| Wed 12 Nov 2008, 10:33 | | DDT - Dimension Data Holdings Plc - Preliminary results year ended 30 September |
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DDT
DIDDT
DDT - Dimension Data Holdings Plc - Preliminary results year ended 30 September
2008
Dimension Data Holdings Plc
JSE Code: DDT
ISIN: GB0008435405
Preliminary Results
Year ended 30 September 2008
Dimension Data Holdings plc (`Dimension Data` or the `Group`) today announced
its results for the year ended 30 September 2008. The results have been
prepared in accordance with International Financial Reporting Standards, as
adopted by the European Union.
Highlights
Revenue up by 19.5% to USD4.5 billion
Gross profit up 19.7% to USD973.3 million
Operating profit up 3 9.1%(1) to USD182.2 million
Operating margin increased to 4.0% (2007: 3.3%)
Earnings per share increased 28.3% to 7.7 cents (2007: 6.0 cents)
Constant currency revenue (2) up by 16.9% (Product up 15.6%, Services up
19.0%)
Growth and margin expansion in all Regions
Supported by Network Integration up 20.4% (2), Security up 31.6% (2) and
Converged Communications up 22.4% (2)
Supported by strong performances from Internet Solutions and Plessey
Financial Summary
USD`000 2008 2007
Revenue 4,510,640 3,773,156
Operating profit 182,214 123,867
Operating margin 4.0% 3.3%
Earnings per ordinary share (US cents) 7.7 6.0
Operating profit (before exceptional items) 182,214 130,994
Operating margin (before exceptional items) 4.0% 3.5%
Earnings per ordinary share (US cents) (before 7.4 5.6
exceptional items)
Notes:
(1) Before exceptional items. See reconciliation in Note 3 to the condensed
financial statements.
(2) Before eliminating intercompany revenue, adjusting for the disposal of the
Swedish operations in the prior year and, except in the case of Datacraft Asia,
adjusted for the impact of currency movements.
Chief Executive Officer`s Review
Overview
The Group`s performance over the past financial year has been excellent, with
strong revenue growth of 19.5%. We have maintained our gross margin and driven
operating profit(1) growth of 39.1% to an operating margin of 4% - a position
that puts us firmly on track to achieve our medium-term goal of 5% for the
Group. The benefits have manifested themselves in significant EPS growth of
28.3%. In
addition to our improved financial results, our cash generation during the
period was excellent, driven by disciplined working capital management.
Our strong financial results are testament to the ongoing success of the
Group`s strategy, as evident in the outstanding rate of Services growth, which
hit 19.5% this year. This now reflects a compound annual growth rate of 22%
over the past three years and is a significant and resounding achievement for
the Group.
We achieved growth across all of our businesses. In our largest business, the
Systems Integration (SI) business, which accounts for 77.1% of revenues and
operates in 47 countries around the world under the Dimension Data and
Datacraft brands, we grew by 18.8%, evidencing a growing market share and
strengthening competitive position. The performance was underscored by the
achievement of a number of significant awards.
Within our regional businesses, Internet Solutions and Plessey, both of which
address the growing telecommunications sectors in Africa, achieved strong
growth. In Express Data, our Australian distribution business, the rate of
growth was more muted.
Strong geographic performances in all regions reflect the improving robustness
of our business model. Accelerated revenue growth was evident in all regions,
but the emerging markets of Asia and Middle East and Africa led the Group with
outstanding revenue growth of 23.9% and 27.1%, respectively. Operating profit
improved across all geographies, with an exceptional improvement of 108.5% in
Europe. Australia and Middle East and Africa posted particularly healthy
improvements in their operating margins.
The Group has enjoyed robust growth over the past few years and even in the
current market conditions there are still a number of key areas within which
clients are willing, and continuing, to invest. We continue to see our clients`
sourcing strategies evolve and believe that the present market conditions will
prove particularly conducive to the benefits of Multisourcing, whereby clients
can outsource specific elements of their IT environment to `best-of-breed` IT
service providers while retaining other IT functions in-house. Over the past
few years, we have been investing in positioning ourselves for these
opportunities and, during the period, we have started to see signs of early
wins across several geographies and are optimistic of future growth
opportunities.
Deploying technology which can drive cost reduction opportunities for our
clients is currently a real opportunity for Dimension Data. During FY2008 we
have developed and introduced a number of services that play to this focus,
including ITSM, performance optimisation, virtualisation and power and cooling
assessment services, all of which are gaining market traction. Likewise, data
centre consolidation, technology refresh projects, security consolidation and
server and storage virtualisation remain strong drivers in the move towards
cost and capacity optimisation and the focus of significant market interest. In
addition, many of these cost saving technologies require network
re-architecture and optimisation; a fast and long-lasting return on investment
makes them a priority investment for many clients. Over and above network
investment being a pre-requisite for a myriad of cost saving technologies, the
network itself remains an integral, mission critical component for the majority
of enterprises.
Security is proving to be equally insulated from budgetary caution; businesses
simply cannot afford to have security breaches, data leaks and compliance
failures. Companies may now be forced to make breaches public and explain their
redress, a costly exercise both in monetary and reputational terms. Compliance
can actually prove to be a business pre-requisite, particularly in the retail
industry, and will often unlock IT spend with considerable speed. Security is
the fastest growing line of business year on year within Dimension Data and we
envisage continued market opportunities going forward.
The push for increased operational efficiencies, cost reductions and
environmental responsibility has also spawned a substantial client interest in
the capabilities of visual communications technologies. These technologies
reduce the need to outlay expensive travel and time resources, as well as
minimising environmental impact, and have demonstrated tremendous growth.
The successful execution 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 culture - is clearly paying
dividends. The recognition that the Group has received from its clients,
vendors and employees, coupled with a proven ability to meet our commitments to
all three, provides us with confidence as we head into less certain economic
times.
Strengthening our position
We regard our clients, our people and our partners as the barometers by which
we measure our operational performance - an approach that continues to be a
cornerstone of the Group`s success. Dimension Data currently holds a
significant number of partner awards, an achievement which underscores our
partners` recognition of the breadth of our technical expertise and experience.
We are particularly proud of our recent positioning, by leading industry
analyst Gartner (1), in their Magic Quadrant for Managed and Professional
Network Service Providers, Worldwide, Eric Goodness et. al., 22 August 2008 (2),
which examined 14 vendors of IT services for business communication systems
worldwide. We believe the recognition of our ability to execute and
completeness of vision is testament to the Group`s commitment to delivering
operational excellence to our clients, and proves that we are firmly on track
with the execution and delivery of our Services strategy within the Systems
Integration business. Our extensive experience providing integrated unified
communications solutions has also garnered us strong recognition from the
industry.
The Group has always articulated the pivotal importance of investing in our
employees. We strongly believe that our people are, and must continue to be, a
key differentiator for the business. In enabling, developing and retaining
excellence in our people we are able to pass the benefits of these attributes
on to our clients. Our continued investments in training and development have
earned industry recognition, specifically for our Internet Protocol Technology
(IPT) initiatives.
Our annual employee satisfaction survey shows its fourth year of improvement,
and the retention of senior leadership within the Group is particularly strong,
with an attrition of just 4%. The past year has seen continued focus on
expanding our employees` accreditations across the board; we now hold almost
2000 Microsoft certifications and well over a thousand Information Technology
Information Library (ITIL) certifications. We have also increased our Cisco
certifications by 20% over the past year, which now include 6 Master
Certifications and 211 CCIEs.
The Group`s improved financial performance comes against a backdrop of ongoing
investment across the Systems Integration business, which will enable us to
build for further future success. To achieve service delivery excellence and to
improve the client experience across the services lifecycle, we have made
systems, people and process related investments. To improve the integration and
efficiency of our Global Services Operating Architecture (GSOA) we are in the
process of implementing a globally consistent IT service management platform to
enhance service delivery to our clients, create new revenue generating
opportunities for the Group and improve our operational and cost efficiency.
We have invested in a Group wide re-launch of Uptime, our maintenance service
offering. We have introduced a new standard platform, systems and process for
this offering in order to sell Uptime more profitably, increase contract
revenue, reduce price churn and, at the same time, improve our client`s
experience. Our Uptime service is an annuity revenue stream and success here
improves the resilience of our business model. The Group has also invested in a
Services International Project Office to accelerate and co-ordinate our
response to global opportunities. We are driving towards total alignment with
ITIL, an industry best practice framework for IT service delivery, across our
services offerings.
In addition to investment in the consistency of our operational delivery, we
have also made investments in our go to market offerings to help orientate the
business to a more services led approach. Our Secure Network Infrastructure
Assessment (SNIA) identifies which hardware and software is in, or approaching,
end-of-support and gives organisations the opportunity to up date and
standardise technology to ensure manufacturer support. This consultative
approach can also help us identify further opportunities for infrastructure
improvement within the organisation. Our Unified Communications Development
Model (UCDM), which assists clients in building a strategic and operational
roadmap to implement a unified communications strategy, has received
significant industry and client recognition and helped enhance our reputation
and credibility across our client base as thought leaders.
We have seen similar strong interest and lead opportunities in our IT Service
Management (ITSM) offering, which is a methodology driven, consultative
approach to mapping service maturity. To address the business critical
importance of network performance we developed the Network Performance
Optimisation Assessment, which enables enterprises to extract maximum value and
efficiency from their network. Our Power and Cooling Assessment has been
developed to help organisations reduce their power requirements by optimising
their infrastructure. In an era of spiralling energy and fuel costs, as well as
increased environmental concerns and obligations, this service addresses yet
another facet of our clients` cost reduction objectives. Together with our
existing services, these newer initiatives demonstrate the evolution of the
Group`s offerings to meet emerging and changing market trends.
The service provider market - which incorporates telecommunications providers,
mobile operators, internet service providers (ISPs) and cable operators -
represents roughly 260% of the Group`s revenue. The Systems Integration arm of
the Dimension Data business is well positioned in this vertical and has ample
opportunity to assist service providers in the deployment and ongoing
management of their IT infrastructure.
In addition to our Systems Integration offerings, the Group has exposure to the
service provider market in Middle East and Africa through Plessey and Internet
Solutions. Across the continent, the demand for access to telecommunication
services is accelerating. Plessey is strongly positioned to take advantage of
the growth opportunities as their offerings are focussed at telecommunication
infrastructure solutions. Internet Solutions is a next generation
communications provider that is particularly well positioned in South Africa
and, as markets continue to deregulate and expand, increasingly positioned
across the continent. We believe the business is strategically well placed
within this evolving environment and, consequently, we have been investing
and enhancing our offerings and capabilities.
Outlook
Over the last few years we have enjoyed tremendous momentum and consistent
improvement as a business. The growth achieved has consistently been at rates
greater than the market, indicating that we have been building our competitive
strength and gaining market share from the competition. We believe that the
long - term fundamentals of the IT market segments in which we compete remain
favourable and have good growth prospects.
The FY2008 performance has been delivered against a weakening macro-economic
environment. Despite the evident health, strength and ongoing improvement of
our business, the current macro-economic conditions are a lot less favourable
than before, and we expect that they will remain both fragile and uncertain for
several quarters. Currency swings and the strength of the US dollar against
most of our operating currencies are also likely to impact our reported results
in the FY2009 financial year.
The global crisis of confidence which started in the financial markets is now
undermining demand in most industries. Within this environment we expect the IT
infrastructure market to be slower in general and that we will be affected
accordingly. To counter the impact of these circumstances we will be
prioritising our client engagement above all else and have implemented a
conservative plan to manage our overhead base. We have tightened our investment
and expenditure programme to match our view of short-term market conditions
and will continue to re-evaluate and adjust these on an ongoing basis. Our
focus over the next six months will be on securing opportunities available in
the market. We will balance this with a prudent expenditure and investment
profile and tight cash management.
The strength of the Group`s balance sheet, our market leading positioning and
offerings, and our expansive geographic footprint provide us with confidence
that we will successfully endure this market downturn and emerge in an enhanced
competitive position.
Chief Financial Officer`s Review
In the review below, growth rates are in relation to FY 2007 and, unless
otherwise indicated, are calculated before eliminating intercompany revenue,
are adjusted for the disposal of the Swedish operations in the prior year and,
except in the case of Datacraft Asia, are adjusted for the impact of
currency movements (i.e. are constant currency growth rates).
Income Statement Summary
Revenue for the year was USD4,511 million, an increase of 16.9%. Revenue from
Asia and Middle East and Africa, and overall Services growth, were exceptional.
Across the businesses, trading was particularly strong in Systems Integration
(trading as Datacraft in Asia and as Dimension Data elsewhere), in Internet
Solutions and in Plessey, with revenue growth of 18.8%, 30.1% and 17.3%
respectively.
Gross profit for the period was USD973.3 million, up 17.0%, reflecting a 0.2%
improvement in gross margin to 21.6%. Both Product and Services margins were
firmer, while an improved Services to Product mix also contributed to the
growth.
Overheads grew by 13.3%, well below revenue, to USD791.1 million. Of this,
variable overheads (including bonuses and sales commission) were up by 18.9% to
USD143.3 million while fixed overheads grew by 10.8% to USD647.8 million.
Operating profit was strongly up on last year to USD182.2 million - a year on
year increase of 39.1% - and operating margin improved from 3.5% to 4.0%.
The share of results from associates increased to USD7.1 million from USD5.7
million, while net interest costs reduced to USD13.5 million, USD1.4 million
less than the prior period.
Property revaluation and other gains and losses include a gain on revaluation
of the investment portion of the Campus property asset of USD8.5 million (2007:
USD22.2 million).
The Group tax charge was USD48.0 million, an effective tax rate on profit
before tax of 25.9% (2007: 25.9%), excluding exceptional items. The Group
continued to benefit in certain jurisdictions from significant assessed losses
carried forward.
Earnings per share were 7.7 cents per share, an increase of 28.3%.
The only exceptional item reported during the period was a USD4.1 million gain
on disposal of Automate, a software development company providing solutions to
the automotive industry, to Britehouse, a Group associate.
Trading and Operations
Group Businesses
Systems Internet
USD`000 Integration Solutions Plessey
Product 2,304.4
Growth 18.7%`
Managed
Services 770.8 225.0
Growth 20.4% 30.1%
Professional
Services 402.0 199.3
Growth 16.3% 17.3%
Total 3,477.1 225.0 199.3
Growth 18.8%
Express
USD`000 Data Other Total
Product 394.9 2,699.3
Growth 4.2% 15.6%
Managed
Services 63.2 1,058.9
Growth (0.4%) 20.4%
Professional
Services 151.2 752.5
Growth 17.9% 16.9%
Total 394.9 214.4 4,510.6
Growth 11.2% 16.9%
The revenue in the table above is as reported, whereas the growth rates are
calculated before eliminating intercompany revenue and adjusted, except in the
case of Asia, for the impact of currency movements (i.e. in constant currency).
Systems Integration (Dimension Data and Datacraft)
The Systems Integration business, operating in 47 countries on five different
continents, incorporates six lines of business: Network Integration, Converged
Communications, Security, Customer Interactive Solutions (CIS), Data Centre and
Storage (DCS) and Microsoft Solutions. Across these lines of business, we have
developed a full lifecycle of services.
Network Integration (which accounts for 59.2% of total Systems Integration
revenues) grew by 20.4%, another year of increasing market share for the Group.
The network today plays an essential role in enabling business to operate and
compete, and our vision of the network becoming the platform for all forms of
communication is being realised. We saw growth from infrastructure refresh
opportunities, and from projects that support clients` business objectives
around cost reduction, operational efficiency and improved customer service.
Strong demand for unified communications (including, voice and video solutions)
resulted in upgrades in the core connectivity fabric. Similarly, an
increasingly mobile workforce`s expectations for "anywhere accessibility" drove
investment in wireless networks. We also saw growth in virtual private
networks, network security, performance optimisation and operational services.
The demand for unified communications also supported our Converged
Communications business, which grew by 22.4%. This business includes the
Group`s IP telephony and visual communications solutions. Strong growth in
video conferencing was driven by environmental concerns as well as ongoing
pressure on travel costs. Opportunities in this business stem from our
leadership in global IP networking and solid relationships with key unified
communications partners, including Cisco, Tandberg and Microsoft.
Concerns over data breaches extend into all areas of infrastructure - the
network, perimeter, endpoints, applications and data in transit. Our Security
line of business grew by 31.6%, as clients looked to implement multi - vendor
solutions within a fragmented technology landscape and an environment of both
increasing security breaches and evolving regulatory compliance requirements.
The Microsoft Solutions business grew by 25.5%. This growth was supported by a
services-led approach to software procurement and deployment, in which we
helped clients create structured roadmaps to improve their Microsoft
infrastructure while lowering software and operational costs. The need for a
robust deployment and management strategy is critical as clients take advantage
of Microsoft unified communications technologies.
The DCS line of business grew by 2.0%, impacted by a few large deals in the
prior year which did not repeat. Clients continued to employ virtualisation and
consolidation technologies to optimise performance, eliminate costs and improve
energy efficiencies. Expanding data traffic, as well as increasing regulatory
compliance requirements also supported demand for storage, backup and recovery
solutions.
Growth in CIS of 1.5% was muted as a result of the loss of a large outsourced
CIS contract in Australia. The line of business in that region has realigned
its sales effort, and expects to record an improved outcome in the new year.
The fundamental drivers for this line of business, which offers a range of
contact centre solutions, remain sound. The call centre is a network super-
user and as contact centres move away from distributed physical locations to
virtualised single centres, there is a need for new technologies and management
practices.
Product
Product revenues in the Systems Integration business grew by a robust 18.7% -
well ahead of the market. The business offers a complete lifecycle of services,
and product procurement is a key component of the overall solution to clients.
An essential component of our value proposition is the established long term
relationships the Group enjoys with the leading global technology vendors
across all of its lines of business. The growth for the period was supported by
our ongoing investment in our supply chain services, incorporating procurement,
freight and the complex cross-border logistics between source and destination.
Services
Services in the Systems Integration business demonstrated strong growth of
18.9%, evidence that our services strategy is firmly on track. This growth
reflects our ongoing focus on skills management, reducing staff churn and
increasing our technical certifications, as well as a focus on improved global
project delivery.
Professional Services growth of 16.3% reflects a continued focus on the
consulting, planning, deployment and integration components of our Services
continuum - expanding our offerings across the lines of business - with a focus
on repeatable methodologies embedded with intellectual property and tools.
Managed Services revenues, comprising support and managed services, grew by
20.4%. An emphasis on service levels contributed to the growth in the Uptime
branded maintenance service offering, while investments in managed services
solutions and capabilities saw a healthy return. Regional solutions, incubated
in specific geographies, produced excellent returns.
Internet Solutions
Internet Solutions is an African next generation services provider. Revenue
growth for the period was strong, up 30.1% on the prior year. Gross margins
reduced slightly, reflecting increased competition in the South African market.
Originally an Internet Services Provider (ISP), the division now operates ten
business units enabling clients to outsource the operations and management of
their telecommunications, internet, data and voice services. Its core offerings
relate to the provision of internet and network connectivity and include:
access services, virtual private network (VPN) services, broadband services,
VoIP (Voice over IP) services and application hosting. Internet Solutions
provides connectivity services to many of the biggest companies in South
Africa, as well as an expanding number of businesses and consumers across the
African continent.
Plessey
Plessey demonstrated another year of robust growth, with revenues up 17.3%.
Plessey has regional offices in 12 African countries, providing
telecommunications infrastructure solutions across the continent. An ongoing
requirement from service providers looking to deploy high speed, multi - media
networks supported demand for Plessey`s physical infrastructure and support
services. Plessey`s offerings include the construction of core base station
infrastructure, wireless, optical fibre, satellite and microwave solutions and
managed services.
Growth was strong in GSM infrastructure rollout in Ghana, Uganda and the
Democratic Republic of Congo, while in South Africa there was a significant
increase in fibre deployment revenues as deregulation and self-provisioning in
the service provider market continued apace.
Express Data
Express Data grew by 4.2% over the period, the strength of the Australian
dollar for the majority of the year having depressed revenue growth, with price
reductions of around 10% across most technologies. Express Data is a
distributor of IT products in Australia and New Zealand, having represented
many of the world`s leading technology vendors for the past twenty years. It
provides a value added service to business-focused technology vendors with
high levels of complexity. Express Data`s key vendor partnerships are deep and
longstanding, and the division is the dominant channel to market for many of
these vendors` products.
Other
The Group operates several other smaller businesses, including Dimension Data
Advanced Infrastructure and Merchants, the outsourced call centre business,
both operating in South Africa and the UK. Dimension Data Advanced
Infrastructure in South Africa performed very well, as South Africa`s power
shortages earlier in the year increased demand for power generation solutions.
Merchants in the UK had a weaker year, largely as a result of some property
lease write-offs and restructuring initiatives.
USD`000 Americas Asia Australia Europe
2008
Revenue 686,393 719,601 974,035 1,120,566
Growth % 17.5% 23.9% 12.3% 10.1%
Product 536,385 451,747 731,352 676,599
Growth % 20.8% 20.5% 9.4% 7.7%
Services 150,008 267,854 242,683 443,967
Growth % 7.2% 30.0% 23.6% 13.8%
Gross margin 16.8% 18.5% 18.5% 20.7%
Operating profit 19,570 44,203 40,376 21,902
Operating margin 2.9% 6.1% 4.1% 2.0%
2007
Revenue 579,882 580,829 791,452 960,822
Product 440,272 374,834 607,266 593,387
Services 139,610 205,995 184,186 367,435
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%
Middle East Central
USD`000 & Africa & Other Total
2008
Revenue 1,000,672 9,373 4,510,640
Growth % 27.1% 16.9%
Product 297,267 5,929 2,699,279
Growth % 40.8% 15.6%
Services 703,405 3,444 1,811,361
Growth % 22.0% 19.0%
Gross margin 28.4% 21.6%
Operating profit 88,442 (32,279) 182,214
Operating margin 8.8% 4.0%
2007
Revenue 849, 238 10,933 3,773,156
Product 225,943 7,623 2,249,325
Services 623,295 3,310 1,523,831
Gross margin 28.2% 21.5%
Operating profit 70,877 (31,428) 130,994
Operating margin 8.3% 3.5%
The revenue, gross margin and operating profit in the table above are as
reported, whereas the growth rates are calculated before eliminating
intercompany revenue and adjusted, except in the case of Asia, for the impact
of currency movements (i.e. in constant currency).
Americas
Revenue in the Americas region grew by 17.5%, although gross margins were
lower. Product revenues were solid, as the Network Integration and Security
lines of business recorded good growth. Professional Services revenue exceeded
expectations, as the region leveraged its capabilities in large-scale
multinational deployments and project management. The US operations continued
to invest in its staff augmentation capabilities and in extending its
Multisourcing capabilities.
Ongoing investment in standardising the region`s operating environment
contributed to a significant improvement in the working capital position from
the interim period.
While our US operations had a satisfactory year, we were not immune to the
credit crisis affecting the financial sector and revenues and order rates were
softer towards the end of the period. Outside of the US, the Mexican operations
performed well, while the Brazilian operations made a good recovery in the
second half after a disappointing loss in the first half.
Asia
Datacraft Asia recorded an excellent operating result, with revenues up 23.9%
and operating profit of USD44.2 million (2007: USD36.5 million). Growth was
supported by strong showings from Network Integration, Security, Converged
Communications, and DCS. CIS growth was slower, influenced by a slowdown in
volumes from BPO clients in India.
Services growth was robust, with good demand for Uptime maintenance services,
as well as product-led Professional Services engagements. The region continued
to invest in improving its services capabilities, extending its ITIL framework
and ensuring ISO 20000 compliance for its Global Services Centre in Bangalore.
During the period, Datacraft acquired Security-Assessment.com, a security
consulting practice based in New Zealand, with competencies in security audits,
assurance, assessment and advisory.
Australia
The Australian operations grew revenues by 12.3% for the period, with operating
profit expanding strongly to USD40.4 million, and operating margin to 4.1%.
The Systems Integration business had an excellent year, growing revenues by
17.0%, supported by strong performances from the Network Integration, Security
and Microsoft Solutions lines of business. In Managed Services, a focus on
renewals and winning new clients contributed to healthy revenue growth. The
business was somewhat impacted by project delays incurred through the change in
Federal government during the period, but significant market consolidation
during the period provided opportunities for market share expansion. The
business also continued to invest in productivity tools, contributing to the
operating margin expansion for the year.
Learning Solutions, the training business, also had a good year, expanding
revenues by 9.3%. As described above, Express Data grew revenues by 4.2%.
The region made two small acquisitions; a majority interest in Viiew, a
Melbourne based recruitment firm, and the remaining minority interest in SQL,
which provides database managed services.
Middle East and Africa
The Middle East and Africa region remained the largest contributor to Group
operating profit, with revenues up by 27.1% and operating profit expanding to
USD88.4 million.
The Systems Integration business had a strong year, with revenues up by 32.4%
supported by strong growth across most lines of business. The Managed Services
operations were solid, and Professional Services coupled revenue growth with
increased gross margin on the back of improved project profitability. The
region`s outsourcing business also performed well, with low client turnover and
improved revenues in its existing client base.
The strong performance came despite economic volatility in South Africa which
affected enterprise spending, particularly in the financial and retail sectors.
However, public sector spending was strong, especially in the lead up to the
2010 FIFA World Cup, and the Group won contracts to provide IT services to five
new stadiums for the 2010 event.
Expansion into the rest of the African continent and the Middle East continued
during the period, where revenues were up by 121.8%. The Group acquired the
remaining 49% interest in Dimension Data Kenya. In the Middle East, we acquired
Data Processing Systems in Dubai and Abu Dhabi, and established a presence in
Saudi Arabia.
As described above, Plessey, Internet Solutions and DDAI all reported strong
performances for the year. Merchants in South Africa had a better year, having
resolved some of the performance issues arising on client contracts in the
previous period.
The equity participation of our Black Economic Empowerment partners increased
to approximately 15.7%, as a result of the robust regional performance for the
year.
Europe
Europe reported a much improved performance for the year. Total revenues were
up by 10.1%, with Services revenues up by 13.8%. Overhead growth was
contained, and operating profit expanded to USD21.9 million compared to
USD8.5 million in the previous year.
The Systems Integration business performed very well, with good contributions
from the UK, Germany, France and the Benelux countries. Ongoing efforts to
standardise processes, as well as inherent leverage in the operating model,
contributed to the improved performance. Within the lines of business, Security
and Converged Communications growth was particularly strong.
In the region`s other businesses, Dimension Data Advanced Infrastructure
performed well despite a difficult trading environment, while Merchants UK had
a weaker year (as discussed previously).
Central and Other
In Central and Other, net costs increased by 2.7% from USD31.4 million to
USD32.3 million. Within this, the contribution from the Campus property was up
by 11.6% for the period to USD15.3 million, with near full occupation. Central
management costs, net of trading income, increased by 9.1% to USD47.6 million.
Apart from the normal holding company costs, the Group continued to invest in
the System Integration business`s services and line of business strategies, and
in the standardisation of Group-wide systems and processes.
Share of Profit of Associates
The share of profit of associates increased to USD7.1 million from USD5.7
million in 2007.
Britehouse was the largest contributor with USD4.1 million through the Group`s
holding of preference shares and a 40% equity interest. Britehouse houses
various application development operations and an IT resourcing business.
Interest Income and Finance Costs
The Group earned interest of USD17.5 million (2007: USD15.4 million) on its
cash holdings. Total finance costs were USD31.0 million (2007: USD30.3
million), including USD22.6 million (2007: USD23.4 million) in respect of the
capitalised property finance lease in South Africa.
Property Revaluation and Other Gains and Losses
Included in Property Revaluation and Other Gains and losses is a USD8.5 million
(2007: USD22.2 million) gain on revaluation of the investment portion of the
Campus property asset in South Africa, based on the Directors` assessment of
fair value at 30 September 2008.
Minority Interests
Based on the results for the year, approximately 1.8% 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 interest up to approximately 16%.
Acquisitions and Disposals
During the period, the Group concluded a few small acquisitions, none of which
was material. In Asia we acquired a security practice in New Zealand. In
Australia, we acquired Viiew, an IT recruitment and resourcing company, and the
remaining minority interest in SQL Services, a provider of database managed
services. In the Middle East and Africa we acquired Accelon, a broadband
service provider operating in Nigeria and in Ghana and we acquired DPS, a
network integration company in Dubai.
Automate, a software development company providing solutions to the automotive
industry, was sold to Britehouse during the period.
Subsequent to year end, we completed the acquisition of the outstanding
minorities in Datacraft Asia for a total consideration of USD276.0 million.
Balance Sheet
The Group exited the year with an improved and strengthened balance sheet
position, with equity attributable to equity shareholders of the parent
increasing to USD710.2 million from USD561.9 million. This reflected the
improved profitability of the Group for the period, as well as the issue of
136,121,909 new shares associated with the acquisition subsequent to year end
of the outstanding minorities in Datacraft Asia. Datacraft Asia was a fully
consolidated subsidiary at year end, although the payment of the cash
consideration and other adjustments to the assets and liabilities reflecting
the acquisition of the minority interests will only be reported in the interim
balance sheet at 31 March 2009.
Fixed assets include the Campus property asset in South Africa, which was
revalued at the end of the year, resulting in a revaluation gain through the
income statement of USD8.5 million in respect of the portion of the Campus
accounted for as an investment property.
Total current assets, excluding cash, at year end were USD1,241.4 million
(2007: USD1,196.2 million) and total current liabilities were
USD1,360.6 million (2007: USD1.245.4 million). Cash generated from a
reduction in the Group`s net investment in working capital amounted to
USD79.2 million for the period.
Obligations under finance leases amounted to USD139.9 million
(2007: USD149.9 million). Of this USD123.9 million (2007: USD144.9 million)
related to the Campus finance lease obligation. The fair value of this lease
obligation was estimated at USD162.7 million (2007: USD201.1 million) at
balance sheet date. Other long term liabilities include deferred income
relating to client maintenance contracts of USD24.1 million
(2007: USD8.1 million).
The cash balance at 30 September 2008, net of bank overdrafts, was USD682.4
million.
Cash Flow
Net cash from operating activities was USD273.6 million (2007: USD177.1
million). An inflow arising from net working capital movements of USD79.2
million was the result of very good collections at period end, a continued
focus on inventory management, as well as the resolution of certain working
capital issues which were highlighted at the interim period. There were no
changes in our trading
terms with vendors.
The Group used USD82.2 million in investing activities (2007: USD57.9 million).
The most significant investment was in respect of capital expenditure on
intangibles of USD13.3 million (2007: USD6.3 million) and property, plant and
equipment (net of disposals) of USD77.8 million (2007: USD59.7 million). The
biggest increase came from South Africa, where Internet Solutions invested in
its network as a consequence of growth in its client base, increasing its
hosting capacity and in upgrading its voice capabilities. Dimension Data in
South Africa refreshed its network, invested in power generation facilities at
the Campus to support increased demand and in land adjacent to the Campus to be
used for future expansion. In addition, Merchants in the UK invested in the
establishment of a stand-alone IP call centre ho sting capability.
Towards the end of the period, the Group also invested in some licensed
software in anticipation of an upgrade of its services operating architecture.
PP&E and Intangible Depreciation and
Additions Amortisation
USD million
2008 2007 2008 2007
Americas 2 3 3 2
Asia 8 9 8 8
Australia 5 4 5 4
Europe 8 8 7 9
ME&A (excl IS) 13 5 8 4
IS 46 34 26 18
Central and 10 2 3 8
Other
Group 92 65 60 53
USD4.8 million (net) was spent on acquisitions compared to USD5.0 million net
cash generated in the prior year from the sale of subsidiaries.
Cash from financing activities was USD56.2 million (2007: USD35.4 million cash
used). USD121.0 million was raised on the issue of new shares to fund the
acquisition of the remaining shares in Datacraft Asia. In addition, the Group
paid a dividend of USD22.8 million (2007: USD15.2 million).
Subsequent to year end, a total cash consideration of USD276 million was paid
out to minority shareholders in Datacraft Asia.
Principal Risks and Uncertainties
In terms of the UK Companies Act 1985, a description of the principal risks and
uncertainties facing the Group is required. The Group`s Risk Management process
is detailed in the Corporate Governance report in the Annual Report. 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 comprehensive range of all
potential risks and uncertainties facing the Group.
Exposure to economic downturn
A significant portion of the Group`s revenue is derived from clients in the
Financial Services sector which has been impacted by the global credit crisis.
The Group also derives a significant portion of revenues from the
Telecommunications sector, and from multinational corporations. To the extent
that economic downturn or recession impacts our clients in these sectors, and
their willingness to invest in the Group`s IT solutions, the Group could be
exposed to a lower level of revenue, and potentially the requirement to reduce
its cost base.
A mitigating factor is that many of the Group`s solutions are mission critical
to clients, and these solutions are used to reduce costs and improve the their
productivity. The Group monitors demand for its products and services
carefully, to ensure that its cost base is aligned to its revenues.
Dependency on key vendors or disruption of key vendor relationships
The Group has close and mutually beneficial partnerships with leading
technology vendors, enabling it to provide its clients with 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. While
the Group has multiple vendor relationships with leading global and regional
technology vendors, the most significant vendor relationship measured by
volume of purchases is with Cisco Systems.
Factors mitigating the risk are the fact that the Group`s geographic footprint,
global procurement and logistics capabilities, and long-standing local client
relationships make it an important channel to market for its partners, and
there is a mutual dependency on promoting stable and long term relationships.
Equally, the Group invests substantial time and resource in promoting and
managing its partner relationships at every level within the organisation.
Exposure to country and regional risk (political and economic)
The Group is present in 47 countries, and thus is subject to differing
political, social, economic and market conditions. Particular aspects of
country-specific risks that may have an impact include changes to government
policies, laws and regulations, including taxation, in countries in which we
operate may change.
We mitigate these risks by having a balanced global footprint between emerging
markets and established markets, as well as by developing and retaining strong
local and global management capability.
Dependence on major clients and contracts
A significant portion of the Group`s revenue is generated from longer term
contracts and agreements with clients, and therefore the Group would be
exposed if these agreements were not to be renewed. However, no single client
accounts for more than 5% of the Group`s revenue and therefore the risk of the
loss of an individual client is considered to be contained.
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 attracts high quality employees and offers them the opportunity
to grow personally and professionally. The Group has a comprehensive programme
to ensure employee retention, including; promotion and support of career
development, a structured approach to employee incentives, consistency in
reward and recognition, and effective communication with employees around the
execution of strategy.
Professional liability (execution and delivery)
The design, support, and project management nature of most client engagements
requires the application of high standards of process control, compliance and
delivery ability. If the client`s service level expectations are not met, the
Group`s reputation could be damaged and profitability impacted through the
increased risk of litigation and damages. The Group could also be required to
provide corrective services to clients at no charge.
The Group continues to invest in ensuring quality and rigour in its deal
qualification, delivery and project management processes. The Group also
carries comprehensive general and professional liability insurance coverage.
Increasing complexity and variability of client contracts
With the Group`s global presence, it is in a position to win an increasing
number of contracts with multinational clients. These contracts are often
logistically complex, requiring cross border cooperation and coordination.
Furthermore, the Group is investing in its management and outsourcing
capabilities, and contracts entered into in this market typically involve more
complex delivery and service level obligations.
The Group continues to invest in bid, project and commercial management
capabilities to oversee the implementation of contracts both globally and
locally. In addition, the Group constantly adapts and changes its project
management methodology in line with best practice.
Business continuity risk
The ability to provide our clients with a seamless, high level of service is a
critical element of the Group`s service offering. In particular, a large
element of the Group`s managed service revenues depends on remote
infrastructure management, which in turn depend on resilient systems and
internal IT infrastructure.
The Group has an ongoing business continuity programme to address this risk,
and to ensure that alternative solutions are in place to adapt to any
unforeseen disruption to critical business processes.
Regulatory compliance risks - in particular taxation and transfer pricing.
The Group operates in 47 different countries, increasing the breadth and
complexity of compliance with regulatory requirements in a variety of different
jurisdictions. Furthermore, there is an increasing scrutiny of and need to
demonstrate regulatory compliance. Accordingly, the Group needs to ensure that
the various compliance risks are understood and effectively managed.
The Group acknowledges the importance of compliance with all regulatory
requirements in the territories within which it operates, and continues to
invest in the people and processes to effectively manage this obligation.
Balance sheet risk and financial instruments
The principal risk arising from the Group`s financial instruments are liquidity
risk, credit risk and currency risk. Liquidity risk concerns the Group`s
ability to meet its financial obligations as they fall due. This risk is
managed through a combination of careful working capital management and
investment decisions, the use of working capital facilities, as well as the
maintenance of a strong net cash position.
Credit risk is the risk of default by a counter party on its obligations to the
Group, the most important of which relates to trade receivables. While there is
heightened risk as a result of the global credit crisis and likely economic
downturn, the Group continues to manage the credit profile of its trade
receivables very closely, and to provide for likely impairment where necessary.
The Group reports in US dollars, and currency risk is the risk of material
negative impact on earnings as a result of currency fluctuations. While the
Group hedges its exposure to financial instruments denominated in currencies
other than the trading currencies of the entities to which the instruments
relate, it does not hedge its earnings. Since the majority of the Group`s
earnings are in currencies other than the US dollar, currency fluctuations will
impact reported Group earnings. In particular, if the US dollar strengthens
against the Group`s major trading currencies - South African rand, Australian
dollar, Sterling or Euro - this will reduce translated US dollar earnings.
Dividend
The Directors recommend the payment of a dividend of 1.7 US cents per share
(2007: 1.5 US cent). Subject to shareholders` approval at the Annual General
Meeting on Wednesday, 28 January 2009, the final dividend will be paid on
Friday, 13 March 2009 to shareholders on the share register at the close of
business on Friday, 13 February 2009.
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, 29 January 2009. The
Directors will not be offering a share alternative to the 2008 final dividend.
The following are the salient dates for the payment of the proposed dividend:
Announcement of conversion rate Friday, 30 January 2009
Last day to trade on the JSE Friday, 6 February 2009
Date trading commences `ex`
the dividend on the JSE Monday, 9 February 2009
Date trading commences `ex`
the dividend on the LSE Wednesday, 11 February 2009
Record date on the JSE and LSE Friday, 13 February 2009
Payment of dividend Friday, 13 March 2009
No transfers between the UK and South African registers may take place during
the period Friday, 30 January 2009 and Friday, 13 February 2009 (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, 9 February 2009 to
Friday, 13 February 2009 (both days inclusive).
(1) The Gartner Report(s) described herein, (the "Gartner Report(s)")
represent(s) data, research opinion or viewpoints published, as part of a
syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not
representations of fact. Each Gartner Report speaks as of its original
publication date (and not as of the date of this Offering Memorandum) and the
opinions expressed in the Gartner Report(s) are subject to change without
notice.
(2) The Gartner Magic Quadrant is copyrighted 22 August 2008 by Gartner, Inc.
and is reused with permission. The Magic Quadrant is a graphical representation
of a marketplace at and for a specific time period. It depicts Gartner`s
analysis of how certain vendors measure against criteria for that marketplace,
as defined by Gartner. Gartner does not endorse any vendor, product or service
depicted in the Magic Quadrant, and does not advise technology users to select
only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is
intended solely as a research tool, and is not meant to be a specific guide to
action. Gartner disclaims all warranties, express or implied, with respect to
this research, including any warranties of merchantability or fitness for a
particular purpose.
CAUTIONARY STATEMENT
This Preliminary Company Announcement (`PCA`) has been prepared solely to
provide additional information to shareholders to assess the Group`s financial
condition, results, strategies and operations. The PCA should not be relied on
by any other party or for any other purpose.
The PCA contains certain forward looking statements. These statements are made
by the Directors in good faith based on the information available to them up to
the time of their approval of this report and such statements should be treated
with caution due to inherent uncertainties, including both economic and
business risk factors, that could cause actual results or developments to
differ materially from those expressed or implied by these forward looking
statements.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2008
2008 2007
Notes USD`000 USD`000
Revenue 2 4,510,640 3,773,156
Cost of sales (3,537,347) (2,960,169)
Gross profit 973,293 812,987
Administrative, selling and
distribution expenses (791,079) (689,120)
Operating profit 182,214 123,867
Share of results of associates 7,113 5,740
Interest and investment income 17,516 15,446
Finance costs (31,025) (30,315)
Property revaluation and other gains
and losses 13,194 35,767
Profit before tax 189,012 150,505
Tax 4 (47,973) (36,034)
Profit for the year 141,039 114,471
Attributable to:
- Equity shareholders of the parent 118,410 92,528
- Minority shareholders 22,629 21,943
141,039 114,471
Earnings per ordinary share: US Cents US Cents
- Basic 5 7.7 6.0
- Diluted 5 7.3 5.6
Proposed dividend per ordinary share 1.7 1.5
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 September 2008
2008 2007
Notes USD`000 USD`000
Non-current assets
Property, plant and equipment 170,560 165,014
Investment property 81,208 92,805
Goodwill 95,820 90,557
Other intangible assets 18,856 16,914
Investments in associates 34,426 30,381
Other investments 3,602 6,971
Deferred tax assets 31,862 41,248
Trade and other receivables 6 38,163 36,804
474,497 480,694
Current assets
Inventories 181,885 192,658
Trade and other receivables 6 1,059,547 1,003,554
Cash and cash equivalents 686,499 459,197
1,927,931 1,655,409
TOTAL ASSETS 2,402,428 2,136,103
Equity
Equity attributable to equity
shareholders of the
parent 710,201 561,947
Minority interests 138,211 128,242
Total equity 848,412 690,189
Non-current liabilities
Bank loans 3,841 4,144
Other long term liabilities 38,574 31,207
Obligations under finance leases 139,906 149,919
Deferred tax liabilities 715 2,295
Provisions 6,186 9,517
189,222 197,082
Current liabilities
Trade and other payables 7 1,347,113 1,213,153
Bank loans 2,256 20,475
Bank overdrafts 4,146 3,439
Provisions 11,279 11,765
1,364,794 1,248,832
Total liabilities 1,554,016 1,445,914
TOTAL EQUITY AND LIABILITIES 2,402,428 2,136,103
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2008
Restated
2008 2007
USD`000 USD`000
Cash flows from operating activities
Operating profit 182,214 123,867
Adjustments for:
Depreciation and amortisation 59,595 52,680
Movement in provisions 885 9,492
Share-based payment expensed 16,726 24,457
Other non-cash items (2,441) 2,684
Operating cash flows before movements in working
capital 256,979 213,180
Decrease in inventories 2,403 1,349
Increase in trade and other receivables (99,334) (168,037)
Increase in trade and other payables 176,140 185,837
Cash generated from operations 336,188 232,329
Income taxes paid (36,000) (30,619)
Interest paid (26,638) (24,609)
Net cash from operating activities 273,550 177,101
Cash flows from investing activities
Interest received 17,516 15,445
Net investment in business interests and other
investments (4,785) 5,033
Acquisition of property, plant and equipment, net
of proceeds on disposal (77,797) (59,712)
Acquisition of intangibles (13,338) (6,273)
Treasury share buy back of own shares by a
subsidiary (1,169) (6,854)
Deferred consideration paid (2,654) (5,500)
Net cash used in investing activities (82,227) (57,861)
Cash flows from financing activities
Shares purchased by Employee Share Trust (33,143) (25,476)
Repayment of borrowings (21,755) (7,338)
New bank loans and finance leases 22,570 16,476
Dividends paid to ordinary shareholders (22,821) (15,170)
Dividends paid to minorities (9,655) (10,602)
Proceeds on issue of new shares net of expenses 121,034 6,712
Net cash from/(used in) financing activities 56,230 (35,398)
Net movement in cash and cash equivalents 247,553 83,842
Cash and cash equivalents at beginning of the year 455,758 341,673
Exchange differences on cash and cash equivalents (20,958) 30,243
Cash and cash equivalents at end of the year 682,353 455,758
Cash and cash equivalents is made up as follows:
Cash and cash equivalents 686,499 459,197
Bank overdrafts (4,146) (3,439)
682,353 455,758
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Total other Retained
capital and reserves* earnings
Premium
USD`000 USD`000 USD`000
1 October 2007 196,165 261,703 104,079
Profit for the period - - 118,410
Items recognised directly in
equity 108,625 (38,819) (39,962)
Share incentive schemes - 14,982 -
Deferred tax on share
incentive
schemes - (3,409) -
Share option reserve utilised - (5,943) (15,595)
Currency adjustments - (44,176) -
Deferred tax arising on
revaluation of
loans - 702 -
Dividends paid - - (22,821)
Shares issued 121,032 - -
Shares held in Employee Trust (12,407) - -
Subsidiaries acquired/changes
in
holdings - - -
Vesting under BEE scheme - (2,507) -
Net gain on cash flow hedging - 340 -
Transfers to income statement - (405) -
Other - 51 -
Transfers - 1,546 (1,546)
30 September 2008 304,790 222,884 182,527
Attributable Minority Total equity
to equity interests
holders of
parent
USD`000 USD`000 USD`000
1 October 2007 561,947 128,242 690,189
Profit for the period 118,410 22,629 141,039
Items recognised directly in
equity 29,844 (12,660) 17,184
Share incentive schemes 14,982 - 14,982
Deferred tax on share
incentive
schemes (3,409) - (3,409)
Share option reserve utilised (21,538) - (21,538)
Currency adjustments (44,176) (7) (44,183)
Deferred tax arising on
revaluation of
loans 702 - 702
Dividends paid (22,821) (4,529) (27,350)
Shares issued 121,032 - 121,032
Shares held in Employee Trust (12,407) - (12,407)
Subsidiaries acquired/changes
in
holdings - (10,742) (10,742)
Vesting under BEE scheme (2,507) 2,507 -
Net gain on cash flow hedging 340 - 340
Transfers to income statement (405) - (405)
Other 51 111 162
Transfers - - -
30 September 2008 710,201 138,211 848,412
* 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 2008
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 2007, with the following exceptions:
IFRS 7 `Financial Instruments: Disclosures` was adopted with effect from 1
October 2006. This has not had an impact on measurement, but has necessitated
additional disclosures.
IAS 1 `Presentation of Financial Statements` - Amendment to add disclosures
about an entity`s capital management was adopted with effect from 1 October
2007. This has not had an impact on measurement, but has necessitated
additional disclosures.
IFRIC 11 `IFRS 2: Group and Treasury Share Transactions` was adopted from 1
October 2007. This had no impact on the consolidated results at 30 September
2008.
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 2008 or 2007, but is
derived from those accounts. Statutory accounts for 2007 have been delivered to
the Registrar of Companies and those for 2008 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 2008.
Restatements and new accounting policies
IFRS 7 `Financial Instruments: Disclosures`
This statement introduced new disclosures to improve the information about
financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising from financial
instruments, including specified minimum disclosures about credit risk,
liquidity risk and market risk, including sensitivity analysis to market risk.
This standard has not impacted the classification and valuation of the Group`s
financial instruments, but has required expanded disclosures.
Restatements
The comparative consolidated cash flow statement for the year ended 30
September 2007 has been restated to reflect a reclassification of shares
purchased by the Employee Share Trust from investing activities to financing
activities, to more accurately reflect their nature.
The weighted average number of shares for the year ended 30 September 2007 has
been restated to take account of the shares purchased by The Employee Share
Trust. The diluted weighted average number of shares for the year ended 30
September 2007 has been restated to take account of attrition factors.
Exchange rates
The following table reflects the average and period end exchange rates against
the US dollar for SA rand, Australian dollar, Sterling and Euro:
2008 2007
Average Period End Average Period End
Australian dollar 1.098 1.251 1.229 1.126
Euro 0.659 0.699 0.746 0.701
South African rand 7.518 8.290 7.142 6.871
Sterling 0.507 0.553 0.509 0.488
2. SEGMENTAL ANALYSIS
Americas Asia Australia Europe
USD`000 USD`000 USD`000 USD`000
2008
Revenue 690,835 719,601 1,146,094 1,152,860
Operating
profit 19,570 44,203 40,376 21,902
2007
Revenue 585,043 580,829 912,004 981,683
Operating
profit* 17,398 36,456 29,169 8,522
Middle Inter-
East & Central & Company
Africa other revenue Total
USD`000 USD`000 USD`000 USD`000
2008
Revenue 1,112,067 19,412 (330,229) 4,510,640
Operating
profit 88,442 (32,279) 182,214
2007
Revenue 931,582 16,065 (234,050) 3,773,156
Operating
profit* 70,877 (31,428) 130,994
*Before exceptional items.
3. EXCEPTIONAL INCOME/(COSTS)
Note 2008 2007
USD`000 USD`000
Exceptional operating costs
Foreign exchange loss on loans - (6,617)
Other - (510)
Total exceptional operating costs - (7,127)
Other exceptional gains a) 4,064 13,736
Exceptional tax
Deferred tax credit - 4,197
Capital gains tax on sale of shares - (2,055)
Tax on withholding costs refund - (965)
Total exceptional tax - 1,177
Exceptional items after tax 4,064 7,786
Minorities` share - (1,354)
Net exceptional income 4,064 6,432
a) Profit on sale of the Group`s 92.3% interest in Automate to Britehouse, an
associate company.
The amount in respect of 30 September 2007 includes the profit on sale of
various subsidiaries.
Reconciliation of reported amounts to
adjusted amounts 2008 2007
USD`000 USD`000
Statutory operating profit 182,214 123,867
- Exceptional operating costs - 7,127
Adjusted operating profit 182,214 130,994
Statutory attributable profit after tax 118,410 92,528
- Exceptional operating costs - 7,127
- Other exceptional gains (4,064) (13,736)
- Exceptional tax items - (1,177)
- Minorities` share - 1,354
Adjusted attributable profit after tax 114,346 86,096
4. TAX
2008 2007
USD`000 USD`000
Current tax 47,369 37,715
Deferred tax - current period 1,678 854
Deferred tax - prior periods (1,074) (2,535)
Total tax expense 47,973 36,034
This expense relates predominantly to tax jurisdictions outside of the United
Kingdom.
5. EARNINGS PER ORDINARY SHARE
2008 2007
`000 `000
Weighted average number of ordinary shares:
- for basic earnings per share 1,540,733 1,539,744
- for diluted earnings per share 1,616,202 1,651,713
USD`000 USD`000
Earnings for basic and diluted earnings per share 118,410 92,528
Exceptional items (4,064) (6,432)
Adjusted earnings 114,346 86,096
US cents US cents
Basic earnings per share 7.7 6.0
Diluted earnings per share 7.3 5.6
Adjusted basic earnings per share 7.4 5.6
Adjusted diluted earnings per share 7.1 5.2
6. TRADE AND OTHER RECEIVABLES
2008 2007
USD`000 USD`000
Trade receivables 804,676 767,654
Other receivables 84,835 96,916
Prepayments and accrued income 184,809 143,075
Taxation authorities 23,390 32,713
1,097,710 1,040,358
Analysed as follows:
Long term portion 38,163 36,804
Short term portion 1,059,547 1,003,554
1,097,710 1,040,358
7. TRADE AND OTHER PAYABLES
2008 2007
USD`000 USD`000
Trade payables 536,213 448,828
Other payables 144,330 178,555
Accruals 299,791 266,741
Deferred income 231,004 188,625
Deferred consideration 1,035 1,712
Taxation authorities 134,740 128,692
1,347,113 1,213,153
8. ACQUISITIONS AND DISPOSALS
With effect from 1 February 2008 the Group disposed of its 92.3% interest in
Automate to Britehouse for a total consideration of USD14.8 million, settled
partly in cash and partly in shares.
During the period, the Group made several small acquisitions of subsidiaries
for an aggregate consideration of USD17.1 million, with USD17.1 million
recognised as goodwill on acquisition. These did not have a significant impact
on the reported results.
9. RELATED-PARTY TRANSACTIONS
During the year the Group sold its 92.3% interest in Automate to Britehouse, in
which the Group holds an effective 40% interest. VenFin Limited, a shareholder
of Dimension Data Holdings plc, holds an effective 30% interest in Britehouse
and a BEE consortium owns the remaining 30%. Moss Ngoasheng, a director of
Dimension Data Holdings plc, is an indirect shareholder of the consortium.
Part of the cost of acquisition of Datacraft Asia, which was completed on 7
November 2008, was financed by way of a share issue of 136,121,909 shares,
which took place in July 2008. VenFin Limited, a substantial shareholder in
Dimension Data, took up 98,375,347 of these shares at a price of 44.25 pence
per share, which amounted to USD86.8 million, in total.
10. POST BALANCE SHEET EVENTS
On 22 July 2008 Dimension Data and Datacraft Asia Limited (`Datacraft`) jointly
announced that they had entered into an agreement whereby Datacraft would
become a wholly-owned subsidiary of Dimension Data. On 15 October 2008 the
Datacraft shareholders voted in favour of the offer by Dimension Data to
purchase the remaining 44.9% interest that it does not already own. On 6
November 2008 the Court sanctioned the scheme and the Datacraft shares were
delisted on 11 November 2008, whereafter the cash consideration will be
settled.
In terms of the transaction, which was effected by way of a Scheme of
Arrangement under Singapore law, shareholders were offered USD1.33 per share -
a 34% premium to Datacraft`s closing share price of USD0.99 on 21 July 2008.
The total cost of the acquisition is approximately USD276 million, and is being
financed by cash, part of which was raised by an equity issuance.
Amendments have been made to the Datacraft Share Option Schemes as follows:
- In-the-money vested options: Dimension Data will pay a cash amount of the
difference between the consideration payable and the exercise price.
- Out-of-the-money vested options: Holders will receive Dimension Data shares,
based on a formula derived from the consideration payable and the Dimension
Data share price on the effective date. This will occur when the options are
exercised, which will only be once they are in-the-money.
- Unvested options: On vesting, holders will receive Dimension Data shares,
based on a formula derived from the consideration payable and the Dimension
Data share price on the effective date.
- Awards under the Datacraft Performance Share Plan: On vesting, holders will
receive Dimension Data shares, based on a formula derived from the
consideration payable and the Dimension Data share price on the effective
date.
11. JSE LIMITED REQUIREMENTS
Disclosure of headline earnings per share is a requirement for entities listed
on the JSE Limited in South Africa and as a result, the Group has calculated
and presented the headline earnings reconciliation below. Headline earnings are
arrived at in terms of the guidance in Circular 8/2007 issued by the South
African Institute of Chartered Accountants.
2008 2007
`000 `000
Weighted average number of ordinary shares:
- for headline earnings per share 1,540,733 1,539,744
- for diluted headline earnings per share 1,616,202 1,651,713
USD`000 USD`000
Earnings for basic and diluted earnings per share
118,410 92,528
Adjustments for headline earnings (8,614) (27,075)
Headline earnings 109,796 65,453
US cents US cents
Headline earnings per share 7.1 4.3
Diluted headline earnings per share 6.8 4.0
The adjustments for headline earnings include the revaluation of the Campus
investment property of USD8.5 million (2007: USD22.2 million), profits and
losses on the sale of subsidiaries and invetments of USD4.7 million (2007:
USD13.5 million) and the loss on sale of property, plant and equipment of
USD1.6 million (2007: USD0.8 million), net of tax and minorities of USD3.0
million (2007: USD7.8 million).
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
Financial Dynamics (UK)
Matt Dixon
Mobile: +(44) 7703 330 913
Office: +(44) 20 7269 7214
Erwan Gauraud
Mobile: +(44) 7515 597 558
Office: +(44) 20 7269 7289
Date: 12/11/2008 10:33:10 Produced by the JSE SENS Department.
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