| Wed 18 May 2005, 8:44 | | Datatec - Group audited results for the year ended |
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Datatec - Group audited results for the year ended 28 February 2005
Datatec Limited
Registration number 1994/005004/06
Share code: DTC & ISIN: ZAE000017745
(`Datatec`)
Group audited results for the year ended 28 February 2005
- Continuing revenue up 10% to $2.4 billion
- Operating profit improvement of $20.3 million
- Headline earnings per share improves to 4.0 cents from a loss of 6.7 cents
- Net cash at year-end up 58% to $140.3 million
Group income statement
Restated
Audited Audited
year ended year ended
US$ 000`s 28 Feb 05 29 Feb 04
Revenue 2 537 963 2 346 948
Continuing operations 2 434 509 2 223 237
Acquisitions 90 260 -
Ongoing operations 2 524 769 2 223 237
Discontinuing operations 13 194 123 711
Cost of sales (2 271 709) (2 071 528)
Gross margin 266 254 275 420
Operating costs (241 390) (251 632)
Operating profit before finance costs,
depreciation and amortisation (`EBITDA`) 24 864 23 788
Ongoing operations 28 917 19 698
Discontinuing operations (4 053) 4 090
Depreciation and other amortisation (14 399) (22 727)
Operating profit before goodwill impairment
and other income 10 465 1 061
Goodwill impairment (3 315) (14 361)
Other income - 81
Operating profit/(loss) 7 150 (13 219)
Profit/(Loss) on disposal and closure
of discontinued operations 50 707 (2 883)
Interest received 5 001 5 150
Finance costs (8 832) (9 570)
Profit/(Loss) before taxation 54 026 (20 522)
Taxation (1 661) (5 861)
Profit/(Loss) after taxation 52 365 (26 383)
Profit attributable to outside shareholders (107) (229)
Attributable profit/(loss) 52 258 (26 612)
KEY RATIOS
Gross margin % 10,5 11,7
EBITDA on ongoing operations (%) 1,1 0,8
Effective tax rate before exceptional items
and goodwill (%) 25,0 173,9
Exchange rates
Average Rand/US$ exchange rate 6,2:1 7,2:1
Closing Rand/US$ exchange rate 5,8:1 6,6:1
SALIENT FINANCIAL FEATURES
Headline profit/(loss) 5 459 (9 213)
Number of shares (millions)
Issued 138 138
Weighted average 138 138
Diluted weighted average 141 140
Profit/(Loss) per share (cents)
HEPS 3,95 (6,69)
Diluted HEPS 3,88 (6,69)
EPS 37,84 (19,32)
Diluted EPS 37,18 (19,32)
Net asset value per share (cents) 298 249
Net tangible asset value per share (cents) 230 204
Group balance sheet
Restated
Audited Audited
US$ 000`s 28 Feb 05 29 Feb 04
ASSETS
Non-current assets 138 608 118 028
Property, plant and equipment 20 251 27 726
Capitalised development expenditure 12 506 11 769
Goodwill 81 925 52 024
Other intangible assets 1 842 -
Investments - 920
Deferred tax assets 22 084 25 589
Current assets 841 778 860 956
Inventories 205 771 247 045
Receivables 417 461 428 810
Cash and cash equivalents 218 546 185 101
Total assets 980 386 978 984
EQUITY AND LIABILITIES
Ordinary shareholders` funds 412 227 344 283
Outside shareholders` interest 24 089 19 276
Total shareholders` funds 436 316 363 559
Long-term liabilities 1 450 3 656
Deferred tax liabilities 2 500 3 987
Current liabilities 540 120 607 782
Payables and provisions 446 949 497 342
Amounts owing to vendors 3 048 438
Taxation 11 847 13 604
Bank overdrafts 78 276 96 398
Total equity and liabilities 980 386 978 984
Capital expenditure incurred in current year 10 009 9 809
Capital commitments at end of year 10 198 9 267
Lease commitments at end of year 109 286 127 196
Payable within one year 17 234 22 355
Payable after one year 92 052 104 841
Abridged group cash flow statement
Restated
Audited Audited
year ended year ended
US$ 000`s 28 Feb 05 29 Feb 04
EBITDA 24 864 23 788
Loss on disposal of property,
plant and equipment 595 352
Non-cash items 12 498 5 833
Cash generated before working capital changes 37 957 29 973
Working capital changes (9 114) (58 995)
Decrease/(Increase) in inventories 41 439 (41 457)
Decrease/(Increase) in receivables 21 950 (84 494)
(Decrease)/Increase in payables (72 503) 66 956
Cash generated/(utilised) from operations 28 843 (29 022)
Net finance costs paid (3 831) (4 420)
Taxation (paid)/refunded (5 473) 1 494
Net cash inflow/(outflow) from
operating activities 19 539 (31 948)
Net cash outflow from investing activities (41 332) (8 243)
Net cash inflow from disposal of operations
and investments 65 801 4 878
Net cash inflow/(outflow) from
financing activities 1 067 (12 213)
Increase/(Decrease) in cash
and cash equivalents 45 075 (47 526)
Translation difference on
opening cash position 6 492 20 625
Cash and cash equivalents
at beginning of year 88 703 115 604
Cash and cash equivalents
at end of year (*) 140 270 88 703
(*) Comprises cash resources, net of bank overdrafts and trade finance
advances.
Segmental analysis
Restated
Audited Audited
year ended year ended
US$ 000`s 28 Feb 05 29 Feb 04
Revenue
Westcon 2 055 015 1 840 500
Logicalis 340 875 259 176
Analysys Mason group 52 058 27 352
Other Holdings 76 821 96 209
Revenue from ongoing operations 2 524 769 2 223 237
Discontinuing operations 13 194 123 711
2 537 963 2 346 948
EBITDA
Westcon 25 043 36 171
Logicalis 9 770 (766)
Analysys Mason group 3 340 (723)
Other Holdings (3 634) (8 257)
Head office foreign exchange losses (5 602) (6 727)
EBITDA from ongoing operations 28 917 19 698
Discontinuing operations (4 053) 4 090
24 864 23 788
Operating profit before
goodwill impairment
and other income
Westcon 15 420 23 781
Logicalis 6 214 (6 147)
Analysys Mason group 3 007 (1 400)
Other Holdings (4 318) (10 330)
Head office foreign exchange losses (5 602) (6727)
Operating profit/(loss)
from ongoing operations 14 721 (823)
Discontinuing operations (4 256) 1 884
10 465 1 061
Total assets
Westcon 724 605 797 771
Logicalis 163 943 124 430
Analysys Mason group 43 027 9 780
Other Holdings 48 811 47 003
980 386 978 984
Determination of headline profit/(loss)
Restated
Audited Audited
year ended year ended
US$ 000`s 28 Feb 05 29 Feb 04
Attributable profit/(loss) per the Group
Income statements 52 258 (26 612)
Headline profit/(loss) adjustments
(net of taxation and outside shareholders):
Goodwill impairment 3 315 14 361
Loss on disposal of property,
plant and equipment 595 209
Profit/(Loss) on disposal and
closure of discontinued
operations (50 709) 2 829
Headline profit/(loss) 5 459 (9 213)
Statement of changes in ordinary shareholders` funds
Restated
Audited Audited
year ended year ended
US$ 000`s 28 Feb 05 29 Feb 04
Balance at beginning of year 344 283 337 886
Attributable profit/(loss) for the year 52 258 (26 612)
Shares issued 574 341
Prior period adjustment - adoption of IAS 39 - (393)
Translation difference on equity loans (2 841) (579)
Tax effect of equity loans movement (315) (245)
Deferred tax on goodwill previously charged
directly to equity - 859
Translation of foreign subsidiaries 18 268 33 026
Balance at end of year 412 227 344 283
Reconciliation between previous SA GAAP and IFRS
Audited year ended 29 Feb 04
US$ 000`s Previous Effect of IFRS
SA GAAP transition
to IFRS
Gross margin 275 420 - 275 420
Operating profit before finance
costs, depreciation
and amortisation 23 788 - 23 788
Operating profit before goodwill
amortisation, impairment
and other income 1 061 - 1 061
Goodwill amortisation (12 091) 12 091 -
Goodwill impairment (14 361) - (14 361)
Other income 81 - 81
Operating profit/(loss) (25 310) 12 091 (13 219)
Profit/(Loss) on disposal
and closure of
discontinued operations (6 438) 3 555 (2 883)
Interest received 5 150 - 5 150
Finance costs (9 570) - (9 570)
Profit/(Loss) before taxation (36 168) 15 646 (20 522)
Taxation (5 336) (525) (5 861)
Profit/(Loss) after taxation (41 504) 15 121 (26 383)
(Loss)/Profit attributable
to outside shareholders 521 (750) (229)
Attributable profit/(loss) (40 983) 14 371 (26 612)
ASSETS
Non-current assets 105 439 12 589 118 028
Property, plant and equipment 27 726 - 27 726
Capitalised development
expenditure 11 769 - 11 769
Goodwill 38 923 13 101 52 024
Investments 920 - 920
Deferred tax assets 26 101 (512) 25 589
Current assets 860 956 - 860 956
Total assets 966 395 12 589 978 984
EQUITY AND LIABILITIES
Ordinary shareholders` funds 332 506 11 777 344 283
Outside shareholders` interest 18 464 812 19 276
Total shareholders` funds 350 970 12 589 363 559
Long-term liabilities 3 656 - 3 656
Deferred tax liabilities 3 987 - 3 987
Current liabilities 607 782 - 607 782
Total equity and liabilities 966 395 12 589 978 984
As a result of adopting IFRS 3, combined with IFRS 1, the following material
adjustments were recorded:
- Goodwill is no longer amortised. No additional impairment losses were
considered necessary.
- As a result of goodwill no longer being amortised, deferred tax on
goodwill that can be claimed for tax purposes was impacted.
- Foreign currency translation reserves have been transferred to
distributable reserves.
- Exceptional items were affected by the reclassification from currency
translation reserve to distributable reserves at the date of transition.
- Minorities were affected by the above adjustments.
There was no change in net equity at the date of adoption of IFRS 1.
COMMENTARY
PROFILE AND GROUP STRUCTURE
Datatec (`the Group`) is an international IT networking and services group
with operations in many of the world`s leading economies. The Group`s main
lines of business comprise the global distribution of advanced networking and
communications convergence products (`Westcon`), IT infrastructure solutions
and network integration (`Logicalis`) and strategic and technical
telecommunications consulting (`Analysys Mason Group`). The Group also has
other interests, which are included with the Group Head Office under Other
Holdings. These interests include Westcon AME (operating in Africa), Online
Distribution (operating in the Middle East) and RangeGate (operating in South
Africa and the United Kingdom).
IFRS REPORTING
This report has been prepared in accordance with the Group`s accounting
policies which fully comply with International Financial Reporting Standards
(`IFRS`). The accounting policies were changed with effect from 1 March 2004
to comply with IFRS. The transition to IFRS is accounted for in accordance
with IFRS 1 (First-time Adoption of International Financial Reporting
Standards), with 1 March 2003 as the date of transition. Comparative numbers
have accordingly been restated.
The financial information has been audited by Deloitte & Touche whose
unqualified audit report is available for inspection at the Group`s registered
office.
FINANCIAL RESULTS
The declining trend in the Group`s financial results have been reversed,
resulting in a strengthened balance sheet, cash position and profitability.
The financial results for the year ended 28 February 2005 reflect revenue
growth of 8% to $2.54 billion, compared with $2.35 billion for the previous
year, while operating profit improved to $7.1 million from a loss of $13.2
million. Headline earnings per share improved to 4.0 cents, compared with a
loss per share of 6.7 cents for the previous year.
A net exceptional gain of $50.7 million was incurred during the year, relating
mainly to the sale of the Logicalis Australia and New Zealand businesses. At
the end of February, the Group showed a net cash position of $140.3 million
compared to a prior year balance of $88.7 million.
The effective rate of tax on income before exceptional items and goodwill
impairment has reduced from 173% to 25%. This is mainly due to the utilisation
of brought forward losses and the recognition of deferred tax assets.Tax rates
in the years ahead are expected to be less volatile and in line with normal tax
rates in the countries in which the Group operates.
DIVISIONAL REVIEWS
Westcon
During the year, Westcon`s revenue increased 11.7% from $1.84 billion in 2004
to $2.06 billion. This reflects an increase across all divisions and
geographic regions due to increased demand for all three foundation vendor
products (Cisco, Nortel and Avaya) coupled with increased sales of security
and other complementary products.
Gross margins decreased from 8.8% in 2004 to 7.7% in this financial year
resulting in a 2.3% decrease in gross profit from $162 million to $158
million. The drop in gross margin was attributable to lower margins in Europe.
The decline in consolidated gross margin is not a global trend as margins in
the US increased slightly over 2004 levels.
Westcon`s EBITDA decreased from $36 million to $25 million and the EBITDA
margin declined from 2.0% to 1.2% as a result of the decreased gross margins
in Europe and non-recurring costs of approximately $12 million relating to the
consolidation of facilities, the separation costs of the former CEO, the
expensing of previously capitalised IPO costs and a European restructuring
programme which was carried out during the second half of the year.
During the year, Westcon`s operating activities generated $6 million of cash as
compared to using $32 million of cash in 2004 as accounts receivable
and inventory levels decreased and a reduction in payables as the US
took advantage of prompt payment opportunities with certain vendors.
For the year Cisco products made up 55% of Westcon`s revenue followed by 11%
for Nortel, 9% for Avaya, 10% for security and 15% for Emerging / Affinity
vendors. Westcon actively generates partnerships amongst smaller specialist and
niche players. From a geographic perspective, 55% of Westcon`s revenue was
generated in the Americas followed by 38% in Europe and 7% in Asia-Pacific.
Logicalis
Revenue was $352.2 million for the 12 months ended 28th February 2005. This
included $7.6 million of revenue from one month of ownership of the disposed
operations in Australia and New Zealand, $52.7 million following the
acquisition of Solution Technology, Inc. (`STI`) on 1 September 2004 and $3.7
million revenue generated from the Vados division sold in April 2005. The
total reported revenue for the 12 months ended 28 February 2004 was $362.9
million which included $103.7 million of revenue from discontinued operations.
Excluding the impact of acquisitions and disposals, revenue increased 11% on a
like-for-like basis during 2005.
The total gross margin for the year from continuing operations remains stable
at over 21%.
Management continued to maintain a concerted focus on operating expenses,
which were down 1% compared with the 11% increase in revenues (on a like-for-
like basis).
The EBITDA for the year was $8.1 million compared to $2.4 million last year.
Continuing operations produced an EBITDA profit of $9.7 million for the year,
compared with an EBITDA loss of $0.7 million for the prior year.
In March 2004, Logicalis group sold its Australian and New Zealand businesses
to IBM for $46.1 million and the intercompany loans of $19.9 million were also
repaid to Logicalis. The net proceeds substantially strengthened the Logicalis
group balance sheet, as well as providing funding for organic growth and
acquisitions in North America and the UK.
A rigorous focus on cash and working capital management has been maintained.
At 28 February 2005 Logicalis` net cash position was $57 million (2004: $26
million).
Analysys Mason Group
In August 2004, Analysys Limited was purchased and merged with Mason to create
Analysys Mason group, which is 15% owned by management. Analysys Mason group
has 300 full time employees with 9 offices across 6 countries. Clear benefits
from working together have already been seen. With complimentary skills and
global reach, Analysys Mason group are uniquely positioned to take advantage
of the steady recovery taking place in the Telecoms sector.
The last year has seen a significant turnaround in the fortunes of Analysys
Mason group. Revenue of $52.1 million was achieved (2004: $27.4 million), an
increase of 90%, attributable to the acquisition of Analysys Limited and a
recovery in the Telecoms sector resulting in record Mason turnover of $37.7
million. This recovery, combined with the desire not to be left behind on the
launch of third generation mobile networks (3G), has led to a significant
increase in the demand for services in this sector. There has also been some
easing of the billing rate pressures that led to depressed profit margins in
recent years.
Analysys Mason group generated EBITDA of $3.3 million, compared to a loss of
$0.7 million in the comparable period and closed the year with a net cash
balance of $9.1 million (2004: $2.5 million).
Other Holdings
Westcon AME and Online Distribution
Westcon AME and Online Distribution are value-added networking equipment
distributors, in SA and the Middle East, respectively, whose operations mirror
those of Westcon. Revenue for the combined entities amounted to
$69.9 million (2004: $94.2 million from continuing operations).
Online Distribution`s EBITDA amounted to $1.4 million (2004: loss of
$0.5 million).
Westcon AME`s EBITDA amounted to $1.3 million (2004: loss of $2.0 million).
This turnaround was achieved as a result of the re-organisation and the
disposal of non-core assets which took place in the prior year. A key
initiative for the coming year, which should further consolidate this
turnaround and provide impetus for growth, is the conclusion of a Black
Economic Empowerment transaction.
RangeGate
RangeGate, located in SA and the UK, represents the Group`s wireless mobile
technology systems intergration business.
RangeGate achieved revenue of $8.8 million (2004: $6.4 million)
and an EBITDA loss of $2.4 million (2004: $2.1 million), mostly arising
in the UK.
POST BALANCE SHEET
On 1 March 2005 Notability Solutions Limited,a $43 million turnover IBM business
partner in the UK, was acquired for $18 million in cash and $2 million in shares
On 17 March 2005 Logicalis acquired Eisco Technology Inc, a $15 million revenue
US IBM solution provider for $2 million.
With effect from March 2005, Datatec decreased its holding in UK Rangegate
to 19.9%, with a carrying value of $1.
PROSPECTS
Overall economic growth in the major economies has moderated. However the IT
industry appears to be entering a cyclical upturn and growth in certain sectors
is expected.
In 2004 much progress was made improving the focus and size of our businesses.
Market conditions have gradually improved and we expect that better
execution and greater operating efficiencies in the Group should continue to
drive margin expansion revenue growth.
DIVIDENDS
At the present time, the Board is continuing with its current policy of not
declaring dividends. Resources will be used for growth acquisitions and the
repurchase of the Company`s shares.
On behalf of the Board:
L Boyd J P Montanana D B Pfaff
Chairman Chief Executive Officer Group Finance Director
18 May 2005
Directors: L Boyd* (Chairman)
J P Montanana# (CEO)
C B Brayshaw*, D B Pfaff, C M L Savage*,
C S Seabrooke*, N J Temple*#
#British
*Non-executive
www.datatec.co.za
Date: 18/05/2005 07:12:14 AM
Produced by the JSE SENS Department
