| Wed 18 Nov 2009, 9:00 | | DDT - Dimension Data - Preliminary Results Year ended 30 September 2009 |
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DDT
DIDDT
DDT - Dimension Data - Preliminary Results Year ended 30 September 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")
Dimension Data Holdings plc
Preliminary Results Year ended 30 September 2009
Dimension Data Holdings plc (`Dimension Data` or the `Group`) today announced
its results for the year ended 30 September 2009. Although the financial
information included in this preliminary announcement has been computed in
accordance with IFRS as adopted by the European Union, this announcement does
not itself contain sufficient information to comply with IFRS. The Company
expects to publish full financial statements in December 2009.
Highlights
- Revenue of $4.0 billion (up 0.4% in constant currency (2))
- Services revenue growth of 13.0% (2)
- Excellent performance from managed services, up 21.2% (2)
- Revenue mix drives gross margin expansion to 22.5% (2008: 21.6%)
- Operating profit (1) up 25.4% in constant currency to $194.4 million
- Operating margin (1) expansion to 4.9% (2008: 4.0%)
- Cash balance $600 million, strong cash generation during the year
Financial Summary
$`000 2009 2008
Revenue 3,973,078 4,510,640
Operating profit (before exceptional items) 194,365 182,214
Operating profit 192,893 182,214
Operating margin (before exceptional items) 4.9% 4.0%
Earnings per ordinary share (US cents) (before
exceptional items) 7.6 7.4
Earnings per ordinary share (US cents) 8.0 7.7
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
In this review, growth rates are in relation to 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.
Overview
The Group`s robust performance over the past financial year has resulted in
improved returns and strong growth in profitability. Given the extremely
challenging economic conditions that prevailed over the period we did well to
report flat revenues overall in constant currency. Strong growth of 13.0% in
services revenues drove an improvement in the gross margin and this, when
combined with tight cost management, resulted in operating profit growth of
25.4%. The Group operating margin grew to 4.9%, an excellent increase on
FY2008`s 4.0% operating margin. A further highlight of the results is good
working capital management and strong cash generation, which resulted in a
closing cash balance of $600 million.
Dimension Data`s strong financial results are testament to the ongoing progress
with the Group`s Profitable Growth Strategy, which was introduced in FY2005.
The key elements of this strategy have been to grow revenues ahead of the
market, to maintain gross margins and to reduce overheads as a percentage of
revenues, thereby driving an improvement in the operating margin and
profitability. Much progress has been made over the past four years. Over this
period we have grown revenues ahead of the market, achieving a compound annual
growth rate of 12.3%, our gross margin has moved up to 22.5% from 21.0%, costs
as a percentage of revenues have reduced to 17.6% from 18.9% and operating
profit has more than tripled to $194.4 million from $56.7 million in FY2005.
The Group operating margin is now 4.9% compared to 2.1% in FY2005.
A key feature of the 2009 results is the excellent growth in services revenues.
This was driven primarily by 19.3% growth in managed services in our Systems
Integration (SI) business and by revenue growth of 27.9% in Internet Solutions.
Professional services revenues (within SI), which tend to be more closely
correlated with product revenues, increased by a pleasing but more modest 2.3%.
Growth in services revenues offset a decline of 7.5% in total product revenues,
a commendable achievement in a tough market where demand was impacted by sharp
cuts in capital expenditure in several of our traditional client segments.
At the first signs of the global slowdown affecting our business in late 2008,
we moved quickly to counteract the impact of a slower demand environment by
managing and cutting costs in specific areas where action was warranted, most
notably in the US and Asia. These measures protected profitability and helped
drive the operating leverage that the Group achieved during the year.
Notwithstanding the significant focus on short term cost management, we have
continued to invest in areas important to the Group`s longer term positioning
and growth prospects.
We achieved good performances across the majority of the Group`s businesses.
Our SI business, which accounts for 80.6% of total revenues, performed
particularly well. The SI business strengthened its competitive position,
successfully harnessing market trends from both a technology and client
sourcing perspective. The SI business in particular benefited from strong
growth in managed services which drove higher gross and operating margins for
the Group.
Within the SI business, the Converged Communications, Security Solutions and
Microsoft Solutions lines of business all delivered good growth as our clients
embraced unified communications and focused on technologies which could
optimise existing infrastructure and reduce costs. Growth in these areas
compensated for a slowdown in Network Integration, Data Centres and Storage
Solutions and Customer Interactive Solutions, following cuts and delays to more
capital intensive projects.
Looking at our SI business from a regional perspective and in the context of an
environment where product revenues came under enormous pressure, particularly
in the US and Asia where product declined 34.5% and 23.7% respectively, it is
gratifying to be able to report that all five regions delivered growth in
services revenues, and that four out of five regions achieved significant
operating profit expansion and improved operating margins. The performance of
the Americas region started to show a recovery in the fourth quarter of the
year. Strong operating leverage was achieved in the SI business following the
mix driven improved gross margin and tight control over costs.
Internet Solutions performed well over the period, with outstanding revenue
growth of 27.9%. The excellent performance was driven by a clear focus on
protecting and growing Internet Solutions` core connectivity and data centre
based services whilst successfully building our competitive position in our
newer communications and carrier services. Some pressure at the gross margin
level was offset by cost efficiencies and operating leverage.
Plessey`s revenues declined marginally, impacted by the slow-down in capital
expenditure and infrastructure rollouts by telecommunications service providers
in Africa due to the prevailing economic conditions. Operating profit was
impacted by some gross margin pressure and the increased overhead base
introduced in FY2008 in order to secure future growth opportunities. In
response to the market changes Plessey has adjusted its cost base.
Express Data strengthened its position as a premier value added distributor in
Australia and New Zealand during the period. Revenue growth of 7.6% combined
with stable margins and careful cost control resulted in strong expansion of
operating profit.
Services progress
Internet Solutions and Plessey have always been services-led businesses.
Dimension Data`s focus over the years on transitioning the SI business to a
services-led organisation has been a key contributor to success in building our
client experience strategy, enhancing our brand, driving competitive
differentiation and in delivering on the Group`s profitable growth strategy.
Over the past few years the SI business has made significant progress in
evolving both its professional and annuity managed services offerings. Our
professional service methodology and offerings have expanded significantly to
include numerous assessment services, planning and design services, and
implementation and consulting services. In our annuity services, our journey
has been one of increasing our capabilities beyond basic maintenance towards
offering clients true managed services where we pro-actively monitor and manage
their IT assets and processes. During the period we also secured some
encouraging wins in several geographies where we are taking responsibility for
the management of our clients` entire IT operations.
In FY2009 we continued to reap the benefits of our investment in services. Over
the past four years the Group`s services revenues have grown by a compound
annual growth rate of 17.3% and services revenues now represent 43.6% of Group
revenue compared to 38.1% in FY2005.
Our Clients
Continued focus on operational excellence remains a key tenet of the Group
strategy around delivering a superior client experience, and during the year we
were involved in multiple initiatives aimed at further enhancing this
experience.
The key areas of client demand in FY2009 from a technology perspective have
been around network optimisation, visual communications, IP telephony,
virtualisation and consolidation of data centres and Windows 7 for Microsoft.
Clients have focused on maintaining and optimising their existing IT
infrastructure as capital budgets reduced. We have also benefited from a
general trend towards standardisation and centralisation of IT to reduce costs
and centralise control. This trend provides us with good managed services
opportunities as multinational clients consolidate services suppliers and move
to partners that can support multi-vendor technologies on a multinational
basis.
Within our client segments, we experienced weakness in demand in our top 30
global clients, which make up 15% (18% in FY2008) of revenues, particularly in
global financial services clients in North America and Asia. Financial services
revenues overall were, nevertheless, relatively stable, with a strong
performance in the regional and domestic financial services client base. We
reacted to the slow-down in spend in our global client sector by broadening our
exposure to clients in the large regional enterprise and commercial segments of
the market where we saw relatively better opportunities.
The service provider vertical was quite resilient and our revenues increased
due to our focus on services rather than technology fulfilment in this
vertical. We have benefited from subcontracting opportunities in large service
provider clients who have partnered with us to execute global contracts.
We have also secured good business through partnering with second tier and
mobile service providers.
The public sector vertical has been another area of focus and one in which we
have performed well in FY2009. Our public sector business has been particularly
strong in Australia and South Africa. We have also seen good contract wins
across the Americas, Europe and Asia. We are planning further investment during
FY2010 in this vertical across our regions.
People and culture
Dimension Data has always believed that our people and culture are key
differentiators in the market and essential to the success of the Group. We
work hard at cultivating a winning, high performance culture. The success of
our efforts has been reflected in widespread recognition from industry leaders
and the winning of a number of exceptional awards. These include the Australia
and New Zealand Hewitt Best Employer for 2009 for Express Data, a ranking of
9th place in the Corporate Research Foundation`s 2009/2010 Best Employers in
Middle East and Africa as well as 9th position for Datacraft India in
Dataquest`s `Top 10 Best IT Employers in 2009` award.
The total number of employees across the Group was 11,032 at year end which is
flat on the prior year. Whilst our people and culture strategy is a key
cornerstone of our Group strategy, it was necessary to respond to the
prevailing economic environment during the year. Our approach was to take rapid
action early in the year to reduce costs where necessary due to a reduced
demand. In contrast, we also invested and sought to maximise opportunities for
growth wherever possible. This dual approach resulted in headcount reductions
in some geographies and businesses, and growth in others.
In addition, we invested in building people strength during the course of the
year, adding to our Microsoft skills organically and through the Teksys
acquisition, and increasing headcount in Internet Solutions and our SI business
through acquisitions in Angola, Mozambique and Australia.
During the year the Group made a number of investments in enabling, developing
and retaining excellence in our people. We deployed `Leading Talent`, a
tailored programme for all line managers aimed at further developing our key
leaders in the Group. We continued to drive the Dimension Data Job Framework
project, which helps employees identify and plot their optimal career paths.
With the recent stabilisation that we have seen in some of our end markets and
in anticipation of some growth in FY2010, we are once again looking at modest
additions to our key technical and sales skills in select areas of the
business.
Partners
The Group enjoys unrivalled relationships with our key vendor partners. These
have strengthened over the past year as we have continued to work closely with
and invest in keeping our go-to-market strategies aligned. Key differentiators
for Dimension Data are the breadth of technical talent within the Group and its
unparalleled ability to execute with multiple partners.
Dimension Data received a record number of awards and accolades over the past
year, which are testament to our partners` recognition of the breadth of the
Group`s technical skills and experience. Key awards included Cisco Technology
Excellence Partner along with 19 other Cisco awards, and Microsoft Global
Partner of the Year in the three categories. In addition, we won awards from
HP, Avaya, Tandberg, VMWare, BlueCoat, McAfee, Symantec, EMC, RSA and Nuance.
Dimension Data achieved 21st place in BusinessWeek`s Info Tech 100 list, which
recognises top-performing technology companies across the globe.
Investing for growth
Dimension Data`s healthy balance sheet, strong cash balance and excellent
cash generating abilities, position the Group to be able to continue to invest
to position the business for long term growth.
The continued execution of our services strategy will be a priority for our SI
business. We have made tremendous progress over the past few years and are
excited about our prospects as we continue the journey. During the year we
embarked upon a services acceleration programme with five key projects aimed at
further enhancing our global services offerings. We will continue to invest in
systems, processes and people to enhance our services offerings for our clients
and improve our execution capabilities.
Our regional SI businesses are at varying levels of maturity along our services
led strategy and we still have a way to go before our objective of offering a
full lifecycle of services in all geographies is realised. It is however, clear
to us that our services strategy is working and that we are on track to derive
further benefits from its ongoing implementation in the years ahead.
We constantly seek to align our go-to-market offerings with current and
upcoming market trends, to ensure that we offer our clients solutions relevant
to their business issues. From a technology market trend perspective, we will
look to invest further in our capabilities and offerings in the network (as the
core business infrastructure enabler), unified communications and collaboration
(including visual technologies) and virtualisation. For medium term
opportunities we will be expanding our competence in cloud and service based
infrastructure models.
Internet Solutions is well positioned to benefit from market trends, and to
build on the strong market position established over the years. Internet
Solutions was awarded two telecommunications licences in South Africa which
provide additional market opportunity. We have also embarked upon the
application process to acquire licensed wireless spectrum, which would enable
us to connect to our clients using both fixed and wireless links.
We will continue to invest in Internet Solutions to secure our desired
positioning as Africa`s leading internet-technology based Service Provider,
offering a superior customer service experience. Our strategic priorities are,
firstly, to invest in the required people, processes and capital expenditure
required to secure the growth opportunity. We will also invest to enhance the
customer service experience and we will expand our existing services offerings.
Finally, we will continue to invest to secure lower input costs, such as our
acquisition this year of local fibre capacity to service our clients, and our
commitment during the year to a new submarine cable bringing enhanced bandwidth
capacity to the continent.
The Group`s profitable growth strategy will largely be driven by organic growth
in existing markets. We still have significant opportunity to increase our
market share in existing geographies and we intend to expand into several
cities in Brazil and China next year. We will, in addition, target two types of
acquisitions - the first to expand our footprint and the second where we need
additional skills to enhance the Group`s IP and hasten our route to market.
In addition to the purchase of the minority shareholding in Datacraft Asia, we
made a few small acquisitions during the year. In Africa, we completed an
acquisition in Mozambique and are currently in the process of completing two
further acquisitions whereby we will be expanding our capability and presence
in Angola and in Morocco.
In November 2008 we made a strategic investment in BlueFire, a Sydney based IT
services company which provides IAAS services.
In February 2009 we purchased Teksys, a UK based Microsoft infrastructure and
licensing services business which has given us scale and Large Account Reseller
status in Europe.
Outlook
A key factor behind the resilience that Dimension Data has shown in the face of
the challenging economic environment is the Group`s high performance culture,
one in which our people are consistently encouraged to maximise opportunity
whatever the prevailing market conditions. In addition, our chosen positioning
in the global Information Technology market and the execution of our strategy
have been successful.
We believe that Dimension Data is positioned in the sweet spot of IT and
communications spend, and that the trends that have been driving superior
growth in the Group over the past few years, have the momentum to continue to
drive growth into the medium and longer term. Our network centric offerings are
vital for our clients to be able to operate effectively in today`s IP and
convergence powered environment, where the network is increasingly the core
platform for all forms of IT and telecommunications. Our strengthening position
in areas such as unified communications, collaboration, virtualisation and
managed services position us for medium term growth. In the longer term, market
developments such as cloud computing and services based models such as
Infrastructure as a Service, provide additional opportunities for growth.
The opportunity to deliver on Dimension Data`s profitable growth strategy,
which is premised on both growth and leverage, lies across all our businesses.
The opportunity to drive the SI margin higher lies in four factors. The first
of these is the ongoing effective rollout of our services strategy; the second
lies in harnessing the benefits of additional scale in a number of key markets;
the third involves securing additional efficiency improvements; and the fourth
relates to recovery in a few under-performing geographies. The low working
capital requirements of the SI business make its return on assets the highest
of all of the Group`s businesses.
We are optimistic that the ongoing deregulation of the telecommunications
market in South Africa and the growth opportunities on the African continent
will provide significant opportunities for Internet Solutions.
Plessey is well placed to benefit from the opening up of the African continent
to growth in telecommunication services and we remain confident that the
business has attractive medium term growth prospects.
Express Data is a premier value added distributor with solid prospects.
We are encouraged by the recent stabilisation in our end markets, however much
uncertainty remains over the resilience of the global recovery. We anticipate
that the market segments in which Dimension Data operates will perform better
in FY2010 and that the Group will be able to deliver modest constant currency
revenue growth. Dimension Data is well placed to capitalise on long term market
trends. Growth in excess of prevailing market rates and medium term operating
leverage remain our key financial objectives.
Chief Financial Officer`s Review
In this review, growth rates are in relation to 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.
Revenue for the year was $4.0 billion, a constant currency increase of 0.4% on
2008. The Group`s reported results were impacted by the appreciation in the
average exchange rate for the year of the US dollar against most of the local
currencies in which the Group trades, resulting in a decline in reported
currency revenues of 11.9%.
Product revenues in constant currency were down by 7.5%, while services
revenues grew by 13.0%. The major contributor to this services growth was 19.3%
growth in managed services in the Systems Integration business and 27.9% growth
in Internet Solutions.
Product margins were firm, while services margins reduced slightly reflecting
some margin pressure in Internet Solutions and a weaker performance from
Plessey. The excellent growth in services revenues (accompanied by higher gross
margins than product) resulted in a 0.9% expansion in the Group`s overall
blended gross margin to 22.5%. Gross profit expanded by 4.8% to $892.8 million.
Overheads of $698.5 million were flat on 2008 (up by 0.2%). The Group`s 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.
This cost containment, coupled with the growth in gross profit, meant continued
operating leverage for the Group, and a 0.9% expansion in the Group`s operating
margin to 4.9% for the period. Operating profit increased by 25.4% to $194.4
million.
The share of results from associates increased to $7.8 million for the period
(2008: $7.1 million). Interest and investment income was $8.1 million (2008:
$17.5 million) mainly as a result of much reduced interest rates during the
period, and finance costs were $29.9 million (2008: $31.0 million).
Property revaluation and other gains and losses include a gain on revaluation
of the investment portion of the Campus property asset of $4.5 million (2008:
$8.5 million).
The effective tax rate, excluding exceptional items, was 26.7% (2008: 25.9%).
The Group recorded a $11.0 million exceptional tax credit (and a $1.5 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 7.6 cents, compared to 7.4
cents last year.
Trading and Operations
Revenue Analysis
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.
$ million Systems Integration Internet Solutions Plessey
Product 1,894.6 - -
Growth (10.6%) - -
Managed Services 824.2 255.0 -
Growth 19.3% 27.9% -
Professional Services 484.5 - 168.4
Growth 2.3% - (0.7%)
Total 3,203.3 255.0 168.4
Growth (2.1%) 27.9% (0.7%)
$ million Express Data Total
Product 344.8 2,239.4
Growth 7.6% (7.5%)
Managed Services - 1,079.2
Growth - 21.2%
Professional Services 1.6 654.5
Growth 32.7% 1.6%
Total 346.4 3,973.1
Growth 7.6% 0.4%
Systems Integration
Revenue Streams (SI)
Product revenues reduced by 10.6%, 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 29.2%, as
multinational corporation clients in general, and financial services industry
clients in particular, reduced spend. Asia`s product revenues were similarly
impacted, down by 23.7%.
Managed services grew by 19.3%. 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 IT functions.
Professional services (PS) revenues grew by 2.3%. This was a pleasing
performance, with growth coming despite the fact that some components of PS
revenues are highly correlated to product revenues.
The change in mix in revenues in favour of higher margin managed services meant
gross margin expansion and - combined with good cost containment described
elsewhere - strong operating leverage for the SI business.
Revenue growth - Lines of Business (SI)
Network Integration -8%
Converged Communications +9%
Microsoft Solutions +28%
Data Centre and Storage Solutions -6%
Customer Interactive Solutions -15%
Security Solutions +5%
In the largest line of business, Network Integration, revenues declined by 8%
driven mainly by a reduction in Asian and North American product revenues as a
result of exposure to multinational corporations and financial services
clients. In Middle East and Africa and Australia however, product revenues
performed well due to demand for performance optimisation, wireless and
mobility services. Services revenues showed good growth overall, led by a
strong performance from managed services and this ensured a robust gross profit
performance for this line of business.
Continuing strong demand for IP telephony and visual communications ensured
growth of 9% in our Converged Communications line of business. Both product and
services showed growth with managed services being the best performer as
clients sought to outsource the management of the associated infrastructures to
specialist providers.
The Microsoft Solutions line of business grew revenues by 28% or, excluding the
impact of the Teksys acquisition in the UK, by 8%. Growth was supported by good
license revenues in Australia and South Africa and solid demand for our
consulting and deployment offerings in all regions as clients sought to exploit
their existing investments in Microsoft technologies during times of budgetary
cuts.
Data Centre and Storage Solutions declined by 6%, largely due to much lower
revenues in North America. Elsewhere, the business performed well, with strong
services growth supporting gross profit expansion. The growth in these regions
was driven mainly by ongoing demand for server virtualisation and increased
demand for Cisco UCS solutions.
We experienced a 15% decline in our Customer Interactive Solutions line of
business, as organisations worldwide delayed large capital expenditure
projects, impacting demand for our call centre solutions. Nonetheless,
Merchants grew revenues by benefiting from wins in South Africa during the
year, and improved traction associated with its hosted call centre technology
solutions in the UK.
Security Solutions revenues increased by 5%. While traditional network security
products declined in sync with network product revenues, we saw good growth in
advanced security revenues. This growth supports our focus on building a
multi-vendor capability, positioning us well to support organisations looking
to consolidate complex vendor relationships in the security environment.
Internet Solutions (IS)
IS revenues grew by 27.9%, reflecting ongoing demand across the business`s
range of services. Growth in internet access, in virtual private networks, in
voice traffic (`Voice over IS`) and in hosting services was particularly
strong. Gross margins remained under pressure in a very competitive
environment, with the stronger US dollar also adding pressure to input costs.
The business continued to focus on operational efficiencies - for example the
centralisation of its client services centre. 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 network. In
response, IS has commenced rolling out some fibre access for its top clients.
During the course of the year, IS invested in the new Seacom undersea cable
which provides enhanced international bandwidth capacity to the continent,
connecting South Africa, Mozambique, Tanzania, Uganda and Kenya to Europe via
an undersea fibre optic system. IS acquired 16 STM1s from Seacom for $24.7
million, of which $14.3 million was paid this year with the balance due over
the next two years.
During the year, IS announced the acquisition of a 38.5% equity stake in Intra,
a Mozambique based ISP, in partnership with Convergence Wireless Networks,
providing an excellent base from which to deliver services to various
landlocked East African countries. This acquisition will also enable IS to
leverage its investment in the Seacom cable.
Plessey
Plessey had a difficult year, with flat revenues accompanied by some gross
margin pressure.
Plessey`s primary client base is African telecommunications service providers
and the global financial crisis led to a downturn in capital expenditure with
network roll outs being delayed or cut back, and margins coming under pressure.
This also led to a change in the way our clients are procuring, with network
sharing, outsourcing and managed services becoming much more prevalent.
Furthermore, merger and acquisition activity led to a reduction in spend by
some of our clients during the period. However the medium term prospects for
mobile infrastructure rollout in Africa remain firmly in place.
In South Africa, the deregulation in the telecommunications market led to an
increase in demand for fibre deployment services. In anticipation of this
deregulation, Plessey invested in its fibre rollout capability, entrenching its
position as the premier African provider of end to end fibre deployment.
Plessey was awarded the contract to lay the first route of the MTN/Neotel
National Long Distance (NLD) fibre network from KwaZulu-Natal to Gauteng, a
total of 592km.
Express Data
Express Data grew revenues by 7.6%. This growth, in the face of the effects on
the Australian ICT sector of the economic slowdown, was achieved through market
share growth, as well as the extension of Express Data`s product range through
the addition of some new vendor lines. Despite competitive pressures and
exchange rate volatility, the business managed to maintain gross margin levels
through value differentiation, and managing its product and customer mix.
Express Data`s position within the market was acknowledged during the year with
various industry awards.
Regional Analysis
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.
$ million Americas Asia Australia Europe
2009
Revenue 528.2 605.6 846.1 1,002.0
Growth % (22.4%) (10.5%) 8.8% 3.5%
Product 377.1 353.8 644.7 577.6
Growth % (29.2%) (23.7%) 9.6% (1.9%)
Services 151.1 251.8 201.4 424.4
Growth % 1.2% 18.5% 5.9% 11.6%
Gross margin 17.9% 22.1% 18.5% 20.8%
Operating profit 5.4 53.0 39.7 31.7
Operating margin 1.0% 8.7% 4.7% 3.2%
2008
Revenue 686.4 719.6 974.1 1,120.6
Product 536.4 488.4* 731.4 676.6
Services 150.0 231.2* 242.7 444.0
Gross margin 16.8% 18.5% 18.5% 20.7%
Operating profit 19.6 44.2 40.4 21.9
Operating margin 2.9% 6.1% 4.1% 2.0%
Middle East Central
$ million & Africa & Other Total
2009
Revenue 964.3 26.9 3,973.1
Growth % 11.9% 0.4%
Product 266.7 19.5 2,239.4
Growth % 0.6% (7.5%)
Services 697.6 7.4 1,733.7
Growth % 16.7% 13.0%
Gross margin 28.8% 22.5%
Operating profit 84.5 (19.9) 194.4
Operating margin 8.8% 4.9%
2008
Revenue 1,000.7 9.2 4,510.6
Product 297.3 5.8 2,735.9
Services 703.4 3.4 1,774.7
Gross margin 28.4% 21.6%
Operating profit 88.4 (32.3) 182.2
Operating margin 8.8% 4.0%
* Revenue of $36.6 million in the prior year has been reclassified from
services to product.
Americas
Revenues in the Americas declined by 22.4% and gross profit reduced by 17.6%.
Very strong revenue performances from Brazil, Mexico and Canada could not
compensate for a 27.4% revenue decline in the US, where product revenues were
down by 34.5% as multinational and financial services clients scaled back on
non-discretionary infrastructure spend. While professional services revenues in
the Americas reduced by 10.6%, managed services revenues grew by 16.9% with
good contract wins in Network Integration and Converged Communications.
In the lines of business, Network Integration was most impacted by the reduced
demand, while the Converged Communications and Microsoft Solutions recorded
good growth, supported by the region`s infrastructure optimisation and
integrated collaboration solutions, supported particularly by demand for video.
Cost reduction programmes ensured that, despite the revenue pressures, the
Americas generated a $5.4 million operating profit for the period.
Asia
Asian revenues declined by 10.5% for the year, with services growth of 18.5%
unable to offset product declines of 23.7%, following challenging economic
conditions in the region 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 very good growth, supported by market share gains in
some territories and some important multi-year outsourcing deals. This meant
that gross profit increased by 7.8% for the year.
Within the lines of business, Network Integration and Customer Interactive
Solutions were the hardest hit by the reduced demand, while Microsoft Solutions
and Data Centre Storage recorded solid growth.
Datacraft implemented a rigorous cost reduction programme during the year, and
this together with the trading performance, resulted in a strong expansion in
operating margin to 8.7% and in operating profit, up 28.9% to $53.0 million for
the period.
Australia
The Australia Systems Integration business had a very good year, with revenues
up by 9.8% supported by good growth in all lines of business. The business
benefited from the Federal Government stimulus package, and from market share
gains on the back of ongoing consolidation in the Australian IT services
industry.
The investments made over the last 12 to 18 months in managed services
delivered revenue growth as well as strong operational leverage. Managed
services were up by 17.8%, supported by some good multi-year contracts as the
market continued to move towards multisourcing as a preferred IT sourcing
option. Professional services declined by 4.4%, impacted in particular by the
termination of a Customer Interactive Solutions contract. During the period,
the business took a majority shareholding in Bluefire, a company specialising
in hosted infrastructure management, or Infrastructure as a Service (IaaS).
This trading performance, together with good cost management, meant that the
business, together with Express Data, grew operating profit for the year by
23.6% to $39.7 million.
Europe
In the face of challenging economic conditions, our European business recorded
an excellent performance for the year, with revenue growth of 3.5%. Managed
services were up by 18.0%, reflecting a focus on contract renewal and solutions
delivery operational efficiencies for our clients. Product was down by 1.9%
and professional services up by 1.3%.
Focused cost saving initiatives bore fruit across the region. These initiatives
included the adoption of workflow systems and integrated working practices, and
the extensive use of our internal unified communications infrastructure and
visual communications facilities.
As a result, Europe`s operating profit expanded by 64.5% to $31.7 million, and
operating margin increased to 3.2%.
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.
Middle East and Africa
The Middle East and Africa Systems Integration business had a very good year,
with revenues up by 8.8%. Product revenues grew by 0.6 %, with declines in
South Africa supported by growth in Emerging Africa. In South Africa, muted
private sector demand (in particular the financial services and mining sectors)
was offset by public sector demand for infrastructure investment generally and
in particular in anticipation of the 2010 FIFA World Cup. Services revenues
were up by 18.4%, supported in particular by very strong managed services.
Within the lines of business, Network Integration, Converged Communications and
Microsoft Solutions all recorded growth. Teamsource, Middle East and Africa`s
outsourcing business, had an excellent year recording some significant contract
wins and contract renewals during the year. The Advanced Infrastructure
business, which offers cabling, data centre infrastructure, wireless
connectivity, portable facilities and physical security solutions also recorded
a very good performance, on the back of infrastructure roll out for the World
Cup.
Together with Plessey and Internet Solutions, the region grew operating profit
by 12.9% to $84.5 million.
Central and Other
Costs
Central management costs, net of central trading income, reduced from $47.6
million to $35.2 million. This reflected several factors: firstly the benefits
of local currency weakness, particularly the Rand in which a significant
portion of the Group`s central costs are incurred; secondly reduced bonus
provisions and other accruals at period end, and finally a sharp focus on cost
management at Group level during the period. We continued to invest centrally
in our core strategic initiatives, including in Lines of Business and in the
development of the Group`s services offerings.
Property
The Campus Office Park, situated in Johannesburg, houses the Group`s head
office operations, several of the Group`s South African operations, as well as
a wide range of third party tenants. The Group occupies some 45% of the useable
space and third party tenants the balance.
Designed as a leading technology park, the Campus occupies 22 hectares of land
and comprises 81,000m2 of Grade A+ offices and conference facilities.
The Campus increased net rental income by 17.5% for the period to $15.3
million, reflecting some growth in underlying rental rates, as well as the
renewal of longer dated contracts at more favourable rates. While the facility
experienced some vacancies during the year, the Campus was back to near
capacity by period end.
The overall impact of the Campus on the Group income statement for the year was
as follows:
$ million
Rental income* 15.3
Revaluation of investment portion** 4.5
Finance costs (21.8)
Loss before tax (2.0)
This impact does not take account of any growth in the valuation of the
non-investment portion of the Campus, namely the 45% of the property utilised
by the Group. Based on the valuation of the investment portion, this growth in
value was $3.9 million and is not reflected in the income statement.
* Disclosed in Other Operating Income
** Disclosed in Property Revaluation and Other Gains and Losses
Share of Results of Associates
The share of results of associates was $7.8 million (2008: $7.1 million).
Britehouse was the largest contributor with $4.1 million.
Interest Income and Finance Costs
Interest and investment income was $8.1 million (2008: $17.5 million). The
reduction was the result of much lower prevailing interest rates during the
year, an increased proportion of the Group`s cash being centralised in US
dollars as opposed to higher yielding currencies, as well as the payment in
cash during the year for the purchase of the minority interest in Datacraft
Asia.
Total finance costs were $29.9 million (2008: $31.0 million), of which $21.8
million (2008: $22.6 million) related to funding the Campus property in
Johannesburg. The balance of the finance costs related to swap costs in respect
of intercompany funding ($3.8 million), interest costs on vendor loans, and
interest on bank overdrafts.
Property Revaluation and Other Gains and Losses
Property revaluation and other gains and losses include a $4.5 million (2008:
$8.5 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 2009. The valuation was determined with reference to the
budgeted rental income for 2010 and based on a yield of 9.5%.
Income Tax
The Group`s effective rate of tax on profit before tax, excluding exceptional
items, increased slightly to 26.7% (2008: 25.9%). This change reflects the
impact of the lower contribution from the US for the period where the Group
pays a lower rate of tax, offset by the beneficial impact of some prior year
adjustments.
During the year 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 $44.7 million
as part of the settlement which resulted in the Group reporting, as an
exceptional gain, a deferred tax asset of $11.0 million during the period. The
effect of the restructure was to replace 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.
Minority Interests
The minority interest in the result for the period reduced to $10.2 million
(2008: $22.6 million) as a result of the acquisition of the remaining minority
shares in Datacraft Asia in November 2008.
The bulk of the remaining interest relates to the Black Economic Empowerment
consortium`s (`the Consortium`) 16.02% interest in the Group`s African
operations, through its shares in Dimension Data Middle East and Africa (Pty)
Limited (`DDMEA`). Based on the performance of DDMEA in 2009, with effect from 1
October 2009 a further estimated 2.02% vested to the Consortium, bringing their
total interest to 18.04%.
Between 1 October 2009 and 30 September 2011, the Consortium has the option
to sell (subject to the achievement of certain internal transformation
objectives - as yet not achieved), and the Group has the option to acquire,
any of its shares in DDMEA at fair value (as determined by an independent
valuer). The Group would be entitled to settle the purchase price in either
cash or Dimension Data Holdings plc shares.
If neither option is exercised then the Consortium will continue to vest
shares in DDMEA (subject to performance targets) until 30 September 2011
whereafter the Consortium will have the option, subject to the Group`s
pre-emptive right, to sell their shares subject to the Group`s approval of
the purchaser.
Exceptional Items
During 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
$1.5 million, which refunded certain rebates received in prior periods.
Pursuant to the restructuring, SARS allowed Dimension Data a once off tax
deduction of $44.7 million. This deduction, net of temporary differences raised
previously on the structure, resulted in the recognition of a deferred tax
asset to the Group of $11.0 million.
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 $282.1 million.
Goodwill on acquisition amounted to $183.8 million.
The Group concluded three other acquisitions, none 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, and Internet Solutions
acquired a 38.5% interest in Intra Lda, an Internet Services Provider (ISP)
based in Mozambique.
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 $849.6 million, and cash, net of overdrafts, of $599.8 million. The
retention of a strong cash position was and is expected to remain an important
sign of strength and resilience to our global trading partners and clients,
particularly in the current difficult economic conditions.
Minority interests reduced during the period from $138.2 million to $56.7
million as a result of the acquisition of the outstanding minority shares in
Datacraft Asia.
Non-current assets of $767.7 million included investment property of $95.9
million. This relates to the 55% 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 to the investment property portion
through the income statement of $4.5 million.
Non-current liabilities included bank loans which increased to $140.6 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.
Net current liabilities (current liabilities less current assets, excluding net
cash) were $253.3 million (2008: $119.2 million).
Cash Flow
Cash and cash equivalents at the end of the period were $599.8 million (2008:
682.4 million).
Cash generated from operations was $319.0 million (2008: $336.2 million),
including cash generated from a reduction in working capital of $45.5 million
(2008: $79.2 million). The Group`s working capital management remained strong
for the period, with a slight increase in Trade Receivable days sales
outstanding to 47 days (2008: 46 days) and an increase in Trade Payable days
outstanding to 77 days (2008: 70 days). The Group managed to secure improved
trading terms with some of its vendors and, despite the difficult economic
conditions, experienced no material bad debts during the period. Inventory
levels reduced, largely as a result of lower product volumes.
Net cash used in investing activities was $345.3 million, including $282.1
million in respect of the acquisition of the minority interests in Datacraft
Asia.
Additions to PPE and Intangibles (Capex) and related depreciation and
amortisation ($ million)
2009 Internet Solutions Other Total
Capex 62.9 20.5 83.4
Depreciation and Amortisation 23.9 29.0 52.9
2008
Capex 46.1 45.5 91.6
Depreciation and Amortisation 25.4 34.2 59.6
Capex amounted to $83.4 million (2008: $91.6 million). Internet Solutions
invested $62.9 million during the period, up from $46.1 million in 2008. The
increase related to a $24.7 million acquisition of international bandwidth in
the form of 16 STM1s from Seacom, thereby securing undersea cable capacity off
the east coast of Africa. Elsewhere, the Group`s capex reduced relative to the
prior year, partly reflecting an emphasis on reducing discretionary spend, but
also the fact that 2008 saw a relatively high investment in the Group`s GSOA
services platform.
Dividend
The Directors recommend the payment of a dividend of 1.9 US cents per share
(2008: 1.7 US cents). Subject to shareholders` approval at the Annual General
Meeting on Wednesday, 3 February 2010, the final dividend will be paid on
Friday, 19 March 2010 to shareholders on the share register at the close of
business on Friday, 19 February 2010.
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, 4 February 2010.
The following are the salient dates for the payment of the proposed dividend:
Announcement of conversion rate Friday, 5 February 2010
Last day to trade on the JSE Friday, 12 February 2010
Date trading commences `ex`
the dividend on the JSE Monday, 15 February 2010
Date trading commences `ex`
the dividend on the LSE Wednesday, 17 February 2010
Record date on the JSE and LSE Friday, 19 February 2010
Payment of dividend Friday, 19 March 2010
No transfers between the UK and South African registers may take place during
the period Friday, 5 February 2010 and Friday, 19 February 2010 (both days
inclusive). Shareholders on the South African register should note that, in
accordance with the requirements of Strate, share certificates may not be
dematerialised or rematerialised between Monday, 15 February 2010 and
Friday, 19 February 2010 (both days inclusive).
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 2009
2009 2008
Notes $`000 $`000
Revenue 2 3,973,078 4,510,640
Cost of sales (3,080,257) (3,537,347)
Gross profit 892,821 973,293
Administrative, selling and
distribution expenses (699,928) (791,079)
Operating profit 192,893 182,214
Share of results of associates 7,814 7,113
Interest and investment income 8,105 17,516
Finance costs (29,915) (31,025)
Property revaluation and other gains
and losses 4,895 13,194
Profit before tax 183,792 189,012
Tax 4 (38,422) (47,973)
Profit for the year 145,370 141,039
Attributable to:
- Equity shareholders of the parent 135,175 118,410
- Minority shareholders 10,195 22,629
145,370 141,039
Earnings per ordinary share: US cents US cents
- Basic 5 8.0 7.7
- Diluted 5 7.7 7.3
Proposed dividend per ordinary share 1.9 1.7
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 September 2009
2009 2008
Notes $`000 $`000
Non-current assets
Property, plant and equipment 190,231 170,560
Investment property 95,911 81,208
Goodwill 291,500 95,820
Other intangible assets 48,102 18,856
Investments in associates 42,509 34,426
Other investments 4,133 3,602
Deferred tax assets 47,730 31,862
Trade and other receivables 6 47,571 38,163
767,687 474,497
Current assets
Inventories 169,013 181,885
Trade and other receivables 6 1,024,434 1,059,547
Cash and cash equivalents 601,129 686,499
1,794,576 1,927,931
TOTAL ASSETS 2,562,263 2,402,428
Equity
Equity attributable to equity
shareholders of the parent 849,594 710,201
Minority interests 56,653 138,211
Total equity 906,247 848,412
Non-current liabilities
Bank loans 140,553 3,841
Other long term liabilities 45,571 38,574
Obligations under finance leases 14,099 139,906
Deferred tax liabilities 1,021 715
Provisions 6,678 6,186
207,922 189,222
Current liabilities
Trade and other payables 7 1,417,224 1,347,113
Bank loans 23,321 2,256
Bank overdrafts 1,313 4,146
Provisions 6,236 11,279
1,448,094 1,364,794
Total liabilities 1,656,016 1,554,016
TOTAL EQUITY AND LIABILITIES 2,562,263 2,402,428
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2009
2009 2008
$`000 $`000
Cash flows from operating activities
Operating profit 192,893 182,214
Adjustments for:
Depreciation and amortisation 52,927 59,595
Movement in provisions 536 885
Share-based payment expensed 20,052 16,726
Other non-cash items 7,179 (2,441)
Operating cash flows before movements in working
capital 273,587 256,979
Decrease in inventories 18,875 2,403
Decrease/(increase) in trade and other receivables 46,915 (99,334)
(Decrease)/increase in trade and other payables (20,328) 176,140
Cash generated from operations 319,049 336,188
Income taxes paid (47,957) (36,000)
Interest paid (28,977) (26,638)
Net cash from operating activities 242,115 273,550
Cash flows from investing activities
Interest received 8,105 17,516
Net investment in business interests and other
investments (278,994) (4,785)
Acquisition of property, plant and equipment, net of
proceeds on disposal (49,269) (77,797)
Acquisition of intangibles, net of proceeds on
disposal (23,677) (13,338)
Treasury share buy back of own shares by a subsidiary - (1,169)
Deferred consideration paid (1,488) (2,654)
Net cash used in investing activities (345,323) (82,227)
Cash flows from financing activities
Shares purchased by Employee Share Trust (18,697) (33,143)
Proceeds on sale of shares by Employee Share Trust 3,847 -
Share options exercised by employees of a subsidiary
company (2,961) -
Proceeds on issue of new shares net of expenses 2,040 121,034
Repayment of borrowings (21,564) (21,755)
New bank loans and finance leases raised 60,943 22,570
Dividends paid to ordinary shareholders (28,505) (22,821)
Dividends paid to minorities (159) (9,655)
Net cash (used in)/from financing activities (5,056) 56,230
Net movement in cash and cash equivalents (108,264) 247,553
Cash and cash equivalents at beginning of the year 682,353 455,758
Exchange differences on cash and cash equivalents 25,727 (20,958)
Cash and cash equivalents at end of the year 599,816 682,353
Cash and cash equivalents is made up as follows:
Cash and cash equivalents 601,129 686,499
Bank overdrafts (1,313) (4,146)
599,816 682,353
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2009
Share Total other Retained
capital and reserves* earnings
Premium
$`000 $`000 $`000
1 October 2008 304,790 222,884 182,527
Profit for the period - - 135,175
Items recognised directly in
equity 32,152 28,574 (56,508)
Share incentive schemes - 17,451 -
Deferred tax on share
incentive
schemes - 5,646 3,195
Share option reserve utilised - (16,034) (32,865)
Currency adjustments - 33,079 -
Dividends paid - - (28,505)
Shares issued 2,040 - -
Shares held in Employee Trust 30,112 - -
Changes in holdings of
subsidiaries - - -
Vesting under BEE scheme - (8,008) -
Losses on cash flow hedges
deferred in equity - (5,378) -
Hedging losses capitalised - 2,856 -
Transfers to income statement - (289) -
Other - 967 (49)
Transfers - (1,716) 1,716
30 September 2009 336,942 251,458 261,194
Attributable Minority Total equity
to equity interest
holders of
parent
$`000 $`000 $`000
1 October 2008 710,201 138,211 848,412
Profit for the period 135,175 10,195 145,370
Items recognised directly in
equity 4,218 (91,753) (87,535)
Share incentive schemes 17,451 - 17,451
Deferred tax on share
incentive
schemes 8,841 - 8,841
Share option reserve utilised (48,899) - (48,899)
Currency adjustments 33,079 (1,388) 31,691
Dividends paid (28,505) (159) (28,664)
Shares issued 2,040 - 2,040
Shares held in Employee Trust 30,112 - 30,112
Changes in holdings of
subsidiaries - (98,278) (98,278)
Vesting under BEE scheme (8,008) 8,008 -
Losses on cash flow hedges
deferred in equity (5,378) - (5,378)
Hedging losses capitalised 2,856 - 2,856
Transfers to income statement (289) - (289)
Other 918 64 982
Transfers - - -
30 September 2009 849,594 56,653 906,247
* 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 2009
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 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 2009 or 2008, but is
derived from those accounts. Statutory accounts for 2008 have been delivered to
the Registrar of Companies and those for 2009 will be delivered following the
Company`s Annual General Meeting. The auditors, Deloitte LLP, have reported on
those accounts; their reports were unqualified, did not draw attention to any
matters by way of emphasis without qualifying their report and did not contain
statements under Section 498(2) or (3) of the Companies Act 2006 or equivalent
preceding legislation.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with IFRS as adopted by the European Union, this
announcement does not itself contain sufficient information to comply with
IFRS. The Company expects to publish full financial statements in December
2009.
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. After making enquiries, the Directors
have a reasonable expectation that the Group has adequate resources to continue
to operate for the foreseeable future, despite the current uncertain economic
environment. Accordingly, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
Exchange rates
The following table reflects the average and period end exchange rates against
the US dollar for South African rand, Australian dollar, Sterling and Euro:
2009 2008
Average Period End Average Period End
Australian dollar 1.382 1.136 1.098 1.251
Euro 0.735 0.682 0.659 0.699
South African rand 8.828 7.388 7.518 8.290
Sterling 0.647 0.621 0.507 0.553
2. SEGMENTAL ANALYSIS
Americas Asia Australia Europe
$`000 $`000 $`000 $`000
2009
Revenue 532,446 605,630 990,576 1,027,418
Operating profit* 5,473 52,984 39,664 31,688
2008
Revenue 690,835 719,601 1,146,094 1,152,860
Operating profit* 19,570 44,203 40,376 21,902
Middle Central & Inter-
East & other Company
Africa revenue Total
$`000 $`000 $`000 $`000
2009
Revenue 1,062,916 34,255 (280,163) 3,973,078
Operating profit* 84,458 (19,902) 194,365
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 ITEMS
Notes 2009 2008
$`000 $`000
Exceptional operating costs
Campus finance restructure (a) (1,472) -
Total exceptional operating costs (1,472) -
Other exceptional gains (b) - 4,064
Exceptional tax
Deferred tax credit (a) 10,976 -
Total exceptional tax 10,976 -
Exceptional items after tax 9,504 4,064
Minorities` share (1,647) -
Net exceptional income 7,857 4,064
Reconciliation of reported amounts to
adjusted amounts 2009 2008
$`000 $`000
Statutory operating profit 192,893 182,214
- Exceptional operating costs 1,472 -
Adjusted operating profit 194,365 182,214
Statutory attributable profit after tax 135,175 118,410
- Exceptional operating costs 1,472 -
- Other exceptional gains - (4,064)
- Exceptional tax items (10,976) -
- Minorities` share 1,647 -
Adjusted attributable profit after tax 127,318 114,346
(a) During 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 $1.5 million, which refunded certain rebates received in prior
periods. Pursuant to the restructuring, SARS allowed Dimension Data a once off
tax deduction of $44.7 million. This deduction, net of temporary differences
raised previously on the structure, resulted in a deferred tax asset to the
Group of $11.0 million.
(b) Profit on sale of the Group`s 92.3% interest in Automate to Britehouse.
4. TAX
2009 2008
$`000 $`000
Current tax - current period 46,767 45,859
Current tax - prior periods (5,560) 1,510
Deferred tax - current period (614) 1,678
Deferred tax - prior periods (2,171) (1,074)
Total tax expense 38,422 47,973
This expense relates predominantly to tax jurisdictions outside of the United
Kingdom.
5. EARNINGS PER ORDINARY SHARE
2009 2008
`000 `000
Weighted average number of ordinary shares:
- for basic earnings per share 1,683,829 1,540,733
- for diluted earnings per share 1,758,284 1,616,202
$`000 $`000
Earnings for basic and diluted earnings per share 135,175 118,410
Exceptional items (7,857) (4,064)
Earnings before exceptional items 127,318 114,346
US cents US cents
Basic earnings per share 8.0 7.7
Diluted earnings per share 7.7 7.3
Basic earnings per share before exceptional items 7.6 7.4
Diluted earnings per share before exceptional items 7.2 7.1
6. TRADE AND OTHER RECEIVABLES
2009 2008
$`000 $`000
Trade receivables 760,827 804,676
Other receivables 70,318 84,835
Prepayments and accrued income 214,243 184,809
Taxation authorities 26,617 23,390
1,072,005 1,097,710
Analysed as follows:
Long term portion 47,571 38,163
Short term portion 1,024,434 1,059,547
1,072,005 1,097,710
7. TRADE AND OTHER PAYABLES
2009 2008
$`000 $`000
Trade payables 483,196 536,213
Other payables 191,561 144,330
Accruals 319,561 299,791
Deferred income 299,833 231,004
Deferred consideration - 1,035
Taxation authorities 123,073 134,740
1,417,224 1,347,113
8. ACQUISITIONS AND CHANGES IN HOLDINGS OF SUBSIDIARIES
Changes in holdings of subsidiaries
As disclosed in Note 40 of the 2008 Annual Report, Dimension Data acquired the
remaining 44.9% interest in Datacraft. 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.
The total cost of the acquisition was $282.1 million, and was financed by cash,
part of which was raised by an equity issuance. The goodwill on acquisition
amounted to $183.8 million.
Transaction costs capitalised to the cost of the investment were $4.2 million.
Acquisitions
During the period, the Group made two small acquisitions of subsidiaries,
Teksys (100%) and Bluefire (65%), for an aggregate consideration of $4.3
million, and $5.1 million for the assumption of a shareholder`s loan. This
resulted in $7.6 million being recognised as goodwill on acquisition. The net
assets and liabilities for these acquisitions amounted to $1.2 million and $0.6
million respectively. Teksys and Bluefire were acquired effective January 2009
and October 2008 respectively.
None of the acquisitions had a material impact on the reported results and the
balance sheet.
9.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.
10. POST BALANCE SHEET EVENTS
Black Economic Empowerment (`BEE`) transaction
In September 2004, Dimension Data Holdings plc finalised an equity shareholding
transaction with a BEE consortium, which would result in the BEE consortium
receiving a 25.01% interest in Dimension Data Middle East and Africa (Pty)
Limited, (`DDMEA`) over a period of five and a half to seven years. The
interest would vest based on the results of the South African business. The
transaction also incorporated a Transformation Charter which outlined certain
BEE objectives as outlined in the announcement on 1 September 2004.
Between 1 October 2009 and 30 September 2011, the BEE Consortium has the
option to sell (subject to the achievement of certain internal transformation
objectives - as yet not achieved), and the Group has the option to acquire,
any of its shares in DDMEA at fair value (as determined by an independent
valuer). The Group would be entitled to settle the purchase price in either
cash or Dimension Data Holdings plc shares.
If neither option is exercised then the BEE Consortium will continue to vest
shares in DDMEA (subject to performance targets) until 30 September 2011
whereafter the Consortium will have the option, subject to the Group`s
pre-emptive right, to sell their shares subject to the Group`s approval of
the purchaser.
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 3/2009 issued by the South
African Institute of Chartered Accountants.
2009 2008
`000 `000
Weighted average number of ordinary shares:
- for headline earnings per share 1,683,829 1,540,733
- for diluted headline earnings per share 1,758,284 1,616,202
$`000 $`000
Earnings for basic and diluted earnings per share 135,175 118,410
Adjustments for headline earnings (2,003) (8,614)
Headline earnings 133,172 109,796
US cents US cents
Headline earnings per share 7.9 7.1
Diluted headline earnings per share 7.6 6.8
The adjustments for headline earnings include the revaluation of the Campus
investment property of $4.5 million (2008: $8.5 million), profits and losses on
the sale of subsidiaries and investments of $0.4 million (2008: $4.7 million)
and the profit and loss on sale of property, plant and equipment and
intangible assets of $0.3 million (2008: $1.6 million) and impairment of
property, plant and equipment and intangible assets of $1.4 million
(2008: nil), net of tax and minorities of $1.8 million (2008: $3.0 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
Press enquiries:
Hilary King
Global PR and Analyst Relations Manager
Dimension Data Holdings plc
Mobile: +(27) 82 414 9623
Office: +(27) 11 575 6728
hilary.king@za.didata.com
Internet address: www.dimensiondata.com
Sponsor:
J.P. Morgan Equities Limited
Date: 18/11/2009 09:00:01 Produced by the JSE SENS Department.
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