 37.7%). This improvement was mainly the result of improved
profitability from those jurisdictions within the Group which are not
currently paying tax.
Earnings per share were 5.6 cents per share, an increase of 180.0% on the
prior year.
The net impact of exceptional items was to increase profit attributable to
ordinary shareholders by $6.4 million.
Trading and Operations
The revenue and gross margin in the tables below are as reported, whereas the
growth percentages are reflected before intercompany revenue eliminations, and
after adjusting for the impact of currency movements.
2007
$`000 Growth
Lines of business
Network Integration 1,672,316 17.6%
Global lines of business 1,206,109 23.9%
Regional 894,731 17.7%
Total 3,773,156 19.5%
2007
$`000 Growth
Revenue streams
Product 2,249,325 16.0%
Managed Services 950,694 18.7%
Professional Services 573,137 38.0%
Total 3,773,156 19.5%
Regional performance
Americas Asia Australia Europe
$`000
2007
Revenue 579,882 580,829 791,452 960,822
Growth % 9.1 20.5 10.9 20.3
Product 440,272 374,834 607,266 593,387
Growth % 5.6 20.9 7.6 31.5
Services 139,610 205,995 184,186 367,435
Growth % 21.6 19.7 25.8 6.1
Gross margin % 17.8 19.1 18.0 20.7
Operating profit 17,398 36,456 29,169 8,522
Operating margin
% 3.0 6.3 3.7 0.9
Restated **
2006
Revenue 532,977 482,157 660,585 734,715
Product 418,078 310,018 526,032 415,552
Services 114,899 172,139 134,553 319,163
Gross margin % 16.3 18.8 18.7 19.1
Operating profit 10,086 26,179 19,376 1,546
Operating margin
% 1.9 5.4 2.9 0.2
Middle
East & Central &
Africa Other * Total
$`000
2007
Revenue 849,238 10,933 3,773,156
Growth % 36.9 19.5
Product 225,943 7,623 2,249,325
Growth % 25.3 16.0
Services 623,295 3,310 1,523,831
Growth % 41.6 25.3
Gross margin % 28.2 21.5
Operating profit 70,877 (31,428) 130,994
Operating margin
% 8.3 3.5
Restated **
2006
Revenue 653,869 3,659 3,067,962
Product 183,855 3,296 1,856,831
Services 470,014 363 1,211,131
Gross margin % 29.8 21.1
Operating profit 49,387 (22,078) 84,496
Operating margin
% 7.6 2.8
* Includes Campus, and net Central trading and management costs.
** Restated for the adoption of IFRIC 4, the reallocation of the Campus from
Middle East and Africa to Central and Other and the reallocation of
certain Africa revenues from Product to Services.
Lines of Business
In the Group`s global lines of business, Network Integration growth of 17.6%
reflects an outstanding year for the Group`s biggest line of business. The
Group`s heritage is in Network Integration and we further consolidated our
leading global position this year. Several factors contributed to strong
demand for network upgrades, including the convergence of data, voice and
video over the network. In addition, we saw increasing central procurement by
multinational companies, where the Group with its global footprint,
e-procurement solution and logistics capabilities is very well positioned.
Robust demand from the Group`s service provider and financial services clients
also supported growth.
Converged Communications growth of 47.8% reflects market acceptance of IP as
the de facto standard for telephony. The strong growth was also the result of
the Group`s continuing investment in its delivery capabilities, including
enhancements to its global IP Telephony deployment and managed service
methodologies. We also started to see a higher adoption of visual
communication solutions such as IP Video Conferencing.
Security grew by 17.3%. Our clients are increasingly expecting security to be
embedded in all infrastructure projects and the increased demand for a
plethora of new applications means that security solutions have become ever
more complex. In addition, government and industry regulations around
compliance and risk management continue to support demand for secure IT
environments.
In our Microsoft Solutions line of business, which grew by 21.2%, we are
taking a leadership position in helping our clients integrate their existing
network and telephony platforms with their Microsoft infrastructures, to
capture the opportunities presented by unified communications.
Our Data Centre and Storage (DCS) line of business grew by 20.5%, as clients
looked to virtualisation and consolidation technologies to optimise
performance and reduce costs. This together with the Group`s focus on business
continuity and compliance solutions supported growth.
The Client Interactive Services (CIS) line of business was up by 24.5%
(excluding the impact of the downsizing in the prior year of Merchants in the
UK). The Group benefited from strong demand for its contact centre solutions
supported by ongoing migration to IP contact centres. The results reflect very
strong performances in Asia and Europe, as well as from Merchants in South
Africa. Furthermore, the Group`s interest in the TSYS partnership in Europe
performed well.
In the Regional lines of business, Plessey, Internet Solutions and Express
Data grew revenues by 99.4%, 33.3% and 3.8% respectively.
Revenue Streams
Product revenues, being 59.6% of total revenues, grew by 16.0%. Growth was
evidenced in most of the vertical market segments, and in particular spending
by our Service Provider and global clients was robust. Geographically, Product
growth was particularly strong in Asia (20.9%), in Europe (31.5%) and in
Middle East & Africa (25.3%). Our ability to deliver Product efficiently and
effectively to our clients remains a key component of our integrated solutions
offering.
Growth in Services revenues accelerated across all geographies, up strongly by
25.3% to $1,523.8 million. Excluding the impact of strong Services revenue
performances from Internet Solutions, Plessey and Merchants (discussed in more
detail below), the Group`s core Services revenues were up by 20.8%, with
Managed Services up by 19.9% and Professional Services up by 19.4%. Our
Services strategy remains focused on the lifecycle management of IT
investments, extending our traditional `Plan, Build and Support` model to
include `Manage`, where we help clients manage their IT assets to improve ROI
and to maximise business impact through improvement and innovation. This
strategy was supported during the year by ongoing investment in our service
delivery models and platforms. Upgrades during the year to our GSOA meant
further functionality and robustness in our Managed Services platform and
offerings to our clients.
Regions
In the Americas region, which includes our operations in the US, Canada,
Mexico and Brazil, revenue grew by 9.1%, reflecting an acceleration in
revenues in the second half. Services growth of 21.6% was particularly
encouraging. Gross margins improved following a higher services mix and
improved product margins. Operating profit was $17.4 million (up 72.5%) and
the operating margin improved by 1.1% to 3.0% for the year. During the year,
new offices were opened in Mexico and Canada and we increased our interest in
our Brazil partner to 51%.
The Group`s Asian subsidiary, Datacraft, had an excellent year. Supported by
strong revenue growth of 20.5%, gross margin expansion and overhead
management, operating profit expanded to $36.5 million, or 6.3% of revenues.
The Converged Communications and CIS lines of business were particularly
strong, and investment in operational efficiencies, including the
consolidation of service centres in Bangalore and Singapore, supported gross
margins. Overhead containment was the result of ongoing focus on establishing
a standard operating environment across the region.
In Australia, revenues grew by 10.9% and operating profit by 38.4% to $29.2
million. Product revenues were impacted by a stronger Australian dollar and
slower growth in Express Data in the second half, coming off a high base in
the prior period. Managed Services revenues were up 17.9% and gross margins
improved, as a result of new client wins and low churn in the existing Managed
Services base. Professional Services revenues also grew strongly by 33.3%,
while margins were lower due to increased reliance on sub-contractors. Good
control over overheads drove improvement in the operating margin to 3.7% from
2.9% in FY2006.
Europe recorded excellent revenue and gross profit growth of 20.3% and 31.1%
respectively, and gross margin expanded by 1.6% to 20.7%. Overheads increased
by 26.9%, partly as a result of increased variable overheads (commission and
bonus payments) but also as the region invested in systems, sales capacity and
skills. Operating profit grew to $8.5 million at an operating margin of 0.9%
from 0.2% in the prior year. The improved performance of most countries in the
region was very pleasing, while there remains room for improvement in others.
During the year, the Group acquired a 100% interest in a Czech network
integrator, and disposed of its operations in Sweden.
Middle East and Africa`s revenues grew by 36.9% to $849.2 million, and
operating profit expanded to $70.9 million at an operating margin of 8.3%.
Growth was supported by continuing geographic expansion on the continent, with
some 31% of revenues for the period derived outside of South Africa. During
the period, the Group acquired a 51% interest in an IT infrastructure business
in Namibia and opened offices in the United Arab Emirates and in Saudi Arabia.
Revenue growth was particularly strong within the telecommunications sector
and in the public sector. Important successes were achieved at national,
provincial and municipal levels of government during the year. A significant
portion of the region`s successful performance is also attributable to the
positive contribution of the Black Economic Empowerment (BEE) partnership, now
in its fourth year of involvement with the Group.
The four key components of the business - Dimension Data, Plessey, Internet
Solutions and Merchants - all performed exceptionally well.
The Dimension Data business recorded growth in all of its key lines of
business. The Network Integration, Converged Communications and DCS lines of
business delivered very strong performances.
Plessey had an outstanding year, with revenues up 99.4%. This reflected
strength in all three of Plessey`s business units - mobile infrastructure,
fibre rollout and wireless.
Internet Solutions (IS), the Group`s market leading next-generation service
provider, grew revenues by 33.3% for the period. The division`s core access
and VPN operations were solid, as was demand for its hosting solutions. Growth
was also driven by the African operations outside of South Africa and by
continuing uptake of IS` voice offerings.
Merchants South Africa had an excellent year, with continued demand for its
outsourced call centre offerings leading to revenue growth of 21.5% for the
year.
Central and Other includes the results of the property asset in Johannesburg
(the Campus) and net Central trading and management costs. The Campus is for
the first time this year disclosed separately from the results of Middle East
and Africa.
The operating profit contribution from the Campus for the year was $14.4
million. Of this, $13.1 was net rental income on the 81,000m2 property, up
18.0% as a result of improved occupation and firmer rental rates.
Central trading and management costs increased to $49.9 million from
$33.6 million last year, reflecting the Group`s increased investment in its
services strategies and in Group-wide systems and processes. Variable
overheads were also higher, and the costs of the Group share incentive schemes
were adjusted in line with the increased Dimension Data Holdings plc share
price.
Share of Profit of Associates
The share of profit of associates increased to $6.2 million from $3.9 million
in 2006.
Good contributions were made by all of the Group`s key associates, including
Paracon, Healthbridge, Automate, Marpless and TSYS. Britehouse also
contributed from June 2007 when the Group sold a 60% interest in the company
to a consortium of BEE partners and Venfin Limited (see Acquisitions and
Disposals below).
Interest Income and Finance Costs
The Group earned interest of $15.4 million on its cash holdings, which were
$459.2 million at 30 September 2007. Total finance costs were $30.3 million,
including $23.3 million on the capitalised property finance lease in South
Africa.
Property Revaluation and Other Gains and Losses
From 1 January 2007, the Group changed its accounting for the Campus from
`owner-occupied` to `investment property` for the element (56.2%) of the
property which is let to third parties. Based on the Directors` assessment of
fair value at 30 September 2007 a gain of $22.2 million was recorded for the
year. It should be noted that this includes a gain of $13.6 million in respect
of the period 1 January 2007 and 31 March 2007 which, despite being disclosed
in the interim report as exceptional, is now recorded as a normal gain because
it is likely that revaluations of the Campus will be a recurring feature of
the Group`s results.
Taxation
The income tax charge for the period was $36.0 million, as a percentage of
profit before tax improving from 37.7% in the prior period to 25.9%. The
improvement was largely the result of better profitability in those
jurisdictions in the Group which are not currently paying tax because of
accumulated assessed tax losses.
Minority Interests
Based on the results for the year, a further 5.0% economic interest in a
portion of the Group`s business in Middle East and Africa vested at period end
in favour of our Black Economic Empowerment partners, bringing their total
economic interest up to 14.2%.
Acquisitions and Disposals
During the period, the Group concluded a few small acquisitions - in Brazil,
the Czech Republic and Namibia - none of which was material. In addition, in
June 2007 we disposed of our interest in our Swedish operations to a
Scandinavian telecommunication services provider.
The most significant transaction was the disposal in June 2007, to a
consortium of BEE partners and Venfin Limited, of a 60% interest in
Britehouse, a company which houses the Group`s interest in Paracon, an IT
resourcing company, and in two IT application companies, Pebbletree and
3Fifteen.
Exceptional Items
Several matters were highlighted as exceptional during the period.
In FY2006, we reported a $7.5 million exceptional profit in respect of an
unrealised foreign exchange gain flowing from the intention to settle an
intercompany loan. This and certain other related loans were settled during
the period, and a $6.6 million loss was recognised due to changes in foreign
exchange rates.
A gain of $11.2 million (before capital gains taxes) was recorded on the sale
of 60% of Britehouse. In Britehouse itself, a BEE expense of $0.5 million was
incurred.
An expense of $3.7 million was incurred in respect of the settlement and
associated legal costs of a legal case brought against the Group`s US
operations.
A gain of $3.2 million was recorded in respect of a refund of Australian
withholding costs on royalties previously overpaid. Tax on this gain amounted
to $1.0 million.
A deferred tax asset of $4.2 million was raised as a result of a reassessment
of the tax loss in South Africa.
The cumulative impact of the above, net of minority interests, was to increase
profit attributable to equity shareholders of the Company by $6.4 million.
Balance Sheet
Non-current assets
The Group`s investment in property, plant and equipment reduced during the
period to $165.0 million mainly as a result of the reclassification as an
investment property of a portion of the South African property capitalised
under finance lease.
Capital expenditure on property, plant and equipment (net of disposals) was
$58.4 million, compared to $55.4 million last year. A significant portion of
this related to Internet Solutions, as that division invested in equipment for
its internet access clients, in expanding its Virtual Private Network, and in
establishing new data centre capacity.
Capex Depreciation
$ million 2007 2006 2007 2006
Americas 3 1 2 2
Asia 8 6 8 8
Australia 4 3 4 4
Europe 8 5 8 7
ME&A, excluding IS 4 3 3 3
Internet Solutions 31 28 16 11
Central - 9 6 7
Group 58 55 47 42
The Group`s $6.1 million investment in a venture with TSYS Inc, together with
the investment reallocation of a $15.1 million interest in Britehouse to
associates, offset by the sale of Paracon of $11.7 million to Britehouse,
partly led to the increase in investments in associates from $15.1 million to
$30.4 million.
Current assets
The 12.0% growth in inventories to $192.7 million (2006: $172.0 million) is a
pleasing result given the much higher revenue growth in the business. Trade
and other receivables grew by 29.9% to $1,003.6 million. Of this, trade
receivables increased by 23.9%, roughly in line with the increased revenues
for the period.
Non-current liabilities
Obligations under finance lease of $149.9 million relate predominantly to the
property finance lease in South Africa. Other long term liabilities of
$31.2 million include vendor financing for long term maintenance contracts in
the UK and the US.
Current liabilities
Trade and other payables amounting to $1,213.2 million, were up 30.1% compared
to $932.5 million at 30 September 2006. Trade payables were $448.8 million, up
20.8%. There were no material changes in the underlying payment terms with our
vendors.
Cash Flow
Net cash from operating activities increased to $177.1 million from $12.5
million in the prior year. This included cash generated from a $19.1 million
reduction in working capital, an excellent result given the volume growth in
the business for the period. Income taxes paid and interest paid were also
lower than last year.
The Group used $83.3 million in investing activities, including $60.5 million
of capital expenditure on property, plant and equipment and intangibles. In
addition, $32.3 million was invested in treasury shares, most of which related
to an amount of $25.5 million where the Company purchased 22,033,259 of its
own shares, currently held in trust, to settle future SARS and LTIP
obligations.
At the end of the year, cash and cash equivalents were $459.2 million compared
to $347.9 million at 30 September 2006, while bank overdrafts decreased from
$6.2 million to $3.4 million.
Principal Risk Factors
In terms of the UK Companies Act 1985, a description of the principal risks
and uncertainties facing the Group is required. Set out below are some of the
factors which could have an impact on the Group`s long term performance. These
should not be regarded as a complete and comprehensive range of all potential
risks and uncertainties facing the Group.
Professional liability (execution and delivery)
The design, support, and project management nature of most client engagements
requires application of high standards of process control, compliance and
delivery ability. If the client`s expectations are not met, the Group`s
reputation could be damaged and the Group could be subject to increased risk
of litigation. The Group could also be required to provide corrective services
to clients at no charge. The Group continues to monitor its processes to
ensure quality in its delivery and project management. The Group also carries
general liability insurance coverage.
People retention
Failure to retain and recruit key personnel could harm our ability to meet key
objectives. A key aspect of the Group`s strategy is to provide an outstanding
employment experience that offers employees the opportunity to grow personally
and professionally and also attracts high quality employees to the Group.
The Group has implemented a comprehensive programme to ensure employee
retention, including; promotion and support of career development, a
structured approach to employee incentives, discipline and consistency in
reward and recognition, and effective communication with employees around
strategy execution.
Vendor risk
The Group forms close and mutually beneficial partnerships with leading
technology vendors. This enables it to provide its clients the most advanced
and flexible technology solutions. The Group`s relationship with these key
vendors is important to its continued success.
Termination of a supply or services agreement or a significant change in
vendor terms or conditions of sale could negatively affect our operating
margins, revenue or the level of capital required to fund our operations.
Liquidity risk
Liquidity risk management within the Group focuses on working capital metrics,
cash balances as well as the adequacy of the Group`s borrowing facilities. The
short term liquidity needs of the Group are managed on a daily basis to ensure
that contractual cash flow obligations, and potential cash flows arising from
undrawn commitments and other contingent obligations, can be met as they
arise.
Currency risk
The Group has operations in over 40 countries and receives revenues and incurs
costs in numerous foreign currencies, the most material of which are the South
African rand, the Australian dollar, Sterling and the Euro. It is not the
Group`s policy to hedge foreign currency earnings and as a consequence,
movements in exchange rates can affect the Group`s results.
When Dimension Data invoices in local currency and has a foreign currency
exposure to suppliers, it generally either uses forward exchange contracts to
hedge the exposure, or adjusts the price charged to clients to take account of
exchange rate fluctuations. In particular, many of the products resold by the
Group are paid for in US dollars.
The following table reflects the average and year end exchange rates against
the US dollar of SA rand, Australian dollar, Sterling and Euro:
2007 2006
Period Period
Average End Average End
Australian dollar 1.229 1.126 1.337 1.341
Euro 0.746 0.701 0.808 0.789
South African rand 7.142 6.871 6.691 7.764
Sterling 0.509 0.488 0.559 0.535
Business continuity risk
The ability to seamlessly provide clients with high service levels is a
critical element of the Group`s service offering. This service delivery is
dependent on people and IT infrastructures to continue operating. The Group
has a business continuity programme in place to address this risk.
New product and technology risk
The market for the products and services offered by the Group is characterised
by rapid technological developments, evolving industry standards, changes in
client requirements, frequent new product introductions and enhancements and
short product life cycles. The Group`s success depends upon its ability to
continue to adapt to these changes and to develop new services in response.
The Group invests in this area by understanding the value propositions
required, building its capabilities in focused areas, and developing depth of
skill and competence in prioritised growth markets.
Restatements and changes in Accounting Policies
The results for the year to 30 September 2006 have been restated for the
effects of adopting new accounting policies, as well as certain classification
adjustments.
The accounting interpretation `IFRIC 4: Determining Whether an Arrangement
Contains a Lease` was adopted in the current financial year; the impact of
this on the results for the year to 30 September 2006 was to decrease
operating profit by $0.5 million and increase investment income by $0.6
million, with a net increase in profit before tax of $0.1 million.
The change in use of the Campus property, which is detailed in Notes 1 and 7
to the condensed financial statements.
The change in the accounting for the South African property asset is accounted
for prospectively.
Product and Services revenues in the prior year have been restated for the
reallocation of $23.1 million of Middle East & Africa`s revenue from Product
to Services.
Refer to Note 1 of the Notes to the condensed consolidated financial
statements for further details on the impact of the above items.
Dividend
The Directors recommend the payment of a dividend of 1.5 US cents per share
(2006: one US cent). Subject to shareholders` approval at the Annual General
Meeting on Wednesday, 30 January 2008, the final dividend will be paid on
Friday, 14 March 2008 to shareholders on the share register at the close of
business on Friday, 15 February 2008.
The dividend will be paid in sterling to shareholders on the UK register and
in South African rand to shareholders on the South African register, converted
from US dollars as at the close of business on Thursday, 31 January 2008. The
Directors will not be offering a share alternative to the 2007 final dividend.
The following are the salient dates for the payment of the proposed dividend:
Announcement of conversion rate Friday, 1 February 2008
Last day to trade on the JSE Friday, 8 February 2008
Date trading commences `ex`
the dividend on the JSE Monday, 11 February 2008
Date trading commences `ex`
the dividend on the LSE Wednesday, 13 February 2008
Record date on the JSE and LSE Friday, 15 February 2008
Payment of dividend Friday, 14 March 2008
No transfers between the UK and South African registers may take place during
the period Friday, 1 February 2008 and Friday, 15 February 2008 (both days
inclusive). Shareholders on the South African register should note that, in
accordance with the requirements of Strate, no dematerialisation or
rematerialisation of shares will be possible from Monday, 11 February 2008 to
Friday, 15 February 2008 (both days inclusive).
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 30 September 2007
Restated
2007 2006
Notes $`000 $`000
Revenue 3,773,156 3,067,962
Cost of sales (2,960,169) (2,420,565)
Gross profit 812,987 647,397
Administrative, selling and
distribution expenses (689,120) (567,175)
Operating profit 123,867 80,222
Share of profit of associates 5,740 3,863
Interest and investment income 15,446 13,578
Finance costs (30,315) (32,057)
Property revaluation and other gains
and losses 35,767 (138)
Profit before tax 150,505 65,468
Tax 4 (36,034) (8,310)
Profit for the year 114,471 57,158
Attributable to:
- Equity shareholders of the parent 92,528 40,602
- Minority interest 21,943 16,556
114,471 57,158
Earnings per ordinary share:
US Cents US Cents
- Basic 6 6.0 2.7
- Diluted 6 5.6 2.6
Proposed dividend per ordinary share 1.5 1.0
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 September 2007
Restated
2007 2006
Notes $`000 $`000
Non-current assets
Property, plant and equipment 165,014 185,977
Investment property 7 92,805 -
Goodwill 90,557 73,118
Other intangible assets 16,914 13,482
Investments in associates 30,381 15,053
Other investments 6,971 7,218
Deferred tax assets 41,248 30,737
Trade and other receivables 8 36,804 26,862
480,694 352,447
Current assets
Inventories 192,658 171,970
Trade and other receivables 8 1,003,554 772,527
Cash and cash equivalents 459,197 347,909
Assets classified as held for sale - 11,365
1,655,409 1,303,771
TOTAL ASSETS 2,136,103 1,656,218
Equity
Equity attributable to equity
shareholders of the parent 561,947 437,548
Minority interests 128,242 105,540
Total equity 690,189 543,088
Non-current liabilities
Bank overdrafts and loans 4,144 21,412
Other long term liabilities 31,207 5,001
Obligations under finance leases 149,919 125,803
Deferred tax liabilities 2,295 2,048
Provisions 9,517 6,195
197,082 160,459
Current liabilities
Trade and other payables 9 1,213,153 932,486
Bank loans 20,475 5,628
Bank overdrafts 3,439 6,236
Provisions 11,765 6,099
Liabilities directly associated with
assets held for sale - 2,222
1,248,832 952,671
Total liabilities 1,445,914 1,113,130
TOTAL EQUITY AND LIABILITIES 2,136,103 1,656,218
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2007
Restated
2007 2006
$`000 $`000
Cash from operating activities
Operating profit 123,867 80,222
Adjustments for:
Depreciation and amortisation 52,680 49,764
Movement in provisions 9,492 (3,052)
Share-based payment expensed 24,457 13,893
Other non-cash items 2,684 (1,800)
Cash generated before movements in working
capital 213,180 139,027
Decrease/(increase) in inventories 1,349 (50,715)
Increase in trade and other receivables (168,037) (138,245)
Increase in trade and other payables 185,837 127,506
Cash generated from operations 232,329 77,573
Income taxes paid (30,619) (35,925)
Interest paid (24,609) (29,133)
Net cash from operating activities 177,101 12,515
Cash flows from investing activities
Interest received 15,445 10,784
Net investment in business interests 5,033 (18,861)
Acquisition of property, plant and equipment and
intangibles, net of proceeds on disposal (65,985) (54,588)
Treasury share buy back undertaken by
subsidiary and holding company (32,330) (17,690)
Deferred consideration paid (5,500) (8,597)
Net cash used in investing activities (83,337) (88,952)
Cash flows from financing activities
Repayment of borrowings (7,338) (29,876)
New bank loans and finance leases raised 16,476 36,483
Dividends paid to ordinary shareholders (15,170) -
Dividends paid to minorities (10,602) (222)
Proceeds on issue of new shares net of
expenses 6,712 3,590
Net cash (used in)/from financing activities (9,922) 9,975
Net increase/(decrease) in cash and cash
equivalents 83,842 (66,462)
Cash and cash equivalents at beginning of the
year 341,673 410,558
Exchange differences on cash and cash
equivalents 30,243 (2,423)
Cash and cash equivalents at end of the year 455,758 341,673
Made up as follows:
Cash and cash equivalents 459,197 347,909
Bank overdrafts (3,439) (6,236)
455,758 341,673
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Attributable
capital Total to equity
and other Retained holders of
Premium reserves* earnings parent
$`000 $`000 $`000 $`000
30 September 2006
as reported 214,929 200,733 21,305 436,967
IFRIC 4 restatement - (136) 717 581
30 September
2006 restated 214,929 200,597 22,022 437,548
Profit for the
period - - 92,528 92,528
Items recognised
directly in equity (18,764) 61,106 (10,471) 31,871
Share incentive
schemes - 15,581 - 15,581
Share incentives
settled - (1,020) - (1,020)
Deferred tax on
share incentive
schemes - 7,336 - 7,336
Currency
adjustments - 52,467 - 52,467
Deferred tax
arising on
revaluation of
loans - (471) - (471)
Dividends paid - - (15,170) (15,170)
Shares issued 6,712 - - 6,712
Shares held in
Employee Trust (25,476) - - (25,476)
Subsidiaries
acquired/changes
in holdings - 262 - 262
Vesting under
BEE scheme - (8,260) - (8,260)
Revaluation of
investment
property - 5,756 - 5,756
Deferred tax on
revaluation of
investment
property - (1,669) - (1,669)
Transfers to
income statement - (4,260) - (4,260)
Movement in
investment
valuations - 255 - 255
Other - (172) - (172)
Transfers - (4,699) 4,699 -
30 September 196,165 261,703 104,079 561,947
2007
Minority
interests Total equity
$`000 $`000
30 September 2006
as reported 105,490 542,457
IFRIC 4 restatement 50 631
30 September
2006 restated 105,540 543,088
Profit for the
period 21,943 114,471
Items recognised
directly in equity 759 32,630
Share incentive
schemes - 15,581
Share incentives
settled - (1,020)
Deferred tax on
share incentive
schemes - 7,336
Currency
adjustments 441 52,908
Deferred tax
arising on
revaluation of
loans - (471)
Dividends paid (10,600) (25,770)
Shares issued - 6,712
Shares held in
Employee Trust - (25,476)
Subsidiaries
acquired/changes
in holdings 3,645 3,907
Vesting under
BEE scheme 8,260 -
Revaluation of
investment
property - 5,756
Deferred tax on
revaluation of
investment
property - (1,669)
Transfers to
income statement - (4,260)
Movement in
investment
valuations - 255
Other (987) (1,159)
Transfers - -
30 September 128,242 690,189
2007
* Other reserves principally comprise consolidation reserves arising prior
to the unbundling of the underlying assets into the Company at the time
of its LSE listing in 2000.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2007
1. BASIS OF PREPARATION
The results for the year have been prepared on a basis consistent with the
accounting policies set out in the Dimension Data Holdings plc Annual Report
for the year ended 30 September 2006, with the following exceptions:
* IFRIC 4 Determining Whether an Arrangement Contains a Lease was
adopted with effect from 1 October 2005. The change in accounting policy
required by IFRIC 4 results in a restatement of prior year figures
(`restated`).
* The Group has adopted the amendments to IAS 39 Financial Instruments:
Recognition and Measurement relating to financial guarantee contracts.
This had no impact on the consolidated results at 30 September 2007.
* The Group has adopted IFRIC 6 Liabilities arising from Participating in a
Specific Market - Waste Electrical and Electronic Equipment. This had no
impact on the consolidated results at 30 September 2007.
* IFRIC 7 `Applying the Restatement Approach` under IAS 29 `Financial
Reporting in Hyperinflationary Economies` had no impact on the
consolidated results at 30 September 2007.
* IFRIC 8 `Scope of IFRS 2` had no impact on the consolidated results
for the period prior to 1 October 2006. In the current year an expense of
$0.5 million was incurred in an associate company.
* IFRIC 9 `Reassessment of Embedded Derivatives` had no impact on the
consolidated results at 30 September 2007.
* IFRIC 10 `Interim Financial Reporting and Impairment`. This had no
Impact on the consolidated results at 30 September 2007.
Following a change in use of the Group`s Campus property located in South
Africa, the Group has accounted for the portion that is held to earn rentals
or for capital appreciation as investment property. Investment property is
carried at fair value and changes in fair values are recognised in income.
Further details about the effect of the change in accounting policy are
provided below.
The preparation of the financial statements in conformity with the Group`s
accounting policies requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the balance sheet date, and the reported
amounts of revenue and expenses during the reported period. Whilst these
estimates and assumptions are based on the Directors` best knowledge of the
amount, events or actions, actual results may differ from those estimates.
The financial information set out above does not constitute the Company`s
statutory accounts for the years ended 30 September 2007 or 2006, but is
derived from those accounts. Statutory accounts for 2006 have been delivered
to the Registrar of Companies and those for 2007 will be delivered following
the Company`s Annual General Meeting. The auditors, Deloitte & Touche LLP,
have reported on these accounts; their reports were unqualified and did not
contain statements under Section 237(2) or (3) of the Companies Act 1985. The
Annual Report will be available for inspection at the Company`s registered
office.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with IFRS, this announcement does not itself
contain sufficient information to comply with IFRS. The Company expects to
publish full financial statements in December 2007.
Restatement and new accounting policies
IFRIC 4 Determining Whether an Arrangement Contains a Lease
IFRIC 4, which was adopted in the current financial year, provides guidance on
whether complex arrangements include a lease. As a result of this requirement,
certain arrangements have required reclassification as leases. In accordance
with the transitional provisions, this has resulted in the derecognition of
$5.9 million of property, plant and equipment at 1 October 2005 ($5.1 million
30 September 2006), and $1.2 million of inventory at 30 September 2006 offset
by the recognition of finance lease receivables of $6.6 million ($5.5 million
30 September 2006). As a consequence, net assets as at 1 October 2005 were
restated from $407.3 million to $407.8 million ($542.5 million to $543.1
million as at 30 September 2006). Operating profit for the year ended 30
September 2006 decreased by $0.5 million which has been offset by a similar
increase in interest and investment income of $0.6 million. As a consequence,
profit before tax for the year ended 30 September 2006 increased by $0.1
million.
Investment property
At 31 December 2006, following the change in use of the Campus property, the
portion held to earn rentals or for capital appreciation was classified as
investment property. Investment properties are stated at fair value. When
property is transferred to investment property following a change in use, any
difference arising at the date of transfer between net book value and
valuation is taken to equity. This resulted in a credit to equity of $4.1
million (net of a deferred tax charge of $1.7 million). Any subsequent
valuations are included in the income statement. (See note 7).
2. SEGMENTAL ANALYSIS
Middle
East &
Americas Asia Australia Europe Africa
$`000 $`000 $`000 $`000 $`000
2007
Revenue 585,043 580,829 912,004 981,683 931,582
Operating
profit* 17,398 36,456 29,169 8,522 70,877
2006
(Restated)
Revenue 536,223 482,157 756,470 751,281 723,400
Operating
profit* 10,086 26,179 19,376 1,546 49,387
Central Inter-
& company
Other** revenues Total
$`000 $`000 $`000
2007
Revenue 16,065 (234,050) 3,773,156
Operating
profit* (31,428) 130,994
2006
(Restated)
Revenue 14,561 (196,130) 3,067,962
Operating
profit* (22,078) 84,496
* Before exceptional items
** Includes net rental income from the Campus of $13.1 million.
3. EXCEPTIONAL INCOME/(COSTS)
Notes
2007 2006
$`000 $`000
Exceptional operating income/(costs)
Foreign exchange (loss)/gain on loans a) (6,617) 7,519
Legal settlement b) (3,726) -
Withholding costs refund c) 3,216 -
Other g) - (11,793)
Total exceptional operating items (7,127) (4,274)
Exceptional associate costs
BEE expense in Britehouse d) (469) -
Exceptional other gains
Profit on sale of Swedish operations e) 3,012 -
Profit on sale of Britehouse d) 11,193 -
Total exceptional other items 14,205 -
Exceptional tax
Deferred tax credit f) 4,197 17,953
Capital gains tax on sale of shares - Paracon d) (1,761) -
Capital gains tax on sale of shares -
Britehouse d) (294) -
Tax on withholding costs refund c) (965) -
Total exceptional tax 1,177 17,953
Exceptional income after tax 7,786 13,679
Minorities` share of exceptional items (1,354) (3,256)
Net exceptional income 6,432 10,423
a) Foreign exchange losses previously included in Other Reserves, now
recorded in the income statement as a result of the settlement of certain
loans. In addition foreign exchange losses were incurred on the
revaluation of the loan designated as short term in the prior year which
was settled in H2 2007.
b) In June 2007, the Group agreed to the settlement of a legal case brought
against its US operations. The Group denied wrong doing but chose to
settle to bring proceedings to an end. An amount of $3.7 million,
inclusive of settlement costs and legal fees, was paid.
c) Refund of withholding costs on royalties previously overpaid by the
Australian operations. Tax of $1.0 million was incurred as a result of
this refund.
d) Profit on sale of 60% of Britehouse Holdings (Proprietary) Limited, a
South African company holding certain applications businesses in the
African segment. This sale resulted in a capital gains tax of $0.3
million. The shares in Paracon were transferred from within the Group to
Britehouse prior to the sale and this resulted in a capital gains tax of
$1.8 million. In Britehouse itself, a BEE expense of $0.5 million was
recorded on the acquisition of the companies.
e) Profit on sale of 100% of the Dimension Data operations in Sweden.
f) A deferred tax asset of $4.2 million was created as a result of a
reassessment of the tax loss in South Africa.
g) Other comprises, in respect of the prior year: $5.2 million in respect of
the Asian insurance claim proceeds; a provision of $12.8 million against
work in progress and receivables in the UK cabling business; and closure
costs of $4.2 million in respect of certain contact centre operations in
Europe.
Reconciliation of reported amounts to Restated
adjusted amounts 2007 2006
$`000 $`000
Statutory operating profit 123,867 80,222
Exceptional operating costs 7,127 4,274
Adjusted operating profit 130,994 84,496
Statutory attributable profit after tax 92,528 40,602
- Exceptional operating costs 7,127 4,274
- Exceptional associate cost 469 -
- Exceptional other gains (14,205) -
- Exceptional tax items (1,177) (17,953)
- Minorities` share 1,354 3,256
Adjusted attributable profit after tax 86,096 30,179
4. TAX
Restated
2007 2006
$`000 $`000
Current tax 37,715 31,037
Deferred tax - current period 1,352 (1,651)
Deferred tax - prior periods (3,033) (21,076)
Total tax expense 36,034 8,310
This expense relates predominantly to tax jurisdictions outside of the United
Kingdom.
5. DIVIDENDS PER SHARE
A final dividend of 1 cent per share was paid on 16 March 2007. A dividend of
1.5 cents has been proposed.
6. EARNINGS PER SHARE
Restated
2007 2006
`000 `000
Weighted average number of ordinary shares:
- for basic earnings per share 1,545,306 1,490,167
- for diluted earnings per share 1,662,818 1,558,108
$`000 $`000
Earnings for basic and diluted earnings per
share 92,528 40,602
Exceptional items (6,432) (10,423)
Earnings before exceptional items 86,096 30,179
US Cents US Cents
Basic earnings per share 6.0 2.7
Diluted earnings per share 5.6 2.6
Earnings per ordinary share before exceptional items 5.6 2.0
7. INVESTMENT PROPERTY
Following the change of use in respect of the Campus, the portion held to earn
rentals or for capital appreciation was classified as an investment property.
With this change, the difference arising at the date of transfer between net
book value and valuation was taken to equity. This resulted in a net credit to
equity of $4.1 million (net of deferred tax charge of $1.7 million).
A fair value assessment of the Group`s investment property was established by
management at 30 September 2007, and the property is stated at $92.8 million.
Subsequent revaluations of the investment property are included in the income
statement and this resulted in a credit to Property Revaluation of $22.2
million and a deferred tax charge of $6.4 million.
8. TRADE AND OTHER RECEIVABLES
Restated
2007 2006
$`000 $`000
Trade receivables 767,654 619,393
Other receivables 96,916 65,283
Prepayments and accrued income 143,075 92,021
Taxation authorities 32,713 22,692
1,040,358 799,389
Analysed as follows:
Long term portion 36,804 26,862
Short term portion 1,003,554 772,527
1,040,358 799,389
9. TRADE AND OTHER PAYABLES
Restated
2007 2006
$`000 $`000
Trade payables 448,828 371,598
Other payables 178,555 107,707
Accruals 266,741 195,649
Deferred income 188,625 151,376
Deferred consideration 1,712 5,152
Taxation authorities 128,692 101,004
1,213,153 932,486
10. ACQUISITIONS AND DISPOSALS
The Group concluded a number of smaller acquisitions during the period,
including: a 100% holding in Unreal Technology a.s, a company incorporated in
the Czech Republic; a 51% holding in Dimension Data Namibia (Pty) Ltd; an
additional 40.1% interest in Datacraft Americas Holdings Limited, the 100%
holding company of Datacraft do Brazil Ltda, bringing the Group`s shareholding
to 50.1%; an additional 46.15% interest in Automate (Proprietary) Limited, a
South Africa company, bringing its holding to 92.3%. None of these
acquisitions
had a material impact on the balance sheet or reported result for the year
ended 30 September 2007
In June, the Group disposed of two interests, namely its Swedish operations to
another Swedish- based company, Cygate AB, and 60% of the ordinary share
capital of Britehouse Holdings (Proprietary) Limited to a consortium of BEE
partners and VenFin Limited.
11. CESSION OF ASSETS AND LEASES
Trade receivables of $83.0 million (September 2006: $80.0 million) and bank
balances amounting to $99.1 million (September 2006: $14.6 million) in the
South African business were ceded to a financial institution as security for a
working capital loan of $20.4 million (September 2006: $23.2 million).
As security for the construction of a new building at the Campus, the Group
ceded the sub-lease agreements of $8.0 million (September 2006: $8.5 million)
to the banks who funded the construction.
In the US an amount of $121.3 million (September 2006: $127.5 million) of
trade
receivables and $3.4 million (September 2006: $10.4 million) of inventory were
ceded as security in respect of a working capital facility.
Enquiries:
Dimension Data Holdings plc
Jeremy Ord, Chairman
Brett Dawson, Chief Executive Officer
David Sherriffs, Chief Financial Officer
Karen Cramer, Investor Relations (UK)
Mobile: +(44) 793 202 0296
Office: +(44) 20 7651 7017
karen.cramer@uk.didata.com
Kevin Handelsman, Investor Relations (SA)
Office: +(27) 11 575 3632
Mobile: +(27) 82 453 9945
kevin.handelsman@za.didata.com
Internet address: www.dimensiondata.com
Press enquiries:
Hilary King
Global PR Manager
Dimension Data Holdings plc
Mobile: +(27) 82 414 9623
Office: +(27) 11 575 6728
hilary.king@za.didata.com
James Melville-Ross
Financial Dynamics
Holborn Gate, 26 Southampton Buildings
London, WC2A 1PB
Mobile: +(44) 7909 684 467
Matt Dixon
Financial Dynamics
Mobile: +(44) 7703 330 913
Office: +(44) 20 7831 3113
Date: 14/11/2007 09:00:03 Produced by the JSE SENS Department.
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