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DIDDT
DDT - Dimension Data Holdings plc - Unaudited Interim Results Six months ended
31 March 2010
Dimension Data Holdings plc
ISIN: GB0008435405
JSE Code: DDT
Unaudited Interim Results Six months ended 31 March 2010
Dimension Data Holdings plc (`Dimension Data` or the `Group`) today announced
its results for the six months ended 31 March 2010. 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.
Financial Highlights
Revenue growth of 11.1% in reported currency and down 3.7%(2) in constant
currency
Continued growth in Managed Services revenue, up 10.1%(2) in constant
currency
Services growth drives gross margin expansion to 22.7% (H1 2009: 21.8%)
Strong operating profit expansion in Systems Integration business
Weak trading conditions in Plessey
Operating profit up 21.0% in reported currency and down 0.4%(1,2) in constant
currency
Operating margin(1) expansion to 5.0% (H1 2009: 4.6%)
Earnings per share(1) increased from 3.5 cents (H1 2009) to 4.2 cents
Closing gross cash balance of $495 million
Operational Highlights
The Group received numerous awards and recognition from our partners and
industry analysts
Employee satisfaction increased and industry recognition for our outstanding
employee experience was achieved
Within our Americas region the US performance improved significantly
Significant Managed Services and IT Outsourcing wins
Continued progress on the Group`s journey to become more services-led through
expansion of our Services portfolio and evolution in our Services systems and
platforms
Financial Summary
Six months ended Six months ended
$`000 31 March 2010 31 March 2009
Revenue 2,165,621 1,950,108
Operating profit 107,469 87,464
Operating margin 5.0% 4.5%
Operating profit (before exceptional items) 107,469 88,798
Operating margin (before exceptional items) 5.0% 4.6%
Profit attributable to equity
shareholders of the parent 71,710 65,997
Profit attributable to equity
shareholders of the parent (before
exceptional items) 71,710 58,739
Basic earnings per ordinary share (US cents) 4.2 3.9
Basic earnings per ordinary share (US
cents) (before exceptional items) 4.2 3.5
Notes:
(1) Before exceptional items. See reconciliation in Note 3 to the condensed
financial statements.
(2) Adjusted for the impact of currency movements and, where relevant, before
eliminating intercompany revenue
Chief Executive Officer`s Review
In this review, growth rates are in relation to H1 2009 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.
Strong performance; strong execution
Reported revenues grew in double digits, up 11.1% in reported currency over the
prior period. Strong growth in Managed Services and in Internet Solutions drove
an improvement in the gross margin which, combined with tight cost management,
resulted in operating profit growth in reported currency of 21.0% and operating
margin of 5.0%. Earnings per share increased from 3.5 cents to 4.2 cents.
Working capital management remained solid throughout the period.
The H1 2010 results need to be seen in the light of major fluctuations across
many of the currencies in which the Group trades, as well as the very strong
comparative H1 2009 performance prior to the global financial crisis.
Revenues in constant currency declined by 3.7%. This decline was primarily
driven by a sharp deterioration in Plessey revenues as well as by lower
revenues in Express Data off a high comparative. Excluding Plessey and Express
Data, a 0.4% increase in constant currency revenues was achieved.
Our SI business performed strongly, achieving in constant currency a 15.8%
increase in operating profit on flat revenues. The revenue performance was
characterised by a strong improvement in Q2 2010, on both a year on year and a
sequential basis, following a decline in Q1 2010. Operating profit growth was
driven by continued strength in Managed Services, which led to an expansion in
gross margin from 21.8% to 23.0%. Supported by good cost management, this
resulted in an increase in the SI operating margin from 3.8% to 4.5%.
By geography, SI operating margins showed a very pleasing improvement in four
of the five regions. The Americas performed extremely well with increased
revenues and a strong improvement in profitability. We saw a recovery in
product spend and a continued improvement in revenue mix in favour of Services.
In Europe, increased margins and efficiency gains drove a significant increase
in profitability. Both regions reported operating margins in excess of 3%, a
significant milestone. Trading in Asia improved throughout the period, and the
region continued to invest in a strategic growth programme. In Australia and in
Middle East and Africa, robust expansion in profitability and in operating
margins was driven by Services revenue growth and cost control.
Network Integration saw improved conditions in Q2 2010 as clients increased
spend on network refresh and upgrades required to support data centre and
multimedia projects. Video solutions showed exceptional growth, increasing
their contribution within the Converged Communications line of business. Growth
in our Microsoft Solutions was driven by clients trying to extract more value
from their existing investments. Increased demand for the integration between
video, telephony and Microsoft systems, which together with upgrades to Windows
7, resulted in success with our licensing, consulting, deployment and managed
services. Our Data Centre and Storage Solutions showed exceptional growth off
increased demand for centralisation, consolidation and virtualisation of data
centre infrastructure. All the above changes supported demand for security
infrastructure enhancements, and drove growth in our multi-vendor security
solutions and managed security services.
Services growth of 7.4% was the big driver of growth and improved profitability
in the SI business. Managed Services continued to perform strongly, increasing
by 10.1%, with solid demand for our industry leading maintenance service
Uptime, as well as for our IT Outsourcing offerings. Professional Services
increased by 3.1%, with growth in most regions. The proportion of Services in
the SI business increased to 42.1% for the period.
Internet Solutions (IS) performed well, with growth driven by the
Communications, Data Centre and Carrier business units. Growth in the
Connectivity business was lower as volume growth in Internet access services
was tempered by pricing pressures. Wins in the public sector, in cloud
solutions and voice services were a feature of the period. Gross margins were
maintained at similar levels to the prior period, and this combined with a
focus on containing overhead growth led to a double digit increase in EBITDA.
IS continues to invest in growth opportunities and in reducing input costs.
During the period we commenced an expansion of our data centre capacity in
Johannesburg and Cape Town, as demand for hosting solutions continues to be
strong. Significant increases in fibre optic cable capacity continue to come on
line on the East coast of Africa. IS installed its first direct fibre optic
connections to clients in Tanzania, Kenya, Mozambique and Uganda during the
period. In addition IS has started to install direct fibre connections into its
largest clients in the Johannesburg and Cape Town metropolitan areas,
augmenting the earlier investments in Durban. These investments should improve
IS`s competitive position in relation to the incumbent telecommunications
operators.
Trading conditions for Plessey continued to be very demanding and revenues for
the half declined by 51.4%. Although Plessey`s South African operations
recorded single digit growth, the African operations saw sharp declines in
demand from mobile operators due to a reduction in capital expenditure flowing
from the global financial crisis, as well as corporate acquisition activity
affecting spend with some of our clients. Cost reduction initiatives, including
retrenchments affecting mainly the African operations, were implemented to
stabilise the business performance during the cyclical low. Whilst H2 2010
market conditions are expected to remain tough, we remain optimistic in respect
of the medium term opportunity for Plessey`s operations, in mobile
infrastructure site build and in the deployment of fibre optic and wireless
services across the African continent.
Express Data`s revenue declined by 13.8% due to price reductions of
approximately 20% across most product lines associated with strong currency
appreciation of the Australian and New Zealand currencies. In addition, volumes
were impacted by supply constraints experienced by some of our key vendors.
Express Data continued to invest in programmes and systems which will allow us
to transition our software licencing business to support the Software as a
Service licensing model. We continued to receive industry recognition, with
various awards from our vendor partners including Cisco, Microsoft, Symantec
and others. The award as `best employer in ANZ` is a strong endorsement of our
leadership and people practices as well as a good indicator of the alignment
and commitment of our people. Express Data remains extremely well positioned in
the market and should benefit from any overall return to growth in the second
half.
Clients buying and spending trends
Client spend displayed a positive trend across most of our geographies during
the half. While product spend was still lower than in H1 2009, we have seen
three quarters of sequential growth in orders. Across all client segments, and
especially in the largest corporations, we see continued drive from clients to
centralise procurement, standardise IT infrastructure, and consolidate vendors
and purchasing channels with the goal of reducing operational costs.
Clients are focusing on sourcing through IT service providers who can offer a
wide range of solutions and services on a multi-national basis. Dimension Data
has benefitted with our multi-national footprint, our quality of services, our
depth of solutions and our strong partnerships with leading technology
manufacturers.
From a Services perspective, companies which have downsized their IT employee
complement are exploring ways to outsource core functions or deploy staff
augmentation solutions. Furthermore, clients are looking to move their
purchasing from capex to opex based models. The Group expects to be a major
beneficiary of these trends with its IT Outsourcing and Managed Services
capabilities.
By vertical market segment, we are seeing strong demand from the public sector,
and in particular healthcare, education, energy and utilities. The public
sector continues to assess ways to improve service delivery via technologies
like video, and government is drawn to investments that can offer economic
stimulus such as digital cities. Manufacturing also increased strongly on the
back of anticipated recovery in demand for consumer goods. Financial services
revenue decreased, with global banks curtailing capex in general whilst
investing in efficiency oriented projects such as server and data centre
consolidation. Regional banks continued to invest. Revenue from services
providers decreased in aggregate as Tier 1 providers slowed spend whilst Tier 2
providers continue to invest.
Accelerating our services journey
Significant progress was made in accelerating our services journey, with Group
Services revenue increasing to 44% of revenues compared to 42% in H1 2009.
Marketplace success with our clients was also strong and a number of
enhancements to our Services portfolio occurred.
The global deployment of our next generation GSOA platform, including IT
Service Management (ITSM) and Remote Infrastructure Management (RIM), is
proceeding according to plan. During the half, the ITSM platform was rolled out
across all regions. Both the ITSM and RIM platforms are key enablers to the
evolution of an enhanced and comprehensive Managed Services portfolio.
In addition, we made progress in extending our maintenance offering, Uptime, to
all of our lines of business.
During the period, the Group also started building a more consistent global IT
Consulting practice. While IT Consulting capabilities have been offered by the
Group for many years, the establishment of a consistent practice across the
world will enhance our ability to engage at a more strategic level with our
clients. By taking a vendor neutral, assessment led approach, Dimension Data
improves its credibility and relevance with clients and enhances its position
as a trusted advisor.
Our IT Outsourcing capabilities across our regions are at various stages of
maturity. However, we continue to invest in these capabilities and have put
dedicated teams in place in all regions. A recent example of success was the
Group`s appointment as Integration Services Manager for Woolworths, a leading
retailer in Australia where we will be responsible for Woolworths` enterprise
telecommunication requirements. The five year contract covers the management of
data services, telephony, security and related infrastructure. This and many
other wins during the period provide evidence that clients endorse the Group`s
value proposition and delivery capabilities in the IT Outsourcing market.
Throughout the period Dimension Data invested in its international business
execution and project delivery capabilities with global clients. Improvements
on this front will ensure regional consistency and world class delivery on
global service contracts.
Differentiation through our committed employees
Dimension Data`s employees are our differentiation in the market. Their
competencies and skills are what set us apart from the competition. During the
period, we continued to invest in our employees` growth, development, and
recognition. We introduced the Technical Hall of Fame and also Group Technical
Excellence Awards to recognise and reward our most esteemed technical talent.
In support of our Services strategy and to provide continued career growth
paths amongst our technical talent, we continued to progress the implementation
of the Dimension Data technical job framework.
An ongoing process of gaining employee feedback and implementing improvements
in our employee experience is a trait of the Group culture. During the period,
we completed our 2010 Employee Survey, with the Group showing improvement in
scores across all key categories. The overall Group Satisfaction Index and
Employee Engagement Score both improved. These scores and other feedback we
have received through the survey, indicate strong satisfaction and commitment
within our employee base.
Increasingly, the Group is being recognised in the industry for its superior
employee experience. During the period Dimension Data and Express Data were
named the 2009 Hewitt Best Employer in Australia and New Zealand across all
industry sectors, which recognises companies` commitment to the development of
their employees and culture. This follows other accolades the Group has
recently received including `top 10 IT employers within India` and `top ICT
company` in Africa.
Industry recognition and awards
Recognition was also achieved in the Group`s positioning by leading industry
analyst firm Gartner(1) in their Magic Quadrant for Communications Outsourcing
and Professional Services, Worldwide, Eric Goodness, 3 March 2010(2) which
examined 17 vendors of IT services for business communications systems
worldwide. Dimension Data was positioned as a Challenger in this Magic Quadrant
(www.dimensiondata.com/gartnermagicquadrant).
We received recognition from our vendors as a leading global systems
integrator, receiving multiple awards during the period. These included
multiple partner of the year and other regional partner awards from vendors
including Cisco, EMC, Tandberg, VMWare, and McAfee. We were also recognised by
Cisco with 30 awards at its annual partner conference, the most of any partner,
and as the Global Enterprise Partner of the Year. These awards recognise our
success at partnering with the leading IT manufacturers in the world and,
thereby, providing our clients with a superior client experience when it comes
to solution design, implementation and support.
Expanding our footprint through acquisition
The Group continues to focus on organic growth as its primary growth strategy,
supplemented by targeted acquisitions to improve our footprint in selected
geographies or expand our skills and expertise.
During the period, we acquired Telcom Morocco and Always On in South Africa.
After the close of the reporting period, we acquired a 51% interest in Magenta
a Chilean systems integrator, expanding the Americas footprint to five
countries - the US, Canada, Mexico, Brazil and Chile. Further, the acquisition
allowed Dimension Data to achieve Global Certification status with Cisco.
These acquisitions expanded the Group`s global footprint to 49 countries.
Looking forward
We are optimistic about our market positioning and relevance and believe that
the market has turned in terms of clients` willingness to spend on IT and IT
services in particular. In response, we continue to invest in resources to meet
market demand and to accelerate our Services strategy. We anticipate that the
second half of 2010 will see further recovery in client spend and are confident
that our revenue targets of single digit constant currency growth in revenue
for the full year are achievable.
Growth and operating leverage remain key objectives. Looking towards the next
three to five years, we have set an objective of growing constant currency
revenues by at least 10% on a compound basis, with Services growing ahead of
Product revenues, and are targeting a 7% operating margin by 2015. This margin
improvement will be driven by a greater contribution from Services and a focus
on efficiencies of scale. We are investing to reach these growth targets and to
ensure our transition to a `services-led` company continues to track to plan.
We are optimistic about the Group`s short and medium term prospects and
continue to see evidence that our value proposition provides competitive
differentiation in the marketplace. Successful progression of our Services
strategy will only serve to differentiate us further.
(1) The Gartner Report(s) described herein, (the `Gartner Report(s)`), represent
data, research opinion or viewpoints published, as part of a syndicated
subscription service by Gartner, Inc. (`Gartner`) and are not representations
of fact. Each Gartner Report speaks as of its original publication date (and
not as of the data of this Offering Memorandum)and the opinions expressed in
the Gartner Report(s) are subject to change without notice.
(2) The Gartner Magic Quadrant is copyrighted 3 March 2010 by Gartner, Inc and
is reused with permission. The Magic Quadrant is a graphical representation of
a marketplace at and for a specific time period. It depicts Gartner`s analysis
of how certain vendors measure against criteria for that marketplace, as
defined by Gartner. Gartner does not endorse any vendor, product or service
depicted in the Magic Quadrant, and does not advise technology users to select
only those vendors placed in the `Leaders` quadrant. The Magic Quadrant is
intended solely as a research tool, and is not meant to be a specific guide to
action. Gartner disclaims all warranties express or implied, with respect to
this research, including any warranties of merchantability or fitness for a
particular purpose.
Chief Financial Officer`s Review
In this review, growth rates are in relation to H1 2009 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).
Income Statement Summary
$`000 Total Systems Internet Plessey
Integration Solutions
2010
Revenue 2,165,621 1,771,995 156,366 54,920
Growth (3.7%) (0.4%) 10.0% (51.4%)
Operating profit/(loss) 107,469 80,577 18,774 (601)
Share of results of
associates 5,714 - - -
Interest, investment
income and finance costs (10,620) - - -
Property revaluation and
other gains and losses 1,804 (1,254) - -
Profit/(loss) before tax 104,367 79,323 18,774 (601)
2009
Revenue 1,950,108 1,593,415 112,541 87,902
Operating profit/(loss) 87,464 60,242 12,573 6,732
Share of results of
associates 3,656 - - -
Interest, investment
income and finance costs (6,564) - - -
Property revaluation and
other gains and losses 2,681 - - -
Profit/(loss) before tax 87,237 60,242 12,573 6,732
$`000 Express Property Group
Data * Holdings
2010
Revenue 182,129 - 211
Growth (13.8%) - -
Operating profit/(loss) 7,758 8,728 (7,767)
Share of results of
associates - - 5,714
Interest, investment
income and finance costs - (11,663) 1,043
Property revaluation and
other gains and losses - 2,996 62
Profit/(loss) before tax 7,758 61 (948)
2009
Revenue 156,108 - 142
Operating profit/(loss) 6,967 4,971 (4,021)
Share of results of
associates - - 3,656
Interest, investment
income and finance costs - (10,409) 3,845
Property revaluation and
other gains and losses - 2,181 500
Profit/(loss) before tax 6,967 (3,257) 3,980
* Express Data`s gross revenues before intercompany eliminations were $256.1
million (H1 2009: $221.8 million)
Revenue for the six months was $2,165.6 million, up 11.1% in reported currency
over the prior period. These reported results were supported by the
appreciation in the average exchange rates for the period of the Group`s main
trading currencies against the US dollar. In constant currency, Group revenues
declined by 3.7%. This decline reflected the comparison to a very strong Q1
2009, with the Group`s Q1 2010 revenues down on the comparative period by some
9%, while Q2 2010 reflected a return to growth of around 5%.
The outstanding feature of the period was the performance of the Systems
Integration business, which grew operating profit by 15.8%, to $80.6 million at
an operating margin of 4.5%. On the other hand, trading conditions for Plessey
were extremely demanding, and the business recorded an operating loss of $0.6
million (H1 2009:operating profit $6.7 million).
Product revenues were $1,206.0 million (H1 2009: $1,134.0 million), down by
7.5% in constant currency, while Services were $959.6 million (H1 2009: $816.1
million) up by 1.4%. As a result, the proportion of Services in relation to
total revenue increased from 41.8% to 44.3%. For the purpose of this
calculation, SI`s revenues are as outlined in the table below, IS and Plessey
are included in Services, and Express Data`s revenues are included in Product.
Product revenue was down by some 17% in the first quarter of the period,
growing by around 5% in Q2 2010. Good Services growth in both Systems
Integration and Internet Solutions was offset by a sharp decline in Plessey.
Overheads of $383.5 million were flat, reflecting an ongoing focus on cost
containment, as well as the benefit of cost reduction measures undertaken in
some parts of the Group in FY 2009.
As a result, operating margin expanded to 5.0% (H1 2009: 4.6%) and operating
profit was $107.5 million (down 0.4%).
The share of results from associates increased to $5.7 million for the period
(H1 2009: $3.7 million), supported by improved contributions from two of the
Group`s associates, as well as the stronger Rand for the period. Interest and
investment income was $6.1 million (H1 2009: $7.9 million) reflecting reduced
interest rates. Total finance costs were $16.7 million (H1 2009: $14.4
million).
Property revaluation and other gains and losses were $1.8 million for the
period (H1 2009: $2.7 million). This was largely the result of a small upward
revaluation of the Campus land and buildings in Johannesburg, despite subdued
conditions in the commercial rental market in South Africa.
The effective tax rate before exceptional items was 28.2% (H1 2009: 28.9%),
with the improvement relating mainly to a stronger contribution from the US
which has a lower effective tax rate than other geographies in which we
operate.
Earnings per share were 4.2 cents compared to 3.5 cents in H1 2009.
Trading and Operations
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 Integration (SI)
$`000
2010 Total Americas Asia Australia
Product 1,025,905 201,666 212,060 149,279
Growth (5.7%) 7.2% 7.2% (21.8%)
Total Services 746,090 86,053 132,385 132,840
Growth 7.4% 16.3% (0.7%) 11.8%
Managed Services
(MS) 474,218 44,850 97,973 73,839
Growth 10.1% 26.3% (7.5%) 17.2%
Professional
Services (PS) 271,872 41,203 34,412 59,001
Growth 3.1% 6.9% 25.3% 6.6%
Total 1,771,995 287,719 344,445 282,119
Growth (0.4%) 9.8% 4.0% (8.2%)
Gross margin 23.0% 19.1% 20.2% 24.0%
Operating
profit/(loss) 80,577 8,983 24,364 16,599
Operating margin 4.5% 3.1% 7.1% 5.9%
Middle East
2010 Europe and Africa SI Central
Product 296,681 146,122 20,097
Growth (12.1%) (11.8%) 172.7%
Total Services 198,031 169,347 27,434
Growth 0.0% 14.3% 12.9%
Managed Services
(MS) 143,149 104,223 10,184
Growth 3.5% 26.1% 22.8%
Professional
Services (PS) 54,882 65,124 17,250
Growth (8.0%) 0.0% 0.5%
Total 494,712 315,469 47,531
Growth (7.6%) 0.9% 34.2%
Gross margin 21.3% 28.2% 42.8%
Operating
profit/(loss) 17,137 23,103 (9,609)
Operating margin 3.5% 7.3% (20.2%)
$`000
2009 Total Americas Asia Australia
Product 978,664 187,326 188,865 140,366
Total Services 614,751 73,604 125,324 90,448
MS 387,708 35,598 100,311 47,011
PS 227,043 38,006 25,013 43,437
Total 1,593,415 260,930 314,189 230,814
Gross margin 21.8% 17.2% 22.0% 21.7%
Operating
profit/(loss) 60,242 2,299 25,928 11,006
Operating margin 3.8% 0.9% 8.3% 4.8%
Middle East
2009 Europe and Africa SI Central
Product 314,908 140,238 6,961
Total Services 182,697 116,895 25,783
MS 129,338 66,520 8,930
PS 53,359 50,375 16,853
Total 497,605 257,133 32,744
Gross margin 20.0% 26.4% 50.6%
Operating
profit/(loss) 13,257 16,258 (8,506)
Operating margin 2.7% 6.3% (26.0%)
The Systems Integration business delivered a strong performance for the period,
with solid services growth, expanding gross margin, and operating profit up
15.8% to $80.6 million. Continued growth in Managed Services was a feature, as
was the fact that most regions showed significant improvement in profitability.
The operating profit growth in the Americas was particularly pleasing, and
Asia`s slight decline in operating profit to $24.4 million was consistent with
the region`s plan to make a range of strategic investments, while retaining
operating margin in that region in excess of 7%. System Integration`s operating
margin expanded from 3.8% to 4.5%, evidence of the leverage potential inherent
in the operating model.
Product revenues reduced by 5.7%, reflecting an H1 2009 comparative which
included a strong first, with the impact of the global economic crisis being
felt most sharply by the Group from Q2 2009. By region, the Americas and Asia
were the first to experience the economic downturn last year, and were the
first to show growth in H1 2010 (each up 7.2%). Product margins were slightly
firmer for the period.
Managed Services grew by 10.1%. This reflects the momentum of our maintenance
and support services, and our strategic focus on developing annuity, valued
added management services. Managed Services gross margins were slightly lower
than H1 2009, partly due to exchange rate fluctuations in Europe in the prior
period, but also reflecting more comprehensive investment in vendor support,
particularly in Asia.
Professional Services revenues grew by 3.1%. Gross margins improved over the
prior period, supported by strong performances in the Americas and in Teksys, a
Microsoft solutions provider which was acquired in the prior period.
Across the lines of business, Network Integration revenues declined by 4.8%.
This decline conceals a robust performance in Network Integration Managed
Services, ensuring a good gross profit performance for this line of business.
The Converged Communications line of business ended flat on H1 2009, with good
growth in the Visual Communications market and continued strong performance in
Managed Services offset by declining revenues in the traditional telephony
market.
The Microsoft Solutions line of business grew revenues by 20.6%. Growth was
supported by good software licensing revenues in 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, particularly to
enable Unified Communications.
Data Centre and Storage Solutions increased by 13.7% with strong performances
in most regions. Product and Services were both strong, driven by ongoing
demand for server virtualisation and for Cisco`s UCS product set.
We experienced a 7.6% decline in our Customer Interactive Solutions line of
business, with growth in Services revenues offset by Product declines. A
cautious approach among our clients to large capital expenditure projects
impacted demand for call centre solutions. Merchants` revenues, however,
continued to benefit from a move to outsourcing and hosted contact centre
solutions in the UK, South Africa and the Middle East.
Security Solutions revenues increased by 11.0%. We reported good growth in
Network security and Advanced security revenues. The Group`s efforts to deliver
a full-service, security capability to our clients, combined with our continued
focus on building a multi-vendor capability, has positioned us well to support
organisations looking to consolidate complex vendor relationships in their
security environment.
Gross margin in the Systems Integration business improved by 1.2% to 23.0%,
largely the result of the improved revenue mix in favour of higher margin
Managed Services, and gross profit grew by 3.7%. Overhead growth was restricted
to 1.1%, benefitting from a focus on cost containment, and from the cost
reduction measures undertaken in the prior period.
Americas
The Americas delivered a pleasing increase in operating profit, up to $9.0
million for the period, driven by an excellent recovery in the US. Operating
margin was up from 0.9% to 3.1% for the period. Revenue was up 9.8%, led in
particular by Managed Services growth of 26.3%. Gross margin improved by 1.9%,
with improved Product and Services margins. Managed Services recorded some good
multi-year contract wins, and Professional Services were significantly more
profitable than in the prior period, reflecting the region`s emphasis on
effective project management during the period.
Within the lines of business, Network Integration improved slightly while
Security, Data Centre and Storage, Customer Interactive Solutions, and
Converged Communications all recorded good trading performances.
Outside the US, Mexico delivered very good revenue and operating profit growth,
while Brazil had a disappointing first half.
Asia
Asia recorded a slight decline in operating profit to $24.4 million, consistent
with the region`s plan to invest in a range of strategic investments. Operating
margin was maintained at a very solid 7.1%.
Revenues were up by 4.0%, with Product up by 7.2% and Services down by 0.7%.
Trading improved noticeably during the course of the period. Gross margin
declined by 1.8%, reflecting the slight shift in revenue mix in favour of
Product, as well as reduced Managed Services margins due to increased vendor
support fees. Gross profit reduced by 4.1% for the period.
Within the lines of business, Network Integration was broadly flat, while
Converged Communications, Data Centre and Storage and Microsoft Solutions all
reported good growth.
The business benefitted from cost savings initiatives undertaken in the prior
period, although these were offset to some extent by the investment programme
into new growth areas across the region.
Within the region, Japan`s trading results were disappointing while India,
China and Malaysia delivered strong performances.
Australia
Revenues in Australia declined by 8.2%, with Product down by 21.8%. Product
volumes were impacted by exchange rate fluctuations - a relatively weak
Australian dollar in H1 2009 encouraging forward purchases in anticipation of
price rises, and conversely a strong Australian dollar in H1 2010 depressing
unit selling prices.
Services on the other hand grew by 11.8%, with an excellent 17.2% expansion in
Managed Services and growth of 6.6% in Professional Services, reflecting
continued investment in Managed Services capabilities and systems, as well as
in consulting capacity. Several significant multi-year contract wins were
achieved during the period.
The change in revenue mix in favour of Services meant that gross margin
expanded by 2.3% for the period, and operating profit grew to $16.6 million
from $11.0 million in the prior period with operating margin improving to 5.9%
from 4.8% in H1 2009.
Europe
Europe`s revenue declined by 7.6%. This followed a 12.1% reduction in Product
volumes, reflecting the fact that Q1 2009 was a strong comparative period, with
the effects of the global economic downturn only being felt from Q2 2009.
Services revenues were flat with Managed Services performing well, growing by
3.5%, and several good contract wins were recorded during the period.
Overall gross margin improved by 1.3%, supported by firmer Product margins and
the change in revenue mix in favour of Services. The business continued to
invest in productivity improvements, including the standardisation of Managed
Services pricing methodologies, and the extension of Managed Services coverage
across a wider range of technologies. Overheads were contained through an
ongoing focus on delivery efficiencies, and as a result operating profit
improved from $13.3 million to $17.1 million for the period, at an operating
margin of 3.5% (H1 2009: 2.7%).
By line of business, Security, Microsoft Solutions and Data Centre and Storage
all reported strong growth, while Network Integration, Converged Communications
and Customer Interactive Services were lower than the prior period.
Within the region, Germany and the UK reported strong performances. Spain was
weak, and Switzerland recorded some improvement off a low base in the previous
period.
Middle East and Africa (MEA)
Revenue in the MEA business grew by 0.9%, with Services delivering strong
growth of 14.3% and Product down by 11.8%. Managed Services growth of 26.1% was
particularly pleasing. Gross margin improved by 1.8%, mainly as a result of the
improved mix. Operating profit grew by 18.0% with operating margin improving to
7.3% from 6.3% in H1 2009.
In the South African business, performance was supported by excellent growth in
Managed Services, with some important contracts wins during the period. Good
growth was recorded by the Microsoft Solutions, Data Centre and Storage and
Security lines of business, as well as by Dimension Data Advanced
Infrastructure. Growth was supported by good demand from service providers.
The Group`s Emerging Africa operations reported a good increase in operating
profit, despite political instability in some of its key territories, as well
as heightened caution in IT project decision making for the period. This good
result reflects increasing traction in the region for the Group`s services
offerings. The Group remains well positioned to benefit from pan-African
opportunities flowing from an anticipated return to growth across the
continent. During the period, we acquired a 51% stake in Telcom Morocco, a
company providing services to the telecommunications infrastructure industry.
The Middle East operations experienced a very difficult period, as volumes
declined in response to the global financial crisis. We expect a return to more
stable trading conditions in the second half.
The Group`s South African operation maintained its Level 3 broad based black
economic empowerment contributor status, being awarded the distinction of `Top
Empowered ICT Company`. The MEA business also received the `Top ICT Company in
Africa` award at the December 2009 African ICT Achievers Awards.
SI Central
Net costs in SI Central increased from $8.5 million to $9.6 million, mainly as
a result of the stronger Rand against the US Dollar for the period. The Group
provides a number of functions centrally in support of the SI business.
This segment also includes certain SI businesses which are managed centrally
rather than within the regional theatres. Merchants grew revenue by 23.1%,
reflecting good demand for its outsourced contact centre solutions in South
Africa (despite the strength of the Rand), as well as for its consulting
services in the UK. Furthermore, the business has seen solid growth in IT
managed services, leveraging its hosted technology platform in the UK.
Dimension Data Advanced Infrastructure (UK) reported a weak trading
performance, reflecting difficult conditions in the UK construction industry,
and Teksys (the Microsoft reseller business) delivered results ahead of
expectations.
Internet Solutions (IS)
IS grew revenue by 10.0%, with good growth in the Communications, Data Centre
and Carrier business units being offset by slower growth in Connectivity.
Overall, gross margins were maintained at similar levels to the prior period.
EBITDA grew by 10.4% to $34.2 million and operating profit by 11.7% to $18.8
million. Operating margin expanded to 12.0% (H1 2009: 11.2%). The business`
return on net operating assets* reduced to 26.6% (H1 2009: 31.2%) partly as
a result of the investment in undersea cable capacity during the period which
is only due to come on-stream in 2011.
IS continues to experience strong demand for its data centre and hosting
solutions and has committed to invest approximately $35 million to increase the
capacity of its data centres in Johannesburg and Cape Town, of which some $4
million was spent in H1 2010.
Taking advantage of its investment last year in undersea fibre optic cable on
the east coast of Africa (Seacom), IS installed its first direct fibre optic
connections to clients in Tanzania, Kenya, Mozambique and Uganda. The business
also invested $10.9 million in the West Africa Cable System, although this
undersea cable capacity is only scheduled to come on-stream in 2011. In
addition to the undersea systems, IS has started to put direct fibre
connections into customers in the Johannesburg and Cape Town Metropolitan
areas, augmenting the earlier moves in Durban.
Plessey
Trading conditions for Plessey continued to be very demanding, and revenues for
the half declined by 51.4%. Plessey`s South African operations (mainly fibre
deployment services) recorded single digit growth, but the African operations
saw sharp declines in demand, especially in respect of site build opportunities
for mobile service providers.
Despite cost reduction initiatives, including retrenchments mainly in the
African operations, Plessey recorded an operating loss of $0.6 million compared
to an operating profit of $6.7 million the previous period.
Looking forward, there remain significant opportunities for Plessey in the
deployment of fibre optic and wireless services, both in South Africa and
throughout the continent, with the expanding undersea cable capacity fuelling
opportunities in the fibre and wireless markets. This development will be
supported by legislative changes designed to increase connectivity in support
of economic growth targets.
While the long term trends for mobile service provision on the African
continent remain robust, particularly in view of increasing demand for data
services, the site build market remains constrained. Furthermore, capital
investment decisions were delayed as a result of corporate acquisition activity
affecting some of our key clients during the period.
Express Data
Express Data`s revenue declined by 13.8%, mainly due to product pricing
pressures caused by the strong Australian and New Zealand currencies during
the period, which resulted in selling price declines across most vendor lines.
Further difficulties were experienced as a result of supply constraints
experienced by some of our vendors during the period.
Gross margin improved to 14.4% from 13.3% in H1 2009 due to an improved mix of
higher margin product lines and a continuing focus on higher complexity, value
oriented solution sales. This combined with a focus on cost containment
resulted in operating profit of $7.8 million at an operating margin of 3.0% (on
gross revenue) for the period (H1 2009: 3.1%), down 17.1% on the prior period.
The business remains well positioned in the Australian and New Zealand markets,
and should benefit from any overall return to growth in the second half.
* Return on net operating assets is calculated by dividing operating profit by
operating assets less operating liabilities, as reported in local currency
Property
The Campus property in Johannesburg recorded net rental income of $8.7 million,
a 7.7% increase over the prior period. Occupancy ratios were good, although the
rental market remains under pressure, with rental rates broadly flat for the
period.
Group Holdings
Group Holdings costs increased from $4.0 million to $7.8 million. This was
partly the result of the stronger Rand during the period, but also reflected
some volatility arising from the revaluation of expenses associated with the
Group`s share incentive scheme.
Share of results of associates
The share of results of associates was $5.7 million (H1 2009: $3.7 million).
The biggest contributions came from Britehouse, a portfolio of business
automation companies offering process, application and data solutions ($1.9
million), Marpless, which provides application solutions to the South African
public sector ($1.2 million), and Tsys, a contact centre joint venture in the
UK ($1.7 million).
Interest, investment income and finance costs
Interest and investment income was $6.1 million (H1 2009: $7.9 million)
reflecting low average yields on cash balances for the period.
Total finance costs were $16.7 million (H1 2009: $14.4 million), of which $11.7
million (H1 2009: $10.4 million) related to loans in respect of the Campus
property in Johannesburg.
Property revaluation and other gains and losses
Property revaluation and other gains and losses include a $3.0 million (H1
2009: $2.2 million) gain on revaluation of the investment portion of the Campus
property in Johannesburg, based on the Directors` assessment of fair value at
31 March 2010.
Also included is a loss of $1.3 million relating to the impairment of goodwill
in respect of the Group`s subsidiary in the United Arab Emirates.
Income tax
The Group`s tax charge for the period was $29.5 million, an effective tax rate
on profit before tax of 28.2%. The tax rate before exceptional items was lower
than the prior period`s 28.9% mainly as a result of the improved contribution
from the US, where the Group has substantial accumulated assessed losses.
Minority interests
The minority interest in the result for the period was $3.2 million (H1 2009:
$5.6 million) relating mainly to minority participations in the Middle East and
Africa business, the most significant of which is the Black Economic
Empowerment consortium in South Africa.
Acquisitions
The Group concluded two acquisitions during the period, neither of which was
material: a 51% interest in a Moroccan systems integrator and a 51% interest in
Always on Broadband, South Africa`s leading wi-fi provider with over 700
internet access hotspots across South Africa and Africa. The Group acquired a
51% interest in Magenta, a Chilean network integrator, after period end.
Balance Sheet and Cash Flow
The Group`s balance sheet remained strong throughout the period, with equity
attributable to equity shareholders of $858.8 million at 31 March 2010.
Cash (net of overdrafts) was $493.2 million compared to total interest bearing
liabilities (bank loans, finance leases and other) of $212.3 million and non
interest bearing liabilities of $47.7 million, reflecting a healthy net cash
position at period end.
Of the interest bearing liabilities, $141.1 million is secured against the
Campus property in Johannesburg, and most of the remaining non interest bearing
liabilities are in respect of assets acquired in support of multi-year managed
services contracts.
Cash generated from operations was $54.0 million (H1 2009: $24.4 million), net
of $85.2 million net investment in working capital (H1 2009 $106.9 million).
The investment in working capital is a normal seasonal pattern. Overall,
working capital metrics were satisfactory: trade receivables days were stable
in relation to those reported at 30 September 2009 of 51 days, despite some
pressure on terms in Middle East and Africa and in Asia. Inventory days picked
up slightly from 25 to 27 days, offset by an improvement in trade payables from
77 to 78 days.
Additions to Property, Plant and Equipment and Intangibles (Capex)
Systems
Total Integration
$ million
31 March 2010
Capex * 42.6 8.7
Depreciation/Amortisation 29.0 11.4
31 March 2009
Capex * 28.4 11.7
Depreciation/Amortisation 25.3 12.6
Internet
Solutions Other
$ million
31 March 2010
Capex * 29.3 4.6
Depreciation/Amortisation 15.4 2.2
31 March 2009
Capex * 14.2 2.5
Depreciation/Amortisation 11.1 1.6
* Actual cash flows net of proceeds on disposal amounted to $40.4 million (H1
2009: $26.6 million)
Capex was $42.6 million for the period (H1 2009 $28.4 million). The SI business
invested $8.7 million, while IS capex increased from $14.2 million to $29.3
million.
IS spent $4.0 million on the commencement of a $35 million upgrade of its data
centres in Johannesburg and Cape Town, which project is due for completion
during the current financial year.
In addition, IS invested $10.9 million in the West African Cable System (WACS)
consortium, extending the business`s access to international undersea cable
capacity. WACS is due to come on-stream in FY 2011.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group have not changed from
those set out in detail in the Group`s 2009 Annual Report on pages 36 to 37,
and include: macroeconomic risk; exposure to country risk;
vendor risk; deal complexity risk; regulatory risk; employee retention risk;
business continuity risk, and balance sheet risk.
A copy of the Group`s 2009 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.
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
11 May 2010
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 2010 which comprises the condensed consolidated income statement, the
condensed consolidated statement of other comprehensive income, 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 2010 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
London, United Kingdom
11 May 2010
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 March 2010
Six months
ended
31 March 2010
Notes $`000
Revenue 2 2,165,621
Cost of sales (1,674,618)
Gross profit 491,003
Administrative, selling and distribution
expenses (383,534)
Operating profit 107,469
Share of results of associates 5,714
Interest and investment income 6,080
Finance costs (16,700)
Property revaluation and other gains and
losses 4 1,804
Profit before tax 104,367
Tax 5 (29,454)
Profit for the period 74,913
Attributable to:
- Equity shareholders of the parent 71,710
- Minority shareholders 3,203
74,913
Earnings per ordinary share: US cents
- Basic 7 4.2
- Diluted 7 4.0
Six months Year ended
ended 30 September
31 March 2009 2009
$`000 $`000
Revenue 1,950,108 3,973,078
Cost of sales (1,525,589) (3,080,257)
Gross profit 424,519 892,821
Administrative, selling and distribution
expenses (337,055) (699,928)
Operating profit 87,464 192,893
Share of results of associates 3,656 7,814
Interest and investment income 7,856 8,105
Finance costs (14,420) (29,915)
Property revaluation and other gains and
losses 2,681 4,895
Profit before tax 87,237 183,792
Tax (15,630) (38,422)
Profit for the period 71,607 145,370
Attributable to:
- Equity shareholders of the parent 65,997 135,175
- Minority shareholders 5,610 10,195
71,607 145,370
Earnings per ordinary share: US cents US cents
- Basic 3.9 8.0
- Diluted 3.8 7.7
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the six months ended 31 March 2010
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2010 2009 2009
$`000 $`000 $`000
Profit for the period 74,913 71,607 145,370
Losses in cash flow hedges
deferred in equity - (783) (5,378)
Hedging losses capitalised to
intangible assets - - 2,856
Transfers from/(to) the income
statement: cash flow hedges 2,938 (263) (289)
Other transfers (to)/from the
income statement (177) 1,261 -
Exchange differences on
translation of foreign operations (10,463) (55,930) 31,691
Other 6 1,517 982
Other comprehensive
(loss)/income for the period (7,696) (54,198) 29,862
Total comprehensive income for
the period 67,217 17,409 175,232
Attributable to:
- Equity shareholders of the parent 64,002 13,587 166,361
- Minority shareholders 3,215 3,822 8,871
67,217 17,409 175,232
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 March 2010
31 March
2010
Notes $`000
Non-current assets
Property, plant and equipment 190,944
Investment property 99,591
Goodwill 318,428
Other intangible assets 62,163
Investments in associates 45,998
Other investments 4,180
Deferred tax assets 38,925
Trade and other receivables 8 49,283
809,512
Current assets
Inventories 192,400
Trade and other receivables 8 1,076,301
Cash and cash equivalents 495,086
1,763,787
TOTAL ASSETS 2,573,299
Equity
Equity attributable to equity shareholders of the parent
858,803
Minority interest 61,274
Total equity 920,077
Non-current liabilities
Bank loans 145,631
Other long term liabilities 57,215
Obligations under finance leases 15,708
Deferred tax liabilities 787
Provisions 5,710
225,051
Current liabilities
Trade and other payables 9 1,415,955
Bank loans 5,100
Bank overdrafts 1,891
Provisions 5,225
1,428,171
Total liabilities 1,653,222
TOTAL EQUITY AND LIABILITIES 2,573,299
31 March 30 September
2009 2009
$`000 $`000
Non-current assets
Property, plant and equipment 147,728 190,231
Investment property 71,232 95,911
Goodwill 273,907 291,500
Other intangible assets 18,516 48,102
Investments in associates 31,303 42,509
Other investments 4,055 4,133
Deferred tax assets 37,340 47,730
Trade and other receivables 34,359 47,571
618,440 767,687
Current assets
Inventories 160,572 169,013
Trade and other receivables 924,572 1,024,434
Cash and cash equivalents 345,397 601,129
1,430,541 1,794,576
TOTAL ASSETS 2,048,981 2,562,263
Equity
Equity attributable to equity shareholders of
the parent
693,165 849,594
Minority interest 38,704 56,653
Total equity 731,869 906,247
Non-current liabilities
Bank loans 120,525 140,553
Other long term liabilities 37,124 45,571
Obligations under finance leases 12,624 14,099
Deferred tax liabilities 3,717 1,021
Provisions 5,944 6,678
179,934 207,922
Current liabilities
Trade and other payables 1,106,170 1,417,224
Bank loans 20,640 23,321
Bank overdrafts 1,104 1,313
Provisions 9,264 6,236
1,137,178 1,448,094
Total liabilities 1,317,112 1,656,016
TOTAL EQUITY AND LIABILITIES 2,048,981 2,562,263
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Total Retained
capital and other earnings
premium reserves*
$`000 $`000 $`000
Balance at 1 October 2008 304,790 222,884 182,527
Profit for the period - - 65,997
Other comprehensive
(loss)/income for the period - (54,565) 2,155
Total comprehensive
(loss)/income for the period
- (54,565) 68,152
Issue of share capital 268 - -
Dividends - - (27,953)
Shares held in Employee
Trust 34,221 - -
Share incentive schemes - 11,164 -
Deferred tax on share
incentive schemes - (2,695) -
Share option reserve utilised - (14,421) (31,207)
Changes in holdings of subsidiaries - - -
Balance at 31 March 2009 339,279 162,367 191,519
Attributable to Minority Total
equity holders interests equity
of parent
$`000 $`000 $`000
Balance at 1 October 2008 710,201 138,211 848,412
Profit for the period 65,997 5,610 71,607
Other comprehensive
(loss)/income for the period (52,410) (1,788) (54,198)
Total comprehensive
(loss)/income for the period
13,587 3,822 17,409
Issue of share capital 268 - 268
Dividends (27,953) (93) (28,046)
Shares held in Employee
Trust 34,221 - 34,221
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)
Changes in holdings of subsidiaries - (103,236) (103,236)
Balance at 31 March 2009 693,165 38,704 731,869
Share Total Retained
capital other earnings
and reserves*
premium
$`000 $`000 $`000
Balance at 1 October 2008 304,790 222,884 182,527
Profit for the period - - 135,175
Other comprehensive
income/(loss) for the period - 29,519 1,667
Total comprehensive income
for the period - 29,519 136,842
Issue of share capital 2,040 - -
Dividends - - (28,505)
Shares held in Employee
Trust 30,112 - -
Share incentive schemes - 17,451 -
Deferred tax on share
incentive schemes - 5,646 3,195
Share option reserve utilised - (16,034) (32,865)
Changes in holdings of subsidiaries - (8,008) -
Balance at 30 September 2009 336,942 251,458 261,194
Attributable to Minority Total
equity holders interests equity
of parent
$`000 $`000 $`000
Balance at 1 October 2008 710,201 138,211 848,412
Profit for the period 135,175 10,195 145,370
Other comprehensive
income/(loss) for the period 31,186 (1,324) 29,862
Total comprehensive income
for the period 166,361 8,871 175,232
Issue of share capital 2,040 - 2,040
Dividends (28,505) (159) (28,664)
Shares held in Employee
Trust 30,112 - 30,112
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)
Changes in holdings of subsidiaries (8,008) (90,270) (98,278)
Balance at 30 September 2009 849,594 56,653 906,247
Share Total Retained
capital and other earnings
premium reserves*
$`000 $`000 $`000
Balance at 1 October 2009 336,942 251,458 261,194
Profit for the period - - 71,710
Other comprehensive loss
for the period - (5,304) (2,404)
Total comprehensive
(loss)/income for the period - (5,304) 69,306
Issue of share capital 5,309 - -
Dividends - - (32,209)
Shares held in Employee
Trust 7,167 - -
Share incentive schemes - 17,560 -
Deferred tax on share
incentive schemes - (4,310) -
Share option reserve utilised - (16,215) (30,378)
Changes in holdings of subsidiaries - (1,792) 75
Balance at 31 March 2010 349,418 241,397 267,988
Attributable to Minority Total
equity holders interests equity
of parent
$`000 $`000 $`000
Balance at 1 October 2009 849,594 56,653 906,247
Profit for the period 71,710 3,203 74,913
Other comprehensive loss for the period (7,708) 12 (7,696)
Total comprehensive
(loss)/income for the period 64,002 3,215 67,217
Issue of share capital 5,309 - 5,309
Dividends (32,209) (300) (32,509)
Shares held in Employee
Trust 7,167 - 7,167
Share incentive schemes 17,560 - 17,560
Deferred tax on share
incentive schemes (4,310) - (4,310)
Share option reserve utilised (46,593) - (46,593)
Changes in holdings of subsidiaries (1,717) 1,706 (11)
Balance at 31 March 2010 858,803 61,274 920,077
* 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.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2010
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2009
2010 2009
$`000 $`000 $`000
Cash flows from operating
activities
Operating profit 107,469 87,464 192,893
Adjustments for:
Depreciation and amortisation 29,002 26,645 52,927
Movement in provisions (126) 1,404 536
Share-based payment expensed 10,967 8,348 20,052
Other non-cash items (8,165) 7,438 7,179
Operating cash flows before
movements in working capital 139,147 131,299 273,587
(Increase)/decrease in
inventories (23,928) 6,028 18,875
(Increase)/decrease in trade and
other receivables (57,863) 50,809 46,915
Decrease in trade and other
payables (3,396) (163,777) (20,328)
Cash generated from operations 53,960 24,359 319,049
Income taxes paid (22,842) (17,111) (47,957)
Interest paid (15,405) (13,157) (28,977)
Net cash from/(used in)
operating activities 15,713 (5,909) 242,115
Cash flows from investing
activities
Interest received 6,080 7,856 8,105
Net investment in business
interests and other investments (3,885) (287,539) (278,994)
Acquisition of property, plant
and equipment, net of
proceeds on disposal (24,362) (22,973) (49,269)
Acquisition of intangibles, net
of proceeds on disposal (16,005) (3,657) (23,677)
Deferred consideration paid - (1,176) (1,488)
Net cash used in investing
activities (38,172) (307,489) (345,323)
Cash flows from financing
activities
Shares purchased by Employee
Share Trust, net of
proceeds of sale of shares (39,859) (12,576) (14,850)
Repayment of borrowings (38,028) (9,492) (21,564)
New bank loans and finance leases 25,099 41,940 60,943
Dividends paid to ordinary
shareholders (32,209) (27,953) (28,505)
Dividends paid to minorities (300) (93) (159)
Proceeds on issue of new shares
net of expenses 5,309 268 2,040
Share options exercised by
employees of a subsidiary (2,933) - (2,961)
company
Net cash used in financing
activities (82,921) (7,906) (5,056)
Net movement in cash and cash
equivalents (105,380) (321,304) (108,264)
Cash and cash equivalents at
beginning of period 599,816 682,353 682,353
Exchange differences on cash and
cash equivalents (1,241) (16,756) 25,727
Cash and cash equivalents at end
of period 493,195 344,293 599,816
Cash and cash equivalents is
made up as follows:
Cash and cash equivalents 495,086 345,397 601,129
Bank overdrafts (1,891) (1,104) (1,313)
493,195 344,293 599,816
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 March 2010
1. BASIS OF PREPARATION
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, including IAS 34 `Interim
Financial Reporting` and the requirements of the Disclosure and Transparency
Rules (DTR) of the Financial Services Authority (FSA) in the United Kingdom as
applicable to interim financial reporting.
The unaudited interim condensed consolidated financial statements for the six
months ended 31 March 2010, which were approved by the Board of Directors on 11
May 2010 and which include certain comparative information with respect to the
year ended 30 September 2009, 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 2009, 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.
Key accounting estimates and judgements
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 tax charge on underlying business performance is calculated by reference to
the estimated effective tax rate for each jurisdiction for the full year 2010.
Tax on disposals and exceptional items is based on the expected tax impact of
each item.
Accounting policies
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 2009, with the exception of the adoption of the
following significant amendments and standards with effect from 1 October 2009:
IAS 1 `Presentation of financial statements`
IFRS 3 `Business combinations`
IAS 27 `Consolidated and Separate Financial Statements`
IFRS 8 `Operating segments`
IAS 1 (revised) `Presentation of financial statements` requires non-owner
changes in equity (income and expenses) to be presented separately from owner
changes in equity within a performance statement. The Group has chosen to
present two performance statements, the consolidated income statement and the
consolidated statement of other comprehensive income. The statement of changes
in equity has been included as a primary statement and presents all owner
changes in equity.
The most significant changes in the revised `IFRS 3 Business Combinations`
include the requirement that costs incurred to effect a business combination
are expensed in the period incurred. Previously these costs were capitalised as
part of the transaction. In addition, consideration for an acquisition,
including contingent consideration, is measured at fair value at the
acquisition date. Changes resulting from events after the acquisition date,
such as the acquiree meeting an earnings target or reaching a specified share
price, are recognised in profit or loss. As a result all costs associated with
acquisitions made by the Group in the period have been expensed and the fair
value of the consideration including deferred consideration for those
acquisitions was determined at the acquisition date.
Changes in the revised `IAS 27 Consolidated and Separate Financial Statements`
include the express requirement that changes in a parent`s ownership interest
in a subsidiary that do not result in the loss of control must be accounted for
as equity transactions. This was previously unspecified. In addition the
minority share of comprehensive income should now be attributed to minority
interests even if this results in the minority interests having a deficit
balance. As a result, the Group now accounts for changes in ownership in
subsidiaries as equity transactions and all losses will be attributed to
minorities if applicable.
IFRS 8 `Operating segments` replaces IAS 14 `Segmental reporting` and requires
operating segments to be identified on the basis of internal management
information that is regularly reviewed by the chief operating decision maker to
allocate resources to the segments and assess their performance. As a result of
the application of IFRS 8, the Group`s segmental information has been presented
as discussed in Note 2 and comparative information has been restated
accordingly.
Pages 76 and 77 of the annual report for the year ended 30 September 2009
detailed a number of other amendments to Accounting Standards and
Interpretations. These were adopted in the current period but had no impact on
the results or balance sheets for the periods presented.
Trading cycles
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.
Going concern
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 interim financial statements.
Exchange rates
The following table reflects the average and period end exchange rates against
the US dollar for Australian dollar, Euro, South African rand and Sterling:
Six months ended Six months ended
31 March 2010 31 March 2009
Average Period end Average Period end
Australian dollar 1.112 1.092 1.489 1.456
Euro 0.705 0.744 0.760 0.750
South African rand 7.580 7.343 9.743 9.526
Sterling 0.633 0.662 0.677 0.697
Year ended
30 September 2009
Average Period end
Australian dollar 1.382 1.136
Euro 0.735 0.682
South African rand 8.828 7.388
Sterling 0.647 0.621
2. SEGMENTAL ANALYSIS
The Group has adopted IFRS 8 `Operating segments` with effect from 1 October
2009. IFRS 8 requires operating segments to be identified on the basis of how
the internal management system reports information to the chief operating
decision maker. The Group is focused on various businesses, including Systems
Integration and various non Systems Integration businesses, including
Telecommunications (Plessey and Internet Solutions), Distribution (Express
Data), Property (the Campus property in South Africa) and Group Holdings. These
businesses form the basis for the Group`s reportable segments. These reportable
segments are designed to allocate resources internally and assess performance.
Segment revenue and results
Six months ended Six months ended
31 March 2010 31 March 2009
Revenue Operating Revenue Operating
profit/(loss) profit/(loss)
$`000 $`000 $`000 $`000
Systems
Integration
- Americas 287,719 8,983 260,930 2,299
- Asia 344,445 24,364 314,189 25,928
- Australia 282,119 16,599 230,814 11,006
- Europe 494,712 17,137 497,605 13,257
- Middle East
and Africa 315,469 23,103 257,133 16,258
- SI Central 47,531 (9,609) 32,744 (8,506)
Total Systems
Integration 1,771,995 80,577 1,593,415 60,242
Internet
Solutions 156,366 18,774 112,541 12,573
Plessey 54,920 (601) 87,902 6,732
Express Data 182,129 7,758 156,108 6,967
Property - 8,728 - 4,971
Group Holdings 211 (7,767) 142 (4,021)
Segment revenue
and results 2,165,621 107,469 1,950,108 87,464
Share of
results of
associates 5,714 3,656
Interest and
investment income 6,080 7,856
Finance costs (16,700) (14,420)
Property
revaluation and
other gains and losses 1,804 2,681
Profit before tax 104,367 87,237
Tax (29,454) (15,630)
Profit for the period 74,913 71,607
Year ended 30 September
2009
Revenue Operating
profit/(loss)
$`000 $`000
Systems Integration
- Americas 528,177 5,473
- Asia 605,630 52,984
- Australia 499,667 23,139
- Europe 956,238 29,764
- Middle East and Africa 527,836 33,348
- SI Central 85,029 (20,601)
Total Systems Integration 3,202,577 124,107
Internet Solutions 255,015 32,923
Plessey 168,396 14,039
Express Data 346,391 16,345
Property - 13,764
Group Holdings 699 (8,285)
Segment revenue and results 3,973,078 192,893
Share of results of associates 7,814
Interest and investment income 8,105
Finance costs (29,915)
Property revaluation and other
gains and losses 4,895
Profit before tax 183,792
Tax (38,422)
Profit for the period 145,370
Revenue streams
Six months ended Six months ended Year ended
31 March 2010 31 March 2009 30 September 2009
$`000 $`000 $`000
Product 1,205,998 1,134,041 2,239,372
Services 959,623 816,067 1,733,706
Revenue 2,165,621 1,950,108 3,973,078
Segment operating assets
31 March 2010 31 March 2009 30 September 2009
$`000 $`000 $`000
Systems
Integration
- Americas 176,335 127,176 159,778
- Asia 240,892 189,116 189,817
- Australia 126,739 85,810 118,488
- Europe 295,804 323,635 318,616
- Middle East
and Africa 194,480 133,242 167,123
- SI Central 42,346 32,776 42,688
Total Systems
Integration 1,076,596 891,755 996,510
Internet
Solutions 183,927 108,276 166,901
Plessey 41,584 70,372 60,212
Express Data 108,580 89,442 89,483
Property 167,410 126,217 169,396
Group Holdings 48,395 35,807 58,793
Segment operating
assets 1,626,492 1,321,869 1,541,295
Other
unallocated
assets
Goodwill 318,428 273,907 291,500
Investments in
associates 45,998 31,303 42,509
Deferred tax
assets 38,925 37,340 47,730
Income tax
assets 36,822 28,898 26,617
Finance lease
receivables 11,548 10,267 11,483
Cash and cash
equivalents 495,086 345,397 601,129
Total Assets 2,573,299 2,048,981 2,562,263
Segment operating assets include property, plant and equipment, investment
property, other intangible assets, other investments, inventories and trade and
other receivables (excluding finance lease receivables).
3. EXCEPTIONAL ITEMS
Note Six months ended
31 March 2010
$`000
Exceptional operating costs
Campus finance restructure (a) -
Total exceptional operating costs -
Exceptional tax
Deferred tax credit (a) -
Total exceptional tax -
Exceptional items after tax
Minorities` share -
Net exceptional income -
Six months ended Year
31 March 2009 ended
30 September 2009
$`000 $`000
Exceptional operating costs
Campus finance restructure (1,334) (1,472)
Total exceptional operating costs (1,334) (1,472)
Exceptional tax
Deferred tax credit 9,946 10,976
Total exceptional tax 9,946 10,976
Exceptional items after tax 8,612 9,504
Minorities` share (1,354) (1,647)
Net exceptional income 7,258 7,857
(a) Campus restructuring costs and related once off tax deduction.
Reconciliation of
reported amounts to Six months Six months Year
adjusted amounts ended ended ended
31 March 2010 31 March 2009 30 September 2009
$`000 $`000 $`000
Statutory operating
profit 107,469 87,464 192,893
- Exceptional
operating costs - 1,334 1,472
Adjusted operating profit 107,469 88,798 194,365
Statutory attributable
profit after tax 71,710 65,997 135,175
- Exceptional
operating costs - 1,334 1,472
- Exceptional tax credits - (9,946) (10,976)
- Minorities` share - 1,354 1,647
Adjusted attributable
profit after tax 71,710 58,739 127,318
4. PROPERTY REVALUATION AND OTHER GAINS AND LOSSES
Six months
ended
31 March 2010
$`000
Revaluation of investment property 2,996
Goodwill impairment (a) (1,254)
Profit on sale of subsidiaries and
investments -
Other 62
1,804
Six months Year
ended ended
31 March 2009 30 September 2009
$`000 $`000
Revaluation of investment property 2,181 4,535
Goodwill impairment - -
Profit on sale of subsidiaries and
investments - 174
Other 500 186
2,681 4,895
(a) The goodwill impairment of $1.3 million relates to the Middle East Systems
Integration business.
5. TAX
Six months ended Six months ended Year
31 March 2010 31 March 2009 ended
30 September 2009
$`000 $`000 $`000
Current tax 22,385 24,234 41,207
Deferred tax -
current period 7,051 (8,597) (614)
Deferred tax -
prior periods 18 (7) (2,171)
Total tax
expense 29,454 15,630 38,422
This expense relates predominantly to tax jurisdictions outside of the United
Kingdom.
6. DIVIDENDS PER SHARE
A final dividend of 1.9 US cents per share was paid on 19 March 2010. No
interim dividend is proposed.
7. EARNINGS PER SHARE
Six months ended Six months ended Year
31 March 2010 31 March 2009 ended
30 September 2009
`000 `000 `000
Weighted
average number
of ordinary shares:
- for basic
earnings per share 1,694,127 1,679,316 1,683,829
- for diluted
earnings per share 1,803,936 1,725,566 1,758,284
$`000 $`000 $`000
Earnings for basic and
diluted earnings per
share 71,710 65,997 135,175
Exceptional items - (7,258) (7,857)
Adjusted
earnings 71,710 58,739 127,318
US cents US cents US cents
Basic earnings per share 4.2 3.9 8.0
Diluted earnings per share 4.0 3.8 7.7
Adjusted basic earnings per
share 4.2 3.5 7.6
Adjusted diluted
earnings per share 4.0 3.4 7.2
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 3/2009
issued by the South African Institute of Chartered Accountants.
Six months Six months ended Year
ended 31 March 2009 ended
31 March 2010 30 September 2009
`000 `000 `000
Weighted average
number of ordinary shares:
- for headline
earnings per share 1,694,127 1,679,316 1,683,829
- for diluted
headline earnings
per share 1,803,936 1,725,566 1,758,284
$`000 $`000 $`000
Earnings for basic
and diluted earnings
per share 71,710 65,997 135,175
Net (profit)/loss
on disposal of
property, plant
and equipment (18) 1,308 416
Impairments and
losses on disposal
of subsidiaries 974 14 323
Revaluation of
investment property (2,996) (2,181) (4,535)
Tax and minority
interests 1,228 857 1,793
Headline earnings 70,898 65,995 133,172
US cents US cents US cents
Headline earnings
per share 4.2 3.9 7.9
Diluted headline
earnings per share 3.9 3.8 7.6
8. TRADE AND OTHER RECEIVABLES
31 March 2010 31 March 2009 30 September 2009
$`000 $`000 $`000
Trade receivables 784,607 675,019 760,827
Other receivables 80,155 60,735 70,318
Prepayments and
accrued income 224,000 194,279 214,243
Taxation authorities 36,822 28,898 26,617
1,125,584 958,931 1,072,005
Analysed as follows:
Long term portion 49,283 34,359 47,571
Short term portion 1,076,301 924,572 1,024,434
1,125,584 958,931 1,072,005
9. TRADE AND OTHER PAYABLES
31 March 2010 31 March 2009 30 September 2009
$`000 $`000 $`000
Trade payables 514,307 368,908 483,196
Other payables 192,380 131,476 191,561
Accruals 286,973 227,823 319,561
Deferred income 301,501 257,675 299,833
Taxation authorities 120,794 120,288 123,073
1,415,955 1,106,170 1,417,224
10. ACQUISITIONS, CHANGES IN HOLDINGS AND DISPOSALS
In the six months ended 31 March 2010 the Group purchased 51% in Morocco
Telecom and 51% in Always on Broadband for a total combined consideration of
$5.4 million. The combined contribution to revenue and profit for the six
months was $10.2 million and $1.0 million respectively
The book value of the net assets of $0.9 million approximated fair value at
acquisition date, and the difference between the purchase price and the net
asset value of the entities acquired of $4.5 million has been provisionally
allocated to goodwill, until the Group has completed its review of potential
intangible assets.
In the six months ended 31 March 2010, the Group purchased a further interest
in two Australian subsidiaries, Bluefire and Viiew. The Group holds an
effective interest of 75% and 85% respectively after the acquisitions.
In the six months ended 31 March 2010 there were no disposals of subsidiaries
and businesses.
11. POST BALANCE SHEET EVENTS
In April 2010, the Group acquired a 51% interest in Magenta Computacion S.A., a
Systems Integration business in Santiago, Chile.
12. 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.
13. 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.
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
This interim report is available on the website: www.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.
Date: 12/05/2010 08:00:03 Produced by the JSE SENS Department.
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