| Wed 26 Oct 2005, 7:05 | | Datatec - Group unaudited results for the six mont |
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Datatec - Group unaudited results for the six months ended 31 August 2005
Datatec Limited
("Datatec")
(Registration number 1994/005004/06)
Share code: DTC ISIN: ZAE000017745
Group unaudited results for the six months ended 31 August 2005
# Revenue up 15% to $1.4 billion
# EBITDA improves to $39.5m from $10.2m
# Headline earnings per share improves to 12.0 cents from 0.1 cent
# Net cash of $112m
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
six months to six months to year ended
US$ 000"s 31 Aug 05 31-Aug-04 28-Feb-05
Revenue 1 441 578 1 251 281 2 537 963
Continuing operations 1 415 045 1 239 504 2 434 509
Acquisitions 26 533 1 623 90 260
Ongoing operations 1 441 578 1 241 127 2 524 769
Discontinuing operations - 10 154 13 194
Cost of sales (1 278 168) (1 126 565) (2 271 709)
Gross margin 163 410 124 716 266 254
Operating costs (123 899) (114 468) (241 390)
Operating profit before
finance
costs, depreciation and
amortisation ("EBITDA") 39 511 10 248 24 864
Ongoing operations 39 511 11 696 28 917
Discontinuing operations - (1 448) (4 053)
Depreciation and other
amortisation (7 621) (7 675) (14 399)
Operating profit before
goodwill
impairment 31 890 2 573 10 465
Goodwill impairment (271) - (2 014)
Foreign currency
translation effects
on goodwill (1 505) - (1 301)
Operating profit 30 114 2 573 7 150
(Loss)/Profit on disposal
and closure of
discontinued operations (1 445) 55 148 50 707
Interest received 2 455 2 274 5 001
Financing costs (4 601) (4 493) (8 832)
Profit before taxation 26 523 55 502 54 026
Taxation (11 898) (180) (1 661)
Profit after taxation 14 625 55 322 52 365
Profit attributable to
outside
shareholders (1 041) (140) (107)
Attributable profit 13 584 55 182 52 258
KEY RATIOS
Gross margin % 11.3 10.0 10.5
EBITDA on ongoing
operations % 2.7 0.9 1.1
Effective tax rate
before exceptional
items and goodwill % 40.0 49.0 25.0
Exchange rates
Average Rand/US$ exchange
rate 6.4:1 6.5:1 6.2:1
Closing Rand/US$ exchange
rate 6.5:1 6.7:1 5.8:1
SALIENT FINANCIAL FEATURES
Headline earnings 16 786 132 5 459
Number of shares (millions)
Issued 142 138 138
Weighted average 140 138 138
Diluted weighted average 143 139 141
Earnings per share (cents)
HEPS 12.02 0.10 3.95
Diluted HEPS 11.74 0.10 3.88
EPS 9.73 39.98 37.84
Diluted EPS 9.50 39.82 37.18
Net asset value per share
(cents) 294 287 298
Net tangible asset
value per share (cents) 208 229 228
GROUP BALANCE SHEET
Unaudited Unaudited Audited
US$ 000"s 31 Aug 05 31-Aug-04 28-Feb-05
ASSETS
Non-current assets 161 491 126 929 138 608
Property, plant and equipment 18 844 21 410 20 251
Capitalised development expenditure 12 026 12 065 12 506
Goodwill 105 575 68 498 81 925
Other intangible assets 4 405 - 1 842
Investments 6 745 -
Deferred tax assets 20 635 24 211 22 084
Current assets 908 130 826 965 841 778
Inventories 201 343 222 592 205 771
Receivables 498 798 404 376 417 461
Cash and cash equivalents 207 989 199 997 218 546
Total assets 1 069 621 953 894 980 386
EQUITY AND LIABILITIES
Ordinary shareholders" funds 416 879 395 968 412 227
Outside shareholders" interest 25 068 23 353 24 089
Total shareholders" funds 441 947 419 321 436 316
Long-term liabilities 2 731 1 231 1 450
Deferred tax liabilities 1 978 5 678 2 500
Current liabilities 622 965 527 664 540 120
Payables and provisions 508 422 414 524 446 949
Amounts owing to vendors 2 843 635 3 048
Taxation 15 486 9 909 11 847
Bank overdrafts 96 214 102 596 78 276
Total equity and liabilities 1 069 621 953 894 980 386
Capital expenditure incurred in
current period 4 483 5 232 10 009
Capital commitments at end of period 4 820 3 814 10 198
Lease commitments at end of period 112 518 122 672 109 286
Payable within one year 14 687 18 670 17 234
Payable after one year 97 831 104 002 92 052
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months to six months to year ended
US$ 000"s 31 Aug 05 31-Aug-04 28-Feb-05
EBITDA 39 511 10 248 24 864
(Profit)/Loss on
disposal of property,
plant and equipment (19) 104 595
Non-cash items 8 047 103 12 498
Cash generated before working
capital changes 47 539 10 455 37 957
Working capital changes (33 563) (32 966) (9 114)
Decrease in inventories 5 297 19 846 41 439
(Increase)/Decrease in
receivables (74 901) 13 337 21 950
Increase/(Decrease) in
payables 36 041 (66 149) (72 503)
Cash generated/(utilised)
from
operations 13 976 (22 511) 28 843
Net finance costs paid (2 146) (2 219) (3 831)
Taxation paid (5 464) (4 047) (5 473)
Net cash inflow/(outflow)
from
operating activities 6 366 (28 777) 19 539
Net cash outflow from
investing
activities (28 692) (23 775) (41 332)
Net cash inflow from
disposal of
operations and investments - 66 000 65 801
Net cash inflow/(outflow)
from
financing activities 4 085 (2 439) 1 067
(Decrease)/Increase in cash
and
cash equivalents (18 241) 11 009 45 075
Translation difference on
opening
cash position (10 254) (2 311) 6 492
Cash and cash equivalents
at beginning of period 140 270 88 703 88 703
Cash and cash equivalents
at end of period (*) 111 775 97 401 140 270
(*) Comprises cash resources, net of bank overdrafts and trade finance
advances.
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
six months to six months to year ended
US$ 000"s 31 Aug 05 31-Aug-04 28-Feb-05
Revenue
Westcon 1 127 449 1 043 972 2 055 015
Logicalis 247 274 139 107 340 875
AMG 30 072 19 023 52 058
Other Holdings 36 783 39 025 76 821
Revenue from ongoing
operations 1 441 578 1 241 127 2 524 769
Discontinuing operations - 10 154 13 194
1 441 578 1 251 281 2 537 963
EBITDA
Westcon 30 768 9 881 25 043
Logicalis 7 442 2 359 9 770
AMG 3 263 (79) 3 340
Other Holdings and head
office (1 962) (465) (9 236)
EBITDA from ongoing
operations 39 511 11 696 28 917
Discontinuing operations - (1 448) (4 053)
39 511 10 248 24 864
Operating profit before
goodwill
impairment
Westcon 25 976 4 497 15 420
Logicalis 5 182 741 6 214
AMG 3 037 (214) 3 007
Other Holdings and Head
Office (2 305) (815) (9 920)
Operating profit from ongoing
operations 31 890 4 209 14 721
Discontinuing operations - (1 636) (4 256)
31 890 2 573 10 465
Total assets
Westcon 784 658 728 239 724 605
Logicalis 212 338 135 818 163 943
AMG 52 871 42 205 43 027
Other Holdings 19 754 47 632 48 811
1 069 621 953 894 980 386
DETERMINATION OF
HEADLINE EARNINGS
Attributable profit
per the consolidated
income statements 13 584 55 182 52 258
Headline earnings adjustments
(net of taxation and outside
shareholders):
Goodwill impairment 271 - 2 014
Foreign currency
translation effects
on goodwill 1 505 - 1 301
(Profit)/Loss on
disposal of plant and
equipment (19) 104 595
Exceptional items:
Loss/(Profit) on
disposal and
closure of discontinued
operations 1 445 (55 154) (50 709)
Headline earnings 16 786 132 5 459
STATEMENT OF CHANGES IN
ORDINARY SHAREHOLDERS" FUNDS
Balance at beginning
of period 412 227 344 283 344 283
Attributable profit
for period 13 584 55 182 52 258
Shares issued 4 107 - 574
Translation difference on
equity loans (5 601) 890 (2 841)
Tax effect of equity
loans movement - - (315)
Translation of foreign
subsidiaries (7 438) (4 387) 18 268
Balance at end of period 416 879 395 968 412 227
1. 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 telecommunications
consulting ("AMG"). The Group also has other interests, which are included with
the Group Head Office under Other Holdings. These interests include the
subsidiaries Westcon AME (operating in Africa), Online Distribution (operating
in the Middle East) and RangeGate (operating in SA).
2. IFRS REPORTING
This report has been prepared in accordance with the Group"s accounting
policies which fully comply with International Financial Reporting Standards
("IFRS").
3. COMMENTARY ON FINANCIAL RESULTS
The Group continued its return to profitability during the review period.
Revenues rose by 15% to $1.44bn (2004: $1.25bn), while gross margin increased
from 10% to 11%. Operating profit increased to $31.9m (2004: $2.6m). Headline
earnings per share grew commensurately to 12.0 cents (2004: 0.1 cent) and the
Group ended the first six months with net cash on hand of $111.8m.
The effective tax rate before exceptional items and goodwill impairment
decreased from 49% to 40%, and this is our estimated tax rate for the year as a
whole.
4. DIVISIONAL REVIEWS
4.1 Westcon
Westcon increased revenues by 8% to $1.1bn (2004: $1.0bn), attributable mainly
to growth in the Americas and in the Asia Pacific region. The gross margin rose
to 8.5% from 7.6% with the settlement of the Lucent litigation contributing
$4.3m to this figure. Without it, the gross margin would have been 8.1%.
Westcon"s higher margins in the Americas and Asia Pacific region helped to
offset the lower margins achieved in Europe. Increased operating efficiencies
coupled with effective cost control initiatives reduced operating expenses to
$64.9m or 5.8% of revenue during the current period from $69.2m or 6.6% of
revenue in 2005. EBITDA margins increased to 2.7% for the review period from
0.9% in 2004.
During the period Westcon"s operations generated $10m in cash compared to $36m
consumed during the comparable period last year. By the end of the first half,
Westcon had net cash on hand of $8.5m.
Cisco sourced products accounted for 59% of Westcon group"s revenues during the
review period, followed by Nortel (10%), Avaya (9%), Nokia (4%), Checkpoint
(4%) and other network products (14%). From a geographic perspective 56% of
Westcon group revenues were generated in the Americas followed by Europe (36%)
and Asia-Pacific (8%).
Westcon"s operating performance is expected to continue to improve in the
second six months. With effect from 28 September 2005, Datatec has increased
its shareholding in Westcon to 97.4% from 93.5% through the purchase by Westcon
of the shares belonging to some founder minorities.
4.2 Logicalis
Revenue from continuing operations rose 78% to $247.3m (2004: $139.1m), while
organic growth, excluding acquisitions, was 27%.
The total gross margin for the period remained relatively constant at 20.1%
despite an increase in product-based business as a result of recent
acquisitions made during the period. Management continued to keep a tight rein
on costs and operating expenses declined from 19.2% of revenue to 17.1%.
The total EBITDA for the period was $7.4m compared to $2.4m last year,
an increase of 217%. Total operating profit, after depreciation and
amortisation, amounted to $5.2m compared with $0.7m for the previous comparable
period.
Net cash declined from $56.9m at 28 February 2005 to $30.9m at 31 August 2005,
mainly due to the $24.2m spent on acquisitions during the period. In August
2005, a four-year $50m loan facility was concluded with HSBC Bank in the US, to
enable Logicalis to grow both organically and acquisitively in the year ahead.
Three strategic acquisitions were made during the review period. In March 2005
Notability Solutions Limited, a $40 million-a-year IBM business partner in the
UK was acquired while in the US, Eisco Technology Inc., a $15 million-a-year
US-based IBM solution provider focused on high-end IBM zSeries mainframe
solutions was bought into the group.
In July 2005, Logicalis acquired Hawke Systems Limited, a $25 million-a-year
supplier of advanced computing infrastructure solutions and one of HP"s top
Enterprise and Storage Elite Partners in the UK.
In September 2005 Logicalis acquired TBC Group Limited, an IBM Premier partner
and supplier of advanced computing infrastructure and managed service solutions
based mainly around the IBM eServer range, database applications and IBM
middleware. With annual revenues over $50m, this acquisition positions
Logicalis as one of IBM"s top three partners in the UK.
4.3 Analysys Mason Group
AMG increased revenues during the period by 58% to $30.1m (2004: $19m). A 10.3%
margin saw EBITDA more than double to $3.3m (2004: $1.6m recurring) and
operating profit of $3.0m (2004: $1.5m recurring).
In little more than a year since the merger of Mason and Analysys, management
has continued to take advantage of the opportunities it has created. Client
reaction to the joint service offerings has remained positive and new business
gains and project sizes have almost doubled, compared with those achieved by
the individual companies prior to the merger.
There is ongoing investment by European and global operators in the roll out of
third generation (3G) networks and new mobile technologies and the group is
well-placed to take advantage of the opportunities that this is creating.
There has also been a marked increase in the level of merger and acquisition
activity in the Telecoms sector and this is generally a positive indicator of
the impending business climate.
4.4 Other Datatec subsidiaries
Westcon AME
Westcon AME is a South African-based value-added networking equipment
distributor whose operations mirror those of the Westcon group. Its revenues
declined during the review period to $17.8m (2004: $22.7m). EBITDA amounted to
$0.1m (2004: $1.1m).
On Line Distribution
Dubai based On Line Distribution is a value-added networking equipment
distributor, servicing the Middle Eastern and North African markets. Its
operations also mirror those of the Westcon group.
Revenue rose 28% to $16.8m (2004: $13.1m) on buoyant sales to the security and
automotive sectors in that region. EBITDA rose to $0.8m (2004: $0.4m).
RangeGate
Located in SA, RangeGate represents the Group"s wireless mobile technology
systems integration business, and provides mobile supply chain solutions to
sectors such as retail, industrial, manufacturing, transport and logistics.
While revenues declined during the period to $2.2m (2004: $3.2m), an EBITDA
profit of $0.03m was achieved compared with a loss of $0.07m in the previous
comparable period.
5. PROSPECTS
The Group has made considerable progress over the last six months, revenues and
gross margins have increased and operating costs have been tightly controlled
leading to a significant improvement in operating profits in all major
divisions.
We expect continued improvement in our financial performance and consolidate
further the gains in market share whilst improving operating efficiencies at
all levels.
Despite economic uncertainties such as the effect of higher world energy prices,
we believe that our scale, focus and execution will allow us to deliver
consistent performance improvements for the remainder of the year.
6. DIVIDENDS
To date,the Company"s policy has been not to pay dividends. The Board is now
considering declaring a maiden dividend at the end of the financial year.
On behalf of the Board:
L Boyd J P Montanana D B Pfaff
Chairman Chief Executive Officer Group Finance Director
26 October 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: 26/10/2005 07:05:24 AM Produced by the JSE SENS Department
