| Wed 13 May 2009, 8:00 | | DDT - Dimension Data Holdings plc - Unaudited Interim Results Six months ended |
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DDT
DIDDT
DDT - Dimension Data Holdings plc - Unaudited Interim Results Six months ended
31 March 2009
Dimension Data Holdings Plc
Incorporated in Great Britain under the Companies Act 1985
Registration Number: 3704278
Share Code: DDT
Issuer code: DIDDT
ISIN number: GB0008435405
("Dimension Data" or "the Company")
Unaudited Interim Results Six months ended 31 March 2009
Dimension Data Holdings plc (`Dimension Data` or the `Group`) today announced
its results for the six months ended 31 March 2009. The results have been
prepared in accordance with International Financial Reporting Standards, as
adopted by the European Union.
Highlights
Revenue of $1.95 billion (up 8.1% in constant currency (2))
Strong Services revenue growth of 21.1% (2)
Gross margin expansion to 21.8% (H1 2008: 21.3%)
Strong operating profit growth from four out of five regions
Operating profit (1) up 37.4% to $88.8 million
Operating margin (1) expansion to 4.6% (H1 2008: 3.9%)
Strong balance sheet with cash of $345.4 million
Financial Summary
Six months ended Six months ended
$`000 31 March 2009 31 March 2008
Revenue 1,950,108 2,171,212
Operating profit 87,464 85,016
Margin 4.5% 3.9%
Operating profit (before exceptional
items) 88,798 85,016
Margin (before exceptional items) 4.6% 3.9%
Profit attributable to equity
shareholders of the parent 65,997 55,881
Profit attributable to equity
shareholders of the parent
(before exceptional items) 58,739 52,190
Earnings per ordinary share (US cents) 3.9 3.7
Earnings per ordinary share (before
exceptional items)
(US cents) 3.5 3.4
Notes:
(1) Before exceptional items. See reconciliation in Note 3 to the condensed
financial statements.
(2) Before eliminating intercompany revenue and, adjusted for the impact of
currency movements.
Chief Executive Officer`s Review
STRONG PERFORMANCE IN DIFFICULT MARKET CONDITIONS
Dimension Data has delivered a strong first half FY2009 performance with
improved metrics across the majority of the business. The performance is
particularly pleasing in light of the challenging trading conditions that we
are experiencing in many of our key markets. In constant currency, revenue grew
by 8.1% to $1.950 billion while the operating margin (1) improved by 0.7 of a
percent to 4.6% driving a 37.4% increase in operating profit (1) to $88.8
million.
The year on year appreciation in the US dollar against most of our trading
currencies has impacted statutory reported results in US dollars with revenues
falling by 10.2%. Encouragingly operating profit increased by 4.4%. Subsequent
discussion of results in this section will focus on our performance in constant
currency except where noted.
Excellent execution in our Services business drove our overall revenue and
profitability growth in the period. Total Services revenues increased 21.1% and
were driven by strong growth of 25.2% in Managed Services. Product revenue
growth was muted reflecting economic realities and decreased client capital
expenditure. In addition to period on period growth, the Group achieved
sequential growth in operating profit on the second half of FY2008,
demonstrating an encouraging level of robustness in our business model.
The progress that we have made over the last five reporting periods in widening
our operating margin continued in this reporting period. Operating margin
improvements came as a result of an increase in the gross profit margin (1)
from 21.0% to 21.8% which reflected excellent growth and execution in our
Services business and good cost containment. Our gross profit increased 11.4%
while we contained growth in our overhead base to 6.1%.
Dimension Data closed the period with a strong balance sheet and $345 million
in cash.
Our regional performances were strong, with the exception of the Americas.
Australia, Europe and Middle East and Africa all delivered excellent growth.
Europe was an outstanding performer in the period, delivering strong growth in
revenues and a doubling of operating profit. Asia experienced revenue
challenges due to its exposure to global financial services and multinational
clients, however, growth in Asia`s Services revenue base and a focus on cost
management helped to deliver a strong increase in operating profit. The effects
of the financial services industry downturn in the Northeast of the US severely
impacted our Americas region. However, Services and select lines of business
performed well. During the period, we addressed the cost base in the US and
continued to focus on developing the maturity of our Services business.
SYSTEMS INTEGRATION BUSINESS DELIVERS RESULTS
Dimension Data`s Systems Integration (SI) business, which comprised 79% of
total revenues, delivered an excellent performance with a 3% increase in
revenues and 10% increase in gross profit. Within the SI business Services
revenues were up by 15% and gross profit up 21%. Product revenues declined by
3%, while Product margins were stable.
The Group`s chosen specialised lines of business continue to be well positioned
in the current economic climate to help clients reduce costs and improve the
productivity and efficiency of their businesses. Within our Systems Integration
business, our Converged Communications, Microsoft Solutions and Security
Solutions lines of business all showed growth. Video and other collaboration
technologies have provided companies with cost effective alternatives to travel
and have bolstered our Converged Communications growth. The focus on cost
reduction has also supported growth in our Microsoft Solutions business as
clients implemented systems management and unified communications. Many
companies have continued to invest in securing their communications and
information during this downturn and this has supported growth in our Security
Solutions.
The Network Integration line of business, which contributed 58% of revenue
within our Systems Integration business, performed well given difficult market
conditions. Outstanding Network Integration performances in Middle East and
Africa, Australia, and Europe were offset by poor performances in the Americas
and Asia regions. This performance variance is attributed to a decrease in the
purchasing of core routing and switching technology by the global financial
services and multinational clients within the Americas and Asia regions.
Network Integration- related Services performed strongly; showing growth during
the period and offsetting the lower Product revenues. Our Customer Interactive
Solutions (CIS) line of business delivered a disappointing performance as spend
on large call centre deployments was cut significantly. Challenges in our
Americas region`s Data Centre and Storage Solutions (DCS) business muted
overall DCS growth.
SERVICES LED STRATEGY GAINS STRONG MARKET ACCEPTANCE
In the current market, companies are looking to reduce capital expenditure and
conserve their cash. This trend is impacting the volume of IT technology sales.
However, the market opportunity for IT services within our SI business has
remained healthy. The Group has taken advantage of the current economic
environment to drive market share gains in maintenance, support and
multisourcing-related Services. Uptime, our value-added maintenance and support
offering, achieved the largest growth within our Services business. Uptime
benefited from global and multinational clients` focus on supplier and contract
consolidation for support services. Additionally, our market traction and
growth in Converged Communications created new support and managed services
revenue opportunities - both in existing and new clients.
During the period we made significant progress in evolving our Services
strategy. One significant such milestone was the completion of our Global
Services Operating Architecture (GSOA) upgrade. Initially deployed in Asia, the
upgraded GSOA will be deployed throughout the remaining regions through 2010.
The GSOA automates efficient and consistent worldwide service delivery and
enables us to meet stringent service level agreements with clients while
providing them better visibility and adaptability.
Important progress also occurred in the market adoption of our assessment
services in Security Solutions, Network Integration, Converged Communications,
and Data Centre and Storage Solutions. Increasingly our clients are engaging
with us to be their trusted advisor within our fields of expertise. This is
driving growth in our consulting and assessment services. Dimension Data`s
assessment services help clients make better investment decisions by providing
an understanding of their IT environments and on how best to procure and manage
IT solutions and services. We also introduced an international programme
management capability with specialist expertise to effectively manage the
growing proportion of our business that involves multinational deployments. We
continue to invest in methodologies and common processes that enable efficient
and consistent global service delivery both directly and through our preferred
partner network.
REGIONAL BUSINESSES ADVANCED
Outside our SI business, our regional businesses - Internet Solutions (IS) and
Plessey in the Middle East and Africa and Express Data in Australia - all
delivered strong growth. Taken together these businesses and other smaller
regional businesses represented 21% of total revenues and 21% of gross profits
for the period. IS and Plessey delivered good performances for the period and
continue to execute on emerging market opportunities throughout the Middle East
and Africa. Express Data delivered a great performance with strong revenue and
margin growth.
In January 2009, IS was awarded two telecommunciations licences permitting the
division to self- provide telecommunications infrastructure services in
competition with incumbent operators. We are optimistic that these licences
will provide IS with the opportunity to expand its client base and market
offerings throughout Africa. Plessey was appointed to lay the first route of
the MTN/Neotel National Long Distance fibre network.
CLIENTS AND MARKET SEGMENTS
The economy is driving our clients to change a number of business processes
around the management and governance of their IT infrastructure with the
ultimate goal of reducing total cost of ownership. Many clients are undertaking
a move toward standardisation of technologies and suppliers. Vendor
relationships are being consolidated to gain more buying leverage from fewer
vendors and reduce the administrative costs of managing multiple vendor
relationships. Clients are opting for differentiated levels of service and
support with their IT infrastructure to balance risk and cost reduction. We
also continue to see significant opportunities for our IT solutions to reduce
the environmental footprint of our clients. In this regard, we invested further
during the period in monitoring and improving on our own environmental
credentials.
Within Dimension Data`s vertical markets, the financial services industry felt
cost pressures and cut back on capital expenditures, while Service Provider and
Public Sector vertical markets showed strong growth for the Group.
COST MANAGEMENT FOCUS
Anticipating tougher economic conditions, the Group paid close attention to
cost containment over the past six months. Careful prioritisation has been
given to spend associated with generating near term revenue and supporting
clients, while key strategic projects, such as completion of our GSOA platform
and the development of our environmental strategy, have continued to receive
focus and investment. In regions where we saw the markets softening, we
curtailed spend. In the Americas we cut travel by over 40%, reduced capital
expenditures by 50%, reduced headcount in North America by 9% and took several
other cost reduction measures. In Asia, among other cost reduction efforts, we
reduced headcount by 4%, cut travel by 29% and capital expenditure by 20%. Our
resilient profitability has helped us to avoid having to make large scale cost
cuts across the business, and the Group has successfully managed the cost base
to appropriate revenue levels.
STRATEGIC ACQUISITIONS
Dimension Data completed the acquisition of the remaining 44.9% of the shares
of its Asian subsidiary, Datacraft. Datacraft had been a Dimension Data
subsidiary for eleven years and has been critical to the Group`s growth and
expansion of its Asian footprint. Dimension Data believes the Asian marketplace
will continue to offer attractive future growth opportunities and increasing
the Group`s stake provides our shareholders participation in such growth. The
Group proceeded with two other strategic acquisitions, the acquisition of
Teksys and Bluefire. The acquisition of Teksys was a key next step in executing
on our Microsoft Solutions strategy within Europe. Teksys is a UK-based
Microsoft infrastructure and licensing services company that provides
professional and managed services and holds Microsoft Large Account Reseller
(LAR) status. Bluefire is a managed services hosting company based in
Australia. The Bluefire acquisition is important to the development of
outsourcing capabilities within our Services strategy.
OUTLOOK
Looking forward, we believe market conditions will remain challenging and
business visibility will be uncertain. There are some signs of stabilisation
and our interim results demonstrate a solid platform as we enter the second
half of the financial year. We continue to see opportunities throughout our
Solutions and Services portfolio, and believe the medium term opportunities are
robust.
Our attention throughout the second half of the year will be on maximising our
opportunities while adopting a prudent expenditure and investment profile. Our
diverse geographic footprint insulates us somewhat and provides us with strong
local delivery and execution capabilities, which continue to set us apart from
our key competitors. We believe at present it is too early to call an upturn in
the market, however we are optimistic about our future prospects and believe
Dimension Data is well positioned for the long term.
Chief Financial Officer`s Review
In this review, growth rates are in relation to H1 2008 and are, unless
otherwise indicated, calculated before eliminating intercompany revenue and
adjusted for the impact of currency movements (i.e. are constant currency
growth rates).
Unless specifically indicated, exceptional items are excluded from the
analysis.
Income Statement Summary
Revenue for the half was $1,950 million, an 8.1% increase on H1 2008. The
Group`s reported results were impacted by the appreciation in the US dollar in
relation to most of the local currencies in which it trades, resulting in a
decline in reported currency revenues of 10.2%. Product revenues were flat (up
0.3%), Professional Services grew by 15.1% while Managed Services grew by
25.2%. This excellent performance from Managed Services, which was accompanied
by higher gross margins, resulted in a 0.5% expansion in the Group`s overall
gross margin to 21.8%, and in gross profit growing 11.4% to $424.5 million.
Product margins were unchanged, while Services margins reduced slightly by
0.2%.
Overheads of $335.7 million were up by 6.1%, well below the 11.4% increase in
gross profit. Of this, variable overheads (bonuses and sales commission)
reduced by 3.5% to $47.7 million while fixed overheads grew by 7.8% to $288.0
million. The Group`s overhead cost base was carefully managed over the period,
with prioritisation given to revenue generation and client support.
Discretionary spend was reduced, while strategic projects, such as the rollout
of the upgraded Global Services Operating Architecture (GSOA) platform,
continued to receive focus and investment. Furthermore, investments made in
technologies such as video conferencing and integrated collaboration reduced
travel and associated costs. Although Group headcount did not reduce as a
whole, there were targeted headcount reductions where appropriate.
The gross margin expansion, coupled with strong focus on cost containment,
meant that the Group`s operating margin expanded by 0.7% to 4.6% for the
period, and operating profit increased by 37.4% to $88.8 million.
By region, revenue growth was strong in Middle East and Africa (MEA) (+ 30.4%),
Australia (+ 21.5%) and Europe (+ 9.4%), although declines were experienced in
Asia (by 1.9%) and in the Americas (by 24.3%). Operating profit more than
doubled in Europe, and was strongly up in MEA (+18.8%), Australia (+ 26.8%) and
in Asia (+ 32.7%). In the Americas, operating profit reduced by 72.1% to $2.3
million.
Across the businesses, Systems Integration (SI) revenues were up by 3.0%, with
the strong performance in Managed Services driving gross profit growth of
10.0%. Internet Solutions (+ 37.4%) and Plessey (+ 57.5%) both reported good
revenue growth, although gross margins in each business were lower. As a
result, gross profit expanded in Internet Solutions by 29.0% and in Plessey by
14.9%. Express Data grew revenues by 18.5% with Product margins remaining
stable.
The share of results from associates reduced slightly from $3.8 million to $3.7
million for the period, as did net interest costs from $7.4 million to $6.6
million.
Property revaluation and other gains and losses include a gain on revaluation
of the investment portion of the Campus property asset of $2.2 million (H1
2008: $3.6 million).
The Group`s effective tax rate on profit before tax, excluding exceptional
items, increased to 28.9% (H1 2008: 26.6%) as a result of the change in mix in
profits across the Group. The Group recorded a $9.9 million exceptional tax
credit, and a $1.3 million exceptional operating expense, flowing from the
restructuring of the funding facility associated with the Campus land and
buildings in South Africa.
Earnings per share before exceptional items were 3.5 cents, up marginally from
prior year.
Trading and Operations
Group Businesses
The revenue in the table below is as reported, whereas the growth rates are
calculated before eliminating intercompany revenue and adjusted for the impact
of currency movements.
Systems Internet
$ million Integration Solutions Plessey
Revenue
Product 979
Growth (3.0%)
Managed
Services 378 113
Growth 23.5% 37.4%
Professional
Services 183 88
Growth 1.4% 57.5%
Total 1,540 113 88
Growth 3.0% 37.4% 57.5%
Express
$ million Data Other* Total
Revenue
Product 155 1,134
Growth 18.5% 0.3%
Managed
Services 1 8 500
Growth 34.9% 0.2% 25.2%
Professional
Services 45 316
Growth 23.0% 15.1%
Total 156 53 1,950
Growth 18.5% 15.3% 8.1%
* Other includes Merchants and DDAI
Systems Integration (SI) (trading as Datacraft in Asia and Dimension Data
elsewhere)
The SI business offers clients a full life cycle of services across each of its
six lines of business, namely Network Integration, Converged Communications,
Security Solutions, Customer Interactive Solutions (CIS), Data Centre and
Storage Solutions (DCS) and Microsoft Solutions. Its Professional Services
portfolio caters for services such as assessment, consulting and design leading
to procurement and deployment of third party product for both multinational and
local clients. Its Managed Services portfolio caters for the ongoing support,
monitoring and management of our clients` IT environments. These services are
designed to leverage the specialist knowledge and intellectual property of each
line of business, adopting best practice in areas such as supply chain
management, consulting frameworks project management and packaged and
customised managed services.
A focus on delivering solutions which improve productivity or reduce costs,
together with solid demand for our Managed Services offerings, ensured that the
SI business displayed encouraging resilience during the period.
SI Revenue Streams
Product revenues reduced by 3.0%, reflecting general caution in purchasing
decisions as our clients elected to defer discretionary expenditure. The
Americas were most severely impacted with Product revenues down by 30.9%, as
multinational corporation clients in general, and financial services industry
clients in particular, reduced spend. Asia`s Product revenues were similarly
impacted, down by 14.6%. Product revenues in Europe grew by 6.3% while MEA and
Australia both delivered strong growth in Product revenues, up by 21.1% and
25.2% respectively.
Professional Services (PS) revenues were up 1.4%. Most of our PS revenues
continue to be derived from the design and deployment of Product based
solutions, but while there is a correlation with product revenues, we are also
increasingly delivering consultative services in advance of or separate to
Product procurement. Converged Communications PS revenue growth was
particularly strong, reflecting an increase in global deployments as our
clients continued to invest in technologies delivering immediate cost
efficiencies, such as IP Telephony and video conferencing. PS gross margins
improved slightly as a result of ongoing investment in improving the efficiency
and consistency of service delivery.
Managed Services grew by 23.5%. This excellent performance highlights the
strength of our Uptime branded maintenance and support service, as well as our
global focus on delivery excellence. Growth was supported by our clients` focus
on rationalising their own sourcing strategies, including the aggregation of
support partners (particularly on a multinational level) and in selectively
out-tasking of IT functions. We continued to invest in our multisourcing
capabilities and experienced accelerating growth in this area.
SI Lines of Business
In the largest line of business, Network Integration, revenues declined by
2.0%. Product revenues in the Americas and Asia were particularly impacted by
exposure to multinational corporation and financial services industry clients.
However, MEA, Australia and Europe performed well, and we continue to see
strong demand in areas such as performance optimisation, wireless and mobility
services, where capital investments deliver more immediate cost savings or
productivity and process benefits. A strong performance from Managed Services
ensured a robust gross profit performance for this line of business for the
period.
Security Solutions revenues increased by 4.5%, with lower network security
product revenues offset by good growth in advanced security revenues. Long term
trends in this line of business remain favourable. Security threats continue to
evolve as the economic climate changes and infrastructure becomes more complex.
This, combined with regulatory compliance requirements, makes security critical
to business agility. Our multi-vendor capability and integration skills with
key partners, position us well to support organisations looking to consolidate
complex vendor relationships in the security environment.
Continuing strong demand for IP Telephony and video conferencing solutions
ensured growth of 21.1% in our Converged Communications line of business.
Pressure on travel costs and environmental concerns, together with clear
opportunities for infrastructure rationalisation and productivity improvements,
continue to underpin this line of business.
We experienced a 12.4% decline in our CIS line of business, as organisations
worldwide delayed large capital expenditure projects, impacting demand for our
call centre solutions. In response, we realigned our cost structure for this
line of business in Australia, the UK and the Americas.
Our DCS line of business declined by 14.1%, largely due to much lower revenues
in the Americas, where we took corrective action during the half. Elsewhere,
the DCS business performed well, with strong services growth supporting gross
profit expansion. We experienced ongoing demand for server virtualisation as
organisations sought to optimise their existing infrastructure, and clients
invested in storage, archiving and de-duplication technologies to improve
efficiencies. Cisco`s recent entry into the blade server and server
virtualisation markets confirms that Data Centre integration capabilities are
increasingly important to our Networking, Security and Microsoft Solutions
lines of business.
Microsoft Solutions grew revenues by 44.3%. Excluding the impact of the Teksys
acquisition in the UK, revenues were up by 30.5%. Growth was supported by good
license resale revenues in Australia and South Africa. Elsewhere, as
organisations looked to extract value from their existing investments in
Microsoft technologies, the Group experienced good demand for its consulting
and deployment offerings.
Internet Solutions (IS)
IS is an African next generation services provider. 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, virtual private
network (VPN), broadband, voice and application hosting services. IS provides
connectivity services to many of the biggest companies in South Africa, as well
as an expanding number of businesses across the African continent.
IS revenues grew by 37.4% over H1 2008, reflecting ongoing demand for the
division`s range of services. Growth in outsourced data networks was strong,
and our clients` focus on cost savings fuelled growth in voice traffic (`Voice
over IS`) and in hosting services. Gross margin declined as a result of
increased competitive pressure in the South African market, as well as the
impact on international input costs of the stronger US dollar.
In January 2009, IS was awarded two telecommunications licences allowing it to
self-provide telecommunications infrastructure services in competition with
incumbent operators. IS can now, in circumstances where it makes commercial
sense, build its own fixed or wireless network. In response, IS will commence
rolling out fibre access for its top clients. It has also embarked upon the
application process to acquire licensed wireless spectrum, which would enable
it to connect its own clients using both fixed and wireless links. Furthermore,
IS is also permitted to connect directly to international gateways for
international bandwidth.
Plessey
Plessey provides telecommunications infrastructure solutions across the African
continent, through its offices in twelve African countries. Telecommunications
service providers looking to deploy high speed, multi-media networks support
demand for Plessey`s physical infrastructure and support services. These
services include the construction of base stations, the provision of wireless,
optical fibre, satellite and microwave solutions as well as managed services.
Plessey continues to invest in its fibre rollout capacity in anticipation of
infrastructure spend following deregulation of the South African
telecommunications environment. As a result, the division is now regarded as
the premier provider of end to end fibre deployment in South Africa, with a
comprehensive service offering.
Plessey reported strong growth in revenues, up 57.5% for the period, supported
by orders for site construction in Africa (in particular Uganda and South
Africa) and by growth in fibre rollout projects in South Africa. Gross margins,
however, were impacted negatively by a combination of factors, including a
change in mix of revenues in favour of South Africa, where margins are lower, a
slowdown in orders in some African countries which resulted in redundancy and
relocation costs, as well as investments made in some large tenders in South
Africa. During the period Plessey was appointed to lay the first route of the
MTN/Neotel National Long Distance fibre network in South Africa, a total of 592
km, and is well positioned for further deployments of this network.
Express Data
Express Data, the Group`s distribution business in Australia, grew revenues by
18.5%. This growth was driven in part by Australian dollar weakness resulting
in clients placing product orders in anticipation of price rises, but also by
market share gains. Express Data enjoys a good balance of clients across the
range of enterprise, commercial, government, small to medium business and
consumer sectors and whilst large enterprise business softened, the division
experienced growth in all other segments, particularly government.
The base of annuity-oriented software licensing and maintenance contracts
continued to support business with channel partners as they increased focus on
retaining customers. In this regard, Express Data remains well placed to act as
an aggregator for software vendors as they transition from periodic licensing
programs to software as a service delivery model.
Other
Dimension Data Advanced Infrastructure (DDAI) focuses on the physical layer of
IT infrastructure. In particular, the division provides solutions and services
around electrical reticulation and communications cabling, wireless
connectivity, and integrated security relating to surveillance, access control,
alarms and IT monitoring. The support of data centres and hosting facilities is
a focus, where the division ensures business continuity for our clients,
including power, cooling, access control and fire suppression systems.
DDAI in South Africa extended its excellent performance of the prior year with
revenue growth of 35.9%, supported by stadium construction for the 2010 FIFA
World Cup. In contrast, in the UK DDAI`s revenues were flat on the back of
depressed conditions in that region`s construction industry.
Merchants, the Group`s outsourced call centre business, now operates
predominantly out of South Africa, retaining only a small consultancy and
hosting operation in the UK. Overall revenues were flat, with an 18.6% growth
in revenues in South Africa offset by a lower contribution from the UK as a
result of the downsizing of operations last year.
Regions
$`000 Americas Asia Australia Europe
2009
Revenue 260,930 314,189 386,922 516,219
Growth % (24.3%) (1.9%) 21.5% 9.4%
Product 187,326 188,865 295,746 315,031
Growth % (30.9%) (14.6%) 25.2% 6.3%
Services 73,604 125,324 91,176 201,188
Growth % (0.2%) 26.6% 9.6% 14.5%
Gross margin 17.2% 22.0% 18.3% 20.2%
Operating profit 2,291 25,928 18,036 13,665
Operating margin 0.9% 8.3% 4.7% 2.6%
Middle East Central
$`000 & Africa & Other Total
2009
Revenue 463,268 8,580 1,950,108
Growth % 30.4% 8.1%
Product 140,115 6,958 1,134,041
Growth % 21.1% 0.3%
Services 323,153 1,622 816,067
Growth % 34.7% 21.1%
Gross margin 27.2% 21.8%
Operating profit 35,751 (6,873) 88,798*
Operating margin 7.7% 4.6%*
$`000 Americas Asia Australia Europe
2008
Revenue 346,560 353,787 440,803 564,581
Product 272,652 225,730 324,887 351,166
Services 73,908 128,057 115,916 213,415
Gross margin 15.7% 18.5% 19.0% 20.5%
Operating profit 8,431 23,481 19,164 8,109
Operating margin 2.4% 6.6% 4.3% 1.4%
Middle East Central
$`000 & Africa & Other Total
2008
Revenue 456,297 9,184 2,171,212
Product 139,483 4,241 1,318,159
Services 316,814 4,943 853,053
Gross margin 28.2% 21.3%
Operating profit 40,432 (14,601) 85,016
Operating margin 8.9% 3.9%
* Before exceptional items.
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 for the impact of currency movements.
Americas
Revenues in the Americas declined by 24.3% although gross profit reduced by
only 16.9%. Strong performances from Brazil, Mexico and Canada could not
compensate for a 29.4% revenue decline in the US. Of this, Product revenues in
the US were down by 36.4% as multinational and financial services clients
scaled back on non-discretionary infrastructure spend. While Professional
Services revenues in the US reduced by 8.9%, Managed Services revenues grew by
8.7% with good contract wins in the Network Integration and Converged
Communications lines of business.
Network Integration was most impacted by the reduced demand, while the
Converged Communications and Microsoft Solutions lines of business recorded
good growth, supported by the region`s integrated collaboration and visual
communications solutions. Cost reduction programs ensured that, despite the
revenue pressures, the business in the Americas generated a $2.3 million
operating profit for the period.
Asia
Total revenues in Asia were 1.9% down. Strong Services growth could not fully
offset Product weakness, where revenues declined by 14.6% reflecting
challenging economic conditions and lower product demand from multinational and
financial services clients. Across the region, projects were deferred and
decision makers delayed capital expenditure commitments.
Managed Services posted a solid performance, up 30.1%, supported by market
share gains in some territories, and some important multi-year outsourcing
deals were concluded during the period. Professional Services grew by 14.3%.
Within the lines of business, Network Integration revenues declined by 7.8%
(although gross profit growth was supported by robust Managed Services).
Microsoft Solutions and DCS recorded very good performances, with the latter
also reporting some excellent client wins during the period.
The trading performance, together with targeted cost reduction programs in the
region, resulted in operating profit increasing by 32.7% to $25.9 million for
the period.
Australia
The Australian Systems Integration business had a very strong half, with
revenues up by 22.4%. Product grew by 36.9% partly driven by Australian dollar
weakness against the US dollar, where clients placed orders in anticipation of
price rises. The business also benefitted from the Federal Government stimulus
package, and from market share gains on the back of ongoing consolidation in
the Australian IT services industry.
Managed Services were up by 14.4%, with good multisourcing wins. Professional
Services, where growth in consulting was offset by the termination of a CIS
contract, grew by 4.3%. During the period, we acquired acquired Bluefire, a
company specialising in outsourced infrastructure management.
With the exception of CIS, where we restructured the business to adjust to
lower revenues, all the lines of business in Australia reported strong growth
for the half.
Express Data recorded a very strong half, as described previously.
Europe
In the face of challenging economic conditions, our European business recorded
an excellent first half performance, with revenue growth of 9.4%. Product grew
by 6.3%, Professional Services by 9.8%, while Managed Services were up strongly
22.1%. Operating profit expanded from $8.1 million to $13.7 million, and
operating margin increased to 2.6%.
The region`s focus on Managed Services renewals, as well as on solutions which
enable operational efficiencies for our clients, supported growth, as did very
good performances from the Converged Communications, Security and Microsoft
Solutions lines of business. During the period, we acquired Teksys, a UK-based
Microsoft solutions and services provider, which will support the region`s
ability to provide Microsoft solutions on a pan-European basis.
The German, Belgium, UK, Netherlands and Luxembourg businesses were all
important contributors to the improved profitability.
In addition to gross profit growth, operating profit expansion was supported by
targeted cost saving programs across the region. Ongoing productivity
initiatives - including leveraging off the newly standardised ERP platform and
reducing travel and meetings costs through the extensive use of unified and
visual communications - all supported profitability.
Middle East and Africa
The Middle East and Africa (MEA) region remained the largest contributor to
Group operating profit, with revenues up by 30.4% and operating profit growing
by 18.8% to $35.8 million.
The Systems Integration business performed well, with revenues up by 22.0%
supported by strong growth in Product (21.1%) and Managed Services (31.1%).
Product revenues were underpinned by robust growth from the African territories
outside of South Africa (in particular Nigeria and Kenya) and by good public
sector demand. This offset weakness in the financial services and mining
sectors in South Africa. Managed Services growth benefitted from clients`
ongoing requirement to support existing infrastructure. Professional Services
revenues declined by 6.4% largely a result of a large contract win in the prior
period which did not repeat.
Within the lines of business, Network Integration, Converged Communications,
DCS and Microsoft Solutions were robust, although revenues declined in CIS.
The performances of the other business in the MEA region (Plessey, Internet
Solutions, DDAI and Merchants) were described previously.
Central and Other
In Central and Other, net costs reduced by $7.7 million to $6.9 million.
Within this, the contribution from the Campus property was $6.3 million (up by
2.5% in constant currency) as rental rates continued to show some growth for
the period.
Central management costs, net of trading income, reduced by 34.7% to $13.2
million, supported by a focus on cost containment, and in particular reduced
bonus and share incentive accruals and reduced project based expenditures. The
Group continued to invest in its Services and Lines of Business strategies, as
well as in the standardisation of sales and operational systems and processes.
Share of Results of Associates
The share of profit of associates was consistent with the prior year in
reported currency at $3.7 million (H1 2008: $3.8 million).
Britehouse, which houses various application development operations and an IT
resourcing business, was the largest contributor with $1.8 million. Dataflo,
which provides application support services to the South African beverage
industry, contributed $1.4 million.
Interest Income and Finance Costs
The Group earned interest of $7.9 million (H1 2008: $7.8 million),
predominantly on its cash holdings.
Total finance costs were $14.4 million (H1 2008: $15.3 million), most of which
($10.4 million (2007: $12.0 million)) related to funding the Campus property in
Johannesburg. During the period, the Group unwound the tax structure associated
with Campus funding and replaced the finance lease with secured bank loans.
While this led to a change in the assessed tax position relating to the
funding, there was no significant change to the reported asset and liability,
nor any change to the underlying cash flows or reported finance costs
associated with the funding.
Property Revaluation and Other Gains and Losses
Property revaluation and other gains and losses include a $2.2 million (H1
2008: $3.6 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 31 March 2009.
Income Tax
The Group`s effective tax rate on profit before tax, excluding exceptional
items, increased to 28.9% (H1 2008: 26.6%) as a result of the change in mix in
profits across the Group. In particular, the Americas region, where there is an
assessed tax loss, experienced a reduction in profits for the period.
In H1 2009, the Group, in conjunction with the lending banks and in agreement
with the South African tax authorities (SARS), restructured the financing
arrangement underpinning the Campus land and buildings in South Africa. SARS
allowed Dimension Data a once off tax deduction of $40.5 million as part of the
settlement which resulted in the Group raising a deferred tax asset of $9.9
million during the period.
Minority Interests
The minority interest in the result for the period of $5.6 million relates
mainly to the Black Economic Empowerment (BEE) consortium`s 15.73% interest in
the MEA operations. The minority interest reduced during the period as a
consequence of the acquisition of the remaining minority shares in Datacraft
Asia in November 2008.
Acquisitions and Disposals
During the period, the Group completed the acquisition of the remaining
minority shares in Datacraft Asia Limited. In terms of the transaction,
shareholders were offered $1.33 per share, at a total cost of approximately
$281 million. Goodwill on acquisition amounted to approximately $183 million.
The Group concluded two other acquisitions, neither of which was material. In
Australia, we acquired Bluefire, a company specialising in outsourced
infrastructure management. In the UK, we acquired Teksys, a company
specialising in Microsoft solutions and services.
There were no disposals during the period.
Balance Sheet
The Group retained a solid balance sheet position throughout the period,
finishing the period with equity attributable to equity shareholders of the
parent of $693.2 million, and cash and cash equivalents, net of overdrafts, of
$344.3 million. Minority interests reduced during the period from $138.2
million to $38.7 million as a result of the acquisition of the outstanding
minority shares in Datacraft Asia.
Non-current assets of $618.4 million included investment property of $71.2
million. This relates to the 52.96% of the Campus property asset in South
Africa occupied by third party tenants (the balance of the Campus is included
in property, plant and equipment). The Campus was revalued at the end of the
period, resulting in a revaluation gain through the income statement of $2.2
million.
Non-current liabilities included bank loans which increased to $120.5 million
mostly as a result of the termination of the Campus lease structure, and its
replacement with secured bank loans. Obligations under finance leases reduced
accordingly.
Cash Flow
Cash and cash equivalents at the end of the period were $344.3 million, with a
net outflow of $321.3 million for the period.
Cash generated from operations was $24.4 million (H1 2008: $66.1 million
inflow), net of cash invested in working capital of $106.9 million (H1 2008:
$58.9 million). Overall, working capital management remained solid throughout
the period, and the Group`s net investment in working capital at 31 March 2008
was lower (in constant currency) than twelve months previously.
While a net investment in working capital is normal in the first half of the
year - bonuses, for example, are settled during the period - the investment
during this period was relatively high for two main reasons: First, trade
receivables days extended slightly relative to the FY 2008 year end, mainly in
Asia and in Africa. In Africa, this reflected extended days in Internet
Solutions, but also a change in mix of clients in favour of public sector and
service providers, where collections were not as robust at period end. Second,
inventory days were higher, reflecting the strong relative performance for the
period of Express Data and Plessey, both of which employ significant inventory
holdings.
Net cash used in investing activities was $307.5 million, including $281.2
million in respect of the acquisition of the minority interests in Datacraft
Asia. Additions of intangibles and of property, plant and equipment amounted to
$26.6 million (H1 2008: $42.1 million), of which Internet Solutions invested
$14.2 million (H1 2008: $18.1 million).
Principal Risks and Uncertainties
Principal risks and uncertainties facing the Group generally, and for the
remaining six months of the financial year, are explained on pages 26 to 29 of
the Group`s 2008 Annual Report. The indentified risks are: exposure to economic
downturn, dependency on key vendors and disruption of key vendor relationships,
exposure to country and regional risk, dependence on major clients and
contracts, people retention, professional liability, increasing complexity and
variability of client contracts, business continuity risk, regulatory
compliance risks and balance sheet and financial instruments risk. A copy of
the Group`s 2008 Annual Report is available on our website at
www.dimensiondata.com. The Directors decision to continue to adopt the going
concern basis of preparation in the interim financial statements is explained
in Note 1 to the condensed financial statements.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 March 2009
Six months Six months Year ended
ended ended 30 September
31 March 2009 31 March 2008 2008
Notes $`000 $`000 $`000
Revenue 2 1,950,108 2,171,212 4,510,640
Cost of sales (1,525,589) (1,709,002) (3,537,347)
Gross profit 424,519 462,210 973,293
Administrative,
selling and
distribution
expenses (337,055) (377,194) (791,079)
Operating profit 87,464 85,016 182,214
Share of results
of associates 3,656 3,751 7,113
Interest and
investment
income 7,856 7,841 17,516
Finance costs (14,420) (15,276) (31,025)
Property
revaluation and
other gains
and losses 2,681 8,456 13,194
Profit before tax 87,237 89,788 189,012
Tax 4 (15,630) (22,885) (47,973)
Profit for the
period 71,607 66,903 141,039
Attributable to:
- Equity
shareholders of
the parent 65,997 55,881 118,410
- Minority
shareholders 5,610 11,022 22,629
71,607 66,903 141,039
Earnings per
ordinary share: US cents US Cents US Cents
- Basic 6 3.9 3.7 7.7
- Diluted 6 3.8 3.4 7.3
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 March 2009
31 March 31 March 30 September
2009 2008 2008
Notes $`000 $`000 $`000
Non-current assets
Property, plant and
equipment 147,728 161,207 170,560
Investment property 71,232 80,156 81,208
Goodwill 273,907 95,414 95,820
Other intangible assets 18,516 11,807 18,856
Investments in associates 31,303 33,708 34,426
Other investments 4,055 4,753 3,602
Deferred tax assets 37,340 40,386 31,862
Trade and other
receivables 7 34,359 49,432 38,163
618,440 476,863 474,497
Current assets
Inventories 160,572 198,472 181,885
Trade and other
receivables 7 924,572 1,070,609 1,059,547
Cash and cash equivalents 345,397 396,716 686,499
1,430,541 1,665,797 1,927,931
TOTAL ASSETS 2,048,981 2,142,660 2,402,428
Equity
Equity attributable to
equity shareholders of
the
parent 693,165 560,701 710,201
Minority interests 38,704 130,473 138,211
Total equity 731,869 691,174 848,412
Non-current liabilities
Bank loans 120,525 4,034 3,841
Other long term
liabilities 37,124 42,156 38,574
Obligations under
finance leases 12,624 132,944 139,906
Deferred tax liabilities 3,717 1,773 715
Provisions 5,944 8,568 6,186
179,934 189,475 189,222
Current liabilities
Trade and other payables 8 1,106,170 1,230,913 1,347,113
Bank loans 20,640 14,869 2,256
Bank overdrafts 1,104 1,022 4,146
Provisions 9,264 15,207 11,279
1,137,178 1,262,011 1,364,794
Total liabilities 1,317,112 1,451,486 1,554,016
TOTAL EQUITY AND
LIABILITIES 2,048,981 2,142,660 2,402,428
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2009
Six months Six months Year
ended ended ended
31 March 2009 31 March 2008 30 September 2008
$`000 $`000 $`000
Cash flows from
operating activities
Operating profit 87,464 85,016 182,214
Adjustments for:
Depreciation and
amortisation 26,645 30,174 59,595
Movement in provisions 1,404 2,218 885
Share-based payment
expensed 8,348 9,211 16,726
Other non-cash items 7,438 (1,620) (2,441)
Operating cash flows
before movements in
working capital 131,299 124,999 256,979
Decrease /(increase)
in inventories 6,028 (6,869) 2,403
Decrease/(increase)
in trade and other
receivables 50,809 (78,687) (99,334)
(Decrease)/increase
in trade and other
payables (163,777) 26,686 176,140
Cash generated from
operations 24,359 66,129 336,188
Income taxes paid (17,111) (13,385) (36,000)
Interest paid (13,157) (12,683) (26,638)
Net cash (used
in)/from operating
activities (5,909) 40,061 273,550
Cash flows from
investing activities
Interest received 7,856 7,841 17,516
Net investment in
business interests
and other investments (287,539) (2,732) (4,785)
Acquisition of
property, plant and
equipment, net of
proceeds on
disposal (22,973) (39,890) (77,797)
Acquisition of
intangibles (3,657) (2,200) (13,338)
Treasury share buy
back of own shares by
a subsidiary - (1,169) (1,169)
Deferred
consideration paid (1,176) (3,748) (2,654)
Net cash used in
investing activities (307,489) (41,898) (82,227)
Cash flows from
financing activities
Shares purchased by
Employee Share Trust (12,576) (26,774) (33,143)
Repayment of
borrowings (9,492) (4,962) (21,755)
New bank loans and
finance leases 41,940 4,507 22,570
Dividends paid to
ordinary shareholders (27,953) (23,282) (22,821)
Dividends paid to
minorities (93) (9,366) (9,655)
Proceeds on issue of
new shares net of
expenses 268 2,907 121,034
Net cash (used
in)/from financing
activities (7,906) (56,970) 56,230
Net movement in cash
and cash equivalents (321,304) (58,807) 247,553
Cash and cash
equivalents at
beginning of period 682,353 455,758 455,758
Exchange differences
on cash and cash
equivalents (16,756) (1,257) (20,958)
Cash and cash
equivalents at end of
period 344,293 395,694 682,353
Cash and cash
equivalents is made
up as follows:
Cash and cash
equivalents 345,397 396,716 686,499
Bank overdrafts (1,104) (1,022) (4,146)
344,293 395,694 682,353
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Total other Retained
capital and reserves* earnings
premium
$`000 $`000 $`000
1 October 2007 196,165 261,703 104,079
Profit for the period - - 55,881
Items recognised
directly in equity (3,972) (14,575) (38,580)
Share incentive
schemes - 7,522 -
Deferred tax on share
incentive schemes - 1,307 -
Settlement of share
schemes - (7,556) (12,866)
Currency adjustments - (20,902) -
Deferred tax arising
on revaluation of
loans - 415 -
Dividends paid - - (23,282)
Shares issued 2,907 - -
Net movement in
shares held in
Employee Trust (6,879) - -
Subsidiaries
acquired/changes in
holdings - - -
Net gains on cash
flow hedging - 2,429 -
Movement in
investment valuations - (429) -
Transfers to income
statement - 291 -
Other - (84) -
Transfers - 2,432 (2,432)
31 March 2008 192,193 247,128 121,380
Attributable to Minority Total
equity holders interests equity
of parent
$`000 $`000 $`000
1 October 2007 561,947 128,242 690,189
Profit for the period 55,881 11,022 66,903
Items recognised
directly in equity (57,127) (8,791) (65,918)
Share incentive
schemes 7,522 - 7,522
Deferred tax on share
incentive schemes 1,307 - 1,307
Settlement of share
schemes (20,422) - (20,422)
Currency adjustments (20,902) (1,517) (22,419)
Deferred tax arising
on revaluation of
loans 415 - 415
Dividends paid (23,282) (4,244) (27,526)
Shares issued 2,907 - 2,907
Net movement in
shares held in
Employee Trust (6,879) - (6,879)
Subsidiaries
acquired/changes in
holdings - (3,030) (3,030)
Net gains on cash
flow hedging 2,429 - 2,429
Movement in
investment valuations (429) - (429)
Transfers to income
statement 291 - 291
Other (84) - (84)
Transfers - - -
31 March 2008 560,701 130,473 691,174
Share Total Retained
capital other earnings
and reserves*
premium
$`000 $`000 $`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 to Minority Total
equity holders interests equity
of parent
$`000 $`000 $`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
Share Total Retained
capital and other earnings
premium reserves*
$`000 $`000 $`000
1 October 2008 304,790 222,884 182,527
Profit for the period - - 65,997
Items recognised
directly in equity 34,489 (60,517) (57,005)
Share incentive
schemes - 11,164 -
Deferred tax on share
incentive schemes - (2,695) -
Share option reserve
utilised - (14,421) (31,207)
Currency adjustments - (54,142) -
Dividends paid - - (27,953)
Shares issued 268 - -
Net movement in
shares held in
Employee Trust 34,221 - -
Subsidiaries
acquired/changes in
holdings - - -
Movement on cash
flow hedging - (783) -
Transfers from income
statement - 998 -
Other - 1,517 -
Transfers - (2,155) 2,155
31 March 2009 339,279 162,367 191,519
Attributable to Minority Total
equity holders interests equity
of parent
$`000 $`000 $`000
1 October 2008 710,201 138,211 848,412
Profit for the period 65,997 5,610 71,607
Items recognised
directly in equity (83,033) (105,117) (188,150)
Share incentive
schemes 11,164 - 11,164
Deferred tax on share
incentive schemes (2,695) - (2,695)
Share option reserve
utilised (45,628) - (45,628)
Currency adjustments (54,142) (1,788) (55,930)
Dividends paid (27,953) (93) (28,046)
Shares issued 268 - 268
Net movement in
shares held in
Employee Trust 34,221 - 34,221
Subsidiaries
acquired/changes in
holdings - (103,236) (103,236)
Movement on cash
flow hedging (783) - (783)
Transfers from income
statement 998 - 998
Other 1,517 - 1,517
Transfers - - -
31 March 2009 693,165 38,704 731,869
* 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 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 March 2009
1. BASIS OF PREPARATION
Statutory financial information
The unaudited interim results have been prepared in accordance with accounting
policies and methods of computation based on International Financial Reporting
Standards (IFRS`s) as adopted by the European Union, and presented in terms of
IAS 34 `Interim Financial Reporting`.
The unaudited interim results 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 2008.
The tax charge on underlying business performance is calculated by reference to
the estimated effective tax rate for each jurisdiction for the full year 2009.
Tax on disposal and exceptional items is based on the expected tax impact of
each item.
The preparation of the interim 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 unaudited interim condensed consolidated financial statements for the six
months ended 31 March 2009, which were approved by the Board of Directors on 12
May 2009 and which include certain comparative information with respect to the
year ended 30 September 2008, do not constitute statutory accounts within the
meaning of section 435 of the Companies Act 2006 (`the Act`). Full accounts for
the year ended 30 September 2008, prepared in accordance with International
Financial Reporting Standards, incorporating an unqualified independent
auditors` report, which did not include a reference to any matters to which the
auditors draw attention by way of emphasis of matter, have been filed with the
Registrar of Companies and did not contain a statement under section 498(2) or
(3) of the Act.
The Group has a balance of businesses globally. Historically, the Northern
hemisphere operations have, ignoring underlying growth trends, reflected a bias
of trading towards the first half of the financial year, and our Southern
hemisphere businesses towards the second half. In recent periods, at a Group
level, on balance there has been a slight bias in trading towards the second
half of the year, although there is no guarantee that in an uncertain economic
environment this trend will continue.
The Group`s business activities, together with the factors likely to affect its
future development, performance and position are set out in the Chief Executive
Officer`s and Chief Financial Officer`s reviews. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities are
described in the Chief Financial Officer`s review and in the financial
statements and notes. The Directors believe that the Group is well placed to
manage its business risks successfully despite the current uncertain economic
outlook. After making enquiries, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue to operate
for the foreseeable future. Accordingly, they continue to adopt the going
concern basis in the interim financial statements.
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:
Six months ended
31 March 2009
Period
Average End
Australian dollar 1.489 1.456
Euro 0.760 0.750
South African rand 9.743 9.526
Sterling 0.677 0.697
Six months ended
31 March 2008
Period
Average End
Australian dollar 1.105 1.090
Euro 0.669 0.633
South African rand 7.244 8.123
Sterling 0.495 0.501
Year ended
30 September 2008
Period
Average End
Australian dollar 1.098 1.251
Euro 0.659 0.699
South African rand 7.518 8.290
Sterling 0.507 0.553
This interim report is available on the website dimensiondata.com
Copies of this report are being sent to shareholders, and are available to the
public at the Company`s registered office, Dimension Data House, Building 2,
Waterfront Business Park, Fleet Road, Fleet, Hampshire GU51 3QT, United Kingdom.
2. SEGMENTAL ANALYSIS
Americas Asia Australia Europe
$` 000 $`000 $`000 $`000
Six months ended
31 March 2009
Revenue 262,967 314,189 461,016 528,454
Operating profit* 2,291 25,928 18,036 13,665
Six months ended
31 March 2008
Revenue 349,261 353,787 511,303 577,377
Operating profit 8,431 23,481 19,164 8,109
Twelve months ended
30 September 2008
Revenue 690,835 719,601 1,146,094 1,152,860
Operating profit 19,570 44,203 40,376 21,902
Middle Inter-
East & Central Company
Africa & other sales Total
$`000 $`000 $`000 $`000
Six months ended
31 March 2009
Revenue 502,396 11,955 (130,869) 1,950,108
Operating profit* 35,751 (6,873) 88,798
Six months ended
31 March 2008
Revenue 511,794 12,169 (144,479) 2,171,212
Operating profit 40,432 (14,601) 85,016
Twelve months ended
30 September 2008
Revenue 1,112,067 19,412 (330,229) 4,510,640
Operating profit 88,442 (32,279) 182,214
*Before exceptional items.
3. EXCEPTIONAL INCOME/(COSTS)
Note Six months Six months Year
ended ended ended
31 March 2009 31 March 2008 30 September 2008
$`000 $`000 $`000
Exceptional
operating
costs
Campus
finance
restructure a) (1,334) - -
Total
exceptional
operating
costs (1,334) - -
Other
exceptional
gains b) - 3,691 4,064
Exceptional
tax
Deferred tax
credit a) 9,946 - -
Total
exceptional
tax 9,946 - -
Exceptional
items after
tax 8,612 3,691 4,064
Minorities`
share (1,354) - -
Net
exceptional
income 7,258 3,691 4,064
a) In H1 2009, the Group, in conjunction with the lending banks and in
agreement with the South African taxation authorities (`SARS`),
restructured the financing arrangement underpinning the Campus land and
buildings in South Africa. In concluding the restructuring, the Group made
payment to the lending banks of $1.3 million, which refunded certain
rebates received in prior periods. Pursuant to the restructuring, SARS
allowed Dimension Data a once off tax deduction of $40.5 million. This
deduction, net of temporary differences raised previously on the
structure, results in a deferred tax asset to the Group of $9.9 million.
b) Profit on sale of the Group`s 92.3% interest in Automate to Britehouse.
Reconciliation of
reported
amounts to adjusted Six months Six months Year
amounts ended ended ended
31 March 2009 31 March 2008 30 September 2008
$`000 $`000 $`000
Statutory operating
profit 87,464 85,016 182,214
- Exceptional
operating costs 1,334 - -
Adjusted operating
profit 88,798 85,016 182,214
Statutory
attributable profit
after tax 65,997 55,881 118,410
- Exceptional
operating costs 1,334 - -
- Other
exceptional
gains and losses - (3,691) (4,064)
- Exceptional tax
credits (9,946) - -
- Minorities` share 1,354 - -
Adjusted attributable
profit after tax 58,739 52,190 114,346
4. TAX
Six months Six months Year
ended ended ended
31 March 2009 31 March 2008 30 September 2008
$`000 $`000 $`000
Current tax 24,234 23,692 47,369
Deferred tax -
current period (8,597) (3,098) 1,678
Deferred tax - prior
periods (7) 2,291 (1,074)
Total tax expense 15,630 22,885 47,973
This expense relates predominantly to tax jurisdictions outside of the United
Kingdom.
5. DIVIDENDS PER SHARE
A final dividend of 1.7 cents per share was paid on 13 March 2009. No interim
dividend is proposed.
6. EARNINGS PER SHARE
Six months Six months Year
ended ended ended
31 March 2009 31 March 2008 30 September 2008
`000 `000 `000
Weighted average
number of
ordinary shares:
- for basic earnings
per share 1,679,316 1,526,817 1,540,733
- for diluted
earnings per share 1,725,566 1,650,092 1,616,202
$`000 $`000 $`000
Earnings for basic
and diluted
earnings per share 65,997 55,881 118,410
Exceptional items (7,258) (3,691) (4,064)
Adjusted earnings 58,739 52,190 114,346
US cents US cents US cents
Basic earnings per
share 3.9 3.7 7.7
Diluted earnings per
share 3.8 3.4 7.3
Adjusted basic
earnings per share 3.5 3.4 7.4
Adjusted diluted
earnings per share 3.4 3.2 7.1
The weighted average number of ordinary shares in issue excludes the shares
held by the Employee Share Trust.
7. TRADE AND OTHER RECEIVABLES
31 March 2009 31 March 2008 30 September 2008
$`000 $` 000 $` 000
Trade receivables 675,019 832,847 804,676
Other receivables 60,735 105,968 84,835
Prepayments and
accrued income 194,279 157,866 184,809
Taxation authorities 28,898 23,360 23,390
958,931 1,120,041 1,097,710
Analysed as follows:
Long term portion 34,359 49,432 38,163
Short term portion 924,572 1,070,609 1,059,547
958,931 1,120,041 1,097,710
8. TRADE AND OTHER
PAYABLES
31 March 2009 31 March 2008 30 September 2008
$`000 $`000 $`000
Trade payables 368,908 452,314 536,213
Other payables 131,476 164,356 144,330
Accruals 227,823 282,235 299,791
Deferred income 257,675 200,936 231,004
Deferred consideration - - 1,035
Taxation authorities 120,288 131,072 134,740
1,106,170 1,230,913 1,347,113
9. ACQUISITIONS AND DISPOSALS
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 did 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 was settled.
In terms of the transaction, which was effected by way of a Scheme of
Arrangement under Singapore law, shareholders were offered $1.33 per share - a
34% premium to Datacraft`s closing share price of $0.99 on 21 July 2008. The
total cost of the acquisition was approximately $281 million, and was financed
by cash, part of which was raised by an equity issuance. The goodwill on the
acquisition amounted to approximately $183 million.
During the period, the Group made two other small acquisitions of subsidiaries,
Teksys (100%) and Bluefire (65%), for an aggregate consideration of $4.0
million and $4.9 million for the non recovery of a shareholder`s loan. This
resulted in $7.0 million being recognised as goodwill on acquisition. The net
assets and liabilities for these acquisitions amounted to $1.3 million and $0.9
million, respectively. Teksys and Bluefire were acquired effective January 2009
and October 2008 respectively. These acquisitions have been accounted for on a
provisional basis. They did not have a significant impact on the reported
results.
10. POST BALANCE SHEET EVENTS
There have been no material events requiring disclosure after balance sheet
date and up to the date of approval of these condensed financial statements.
11. CONTINGENT ASSETS AND LIABILITIES
The Group is subject to claims which arise in the ordinary course of business.
Each claim is evaluated by management, together with their legal advisers, and
a decision made on whether financial settlement is probable, in which case
appropriate provisions are made. There have been no material changes in
contingent assets or liabilities since the year end.
12. RELATED PARTY TRANSACTIONS
There were no changes during the period in the related party transactions
described in the last Annual Report that could have a material effect on the
financial position or performance of the Group.
13. 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 a 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.
Six months Six months Year
ended ended ended
31 March 2009 31 March 2008 30 September 2008
`000 `000 `000
Weighted average
number of ordinary
shares:
- for headline
earnings per share 1,679,316 1,526,817 1,540,733
- for diluted
headline earnings per
share 1,725,566 1,650,092 1,616,202
$`000 $`000 $`000
Earnings for basic and
diluted earnings per share 65,997 55,881 118,410
Net loss on disposal of
property, plant
and equipment 1,308 1,197 1,559
Other gains and losses
and (profit)/loss on
disposal of subsidiaries 14 (4,826) (4,666)
Revaluation of investment
property (2,181) (3,632) (8,528)
Tax and minority effects 857 1,149 3,021
Headline earnings 65,995 49,769 109,796
US cents US cents US cents
Headline earnings per
share 3.9 3.3 7.1
Diluted headline
earnings per share 3.8 3.0 6.8
The adjustments for headline earnings include the revaluation of the Campus
investment property, profits and losses on the sale of subsidiaries and the
loss on sale of property, plant and equipment, net of tax and minorities.
CAUTIONARY STATEMENT
This Interim Management Report (`IMR`) has been prepared solely to provide
additional information to shareholders to assess the Group`s strategies and the
potential for those strategies to succeed. The IMR should not be relied on by
any other party or for any other purpose.
The IMR 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 the inherent uncertainties, including both economic and
business risk factors, underlying any such forward looking information.
STATEMENT OF DIRECTORS` RESPONSIBILITIES
We confirm that to the best of our knowledge:
a) the condensed set of financial statements which has been prepared in
accordance with IAS 34, gives a true and fair view of the assets,
liabilities, financial position and profit of Dimension Data Holdings plc,
as required by DTR 4.2.4R;
b) the interim management report includes a fair review of important events
during the first six months and a description of the principal risks and
uncertainties for the remaining six months of the year, as required by DTR
4.2.7R; and
c) the interim management report includes a fair review of the disclosure of
related parties` transactions and changes therein, as required by DTR
4.2.8R.
By order of the Board
Brett Dawson Dave Sherriffs
Chief Executive Officer Chief Financial Officer
12 May 2009
INDEPENDENT REVIEW REPORT TO DIMENSION DATA HOLDINGS PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
March 2009 which comprises the condensed consolidated income statement, the
condensed consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated cash flow statement and related
notes 1 to 13.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International
Standards on Review Engagements (UK and Ireland) 2410 `Review of Interim
Financial Information Performed by the Independent Auditor of the Entity`
issued by the Auditing Practices Board. Our work has been undertaken so
that we might state to the Company those matters we are required to state
to them in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this report, or
for the conclusions we have formed.
Directors` responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom`s Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRS`s as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, `Interim Financial Reporting`, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standards on Review
Engagements (UK and Ireland) 2410 `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 March 2009 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom`s Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
12 May 2009
London
United Kingdom
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 3632
hilary.king@za.didata.com
Date: 13/05/2009 08:00:04 Produced by the JSE SENS Department.
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