DATATEC GROUP AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2007.
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Transcript of DATATEC GROUP AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2007.
DATATEC GROUPAUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2007
DATATEC GROUP Highlights - Business Update
• Completion of two significant acquisitions post year-end
• Improving mix of businesses
• Continued margin expansion
• Growing geographic presence
• Strong emerging markets contribution
• Successful first year of London dual listing
DATATEC GROUP Financial Performance Summary
• 5th consecutive year of improving key financial ratios
• Continuing strong revenue growth up 17%
• Earnings per share up 51% to US$ 0.40c
• Operating profit up strongly by 45% to over $100 million
• Year-end net cash of $99 million
• Change to net revenue accounting on 3rd party maintenance sales
DATATEC GROUP Total Revenue ($ millions)
Revenue grew by 17% (9% organic)
2,1452,386
510721
61
60
FY2006 restated FY2007
Consulting(Analysys Mason)
ICT Solutions & Services(Logicalis & African Legend Indigo)
Distribution(Westcon, Westcon SA & Online)
3,168
2,715
DATATEC GROUPRevenue % by Geography
North America48%
South America2%
Europe38%
Asia7%
Africa & Middle East
5%
North America remains largest region
DATATEC GROUP Gross Profit ($ millions)
205231
111
162
22
22
FY2006 FY2007
Consulting(Analysys Mason)
ICT Solutions & Services(Logicalis & African Legend Indigo)
Distribution(Westcon, Westcon SA, Online)
338
415
Gross profit grew by 23%
DATATEC GROUP EBITDA ($ millions)
85
119
0
20
40
60
80
100
120
140
FY 2006 FY 2007
EBITDA grew by 40%
DATATEC GROUP Total Headline Earnings Per Share (US cents)
26.9
40.8
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
FY 2006 FY 2007
Headline Earnings grew by 52%
DATATEC GROUP Cash Generation ($ millions)
• Primary uses of cash:
– working capital investments funding growth
– acquisitions
129
99
0
20
40
60
80
100
120
140
160
180
FY 2006 FY 2007
Net Cash ($ millions)
Opening short term net cash 172
EBITDA 119Working capital (102)Taxation paid (14)Net finance costs (10)Non cash items 11Investing activities (60)Financing activities 31Cash distribution (6)Net movement in cash (31)
Closing short term net cash 141Long term loan -42
Closing net cash 99
DATATEC GROUP Divisional Segmental Analysis
Revenue EBITDAGross Profit
Westcon
AMG
Africa / MiddleEast
4%2%22%
72%
Logicalis
Westcon
Logicalis
AMG
Africa /MiddleEast5%
52%
6%
37%
Westcon
AMG
Africa / MiddleEast4%
5%23%
68%
Logicalis
DATATEC GROUP Revenue Restated ($’000)
($’000) Feb 2006 Feb 2007
Revenue as previously recorded 2,975,635 3,492,917
Total Effect of Restatement (260,884) (325,145)
- Westcon (220,465) (252,142)
- Logicalis (40,419) (73,003)
Revenue as currently recorded 2,714,751 3,167,772
• Change in accounting for revenue recognition on 3rd party vendor maintenance contracts (announced 3 May 2007)
WESTCON GROUP
WESTCON GROUP Highlights
• Revenues increased by $209 million to $2.3 billion. Increases in all geographic regions
• Gross margins improve to 9.5%
• EBITDA increases 24%. Significant growth in Europe and Asia Pacific
• Purchased distribution arm of Ronco Electronics (Americas). Acquisition contributes $50 million in revenue FY 2007
• European process and IT enhancements increase transaction efficiency and simplify pricing in a multi-currency environment
• Opened offices in Dubai, Malaysia and New Zealand
• NOXS and Crane acquisitions create leadership position in Security & Convergence and improve European product mix
WESTCON GROUP Financial Performance Summary
($ ‘000s) Feb 2006 (restated) Feb 2007 Growth
Sales 2,062,934 2,271,557 10%
Gross Margin 194,728 216,192 11%
Gross Margin % 9.4% 9.5%
Operating Costs 128,093 133,521 4%
Operating Cost Margin % 6.2% 5.9%
EBITDA 66,635 82,671 24%
EBITDA % 3.2% 3.6%
Operating Profit 56,861 72,504 28%
As a % of Revenue 2.8% 3.2%
Net Interest 5,581 9,277
Pre-Tax Income 51,280 63,227 24%
WESTCON GROUP Revenue % by Geography
Europe
Americas50%
40%
Asia Pac
10%
Consistent Geographic results
FY 2007
Europe40%
Americas52%
Asia Pac
8%
FY 2006 Restated
WESTCON GROUP Revenue Product Vendor Mix %
Cisco 60%
13%
14%
4%
9%
NortelOther
Security
Avaya
OtherSecurity
Avaya
Nortel
Cisco 61%
11%14%
4%
10%
FY 2006 Restated FY 2007
Cisco remains dominant vendor
WESTCON GROUP Gross Margin %
10.6
7.9
9.3 9.4
10.2
8.6
9.79.5
5.0
6.0
7.0
8.0
9.0
10.0
11.0
Americas Europe Asia Pacific Total
FY2006
FY2007
Note: 2006 Restated
WESTCON GROUP EBITDA ($ millions)
Note: * Central costs include infrastructure, systems and other non-operating group costs
69
25
8
83
67
6-135
-20
70
-30
-20
-10
0
10
20
30
40
50
60
70
80
90
Americas Europe Asia Pac Central Costs* Total
FY2006
FY2007
WESTCON GROUP Consolidated Balance Sheet – Working Capital – US GAAP
($ millions) Feb 2006 Feb 2007
Accounts Receivable $321 $385
DSO (days) 56 61
Inventory $189 $232
Inventory Turns 10.0x 8.9x
Accounts Payable $333 $387
DPO (days) 64 68
Current Ratio 1.6 1.6
Note: Ratios based on trailing twelve month averages Net revenue accounting for vendor maintenance contracts means that absolute numbers remain
the same but ratios deteriorate compared to previous gross accounting method
WESTCON GROUP Consolidated Balance Sheet – Capitalisation – US GAAP
* Includes inter-company loan payable to Datatec which is eliminated in consolidation
($ millions) Feb 2006 Feb 2007
Cash $166 $129
Working Capital Lines 67 61
Notes payable 40 40
Net Cash * 22 0
Equity 284 325
Debt to Capitalization 0.33 0.28
Liabilities to TNW 1.83 1.87
WESTCON GROUP Net Cash / Debt Trend
-$250,000,000
-$200,000,000
-$150,000,000
-$100,000,000
-$50,000,000
$0
$50,000,000
Mar-
01
Jul-01
Nov-0
1
Mar-
02
Jul-02
Nov-0
2
Mar-
03
Jul-03
Nov-0
3
Mar-
04
Jul-04
Nov-0
4
Mar-
05
Jul-05
Nov-0
5
Mar-
06
Jul-06
Nov-0
6
($139,544,122) ($59,842,704) ($30,701,555) ($76,872,694) ($32,122,321) ($55,141,499)
WESTCON GROUP Headcount by Region
Region Feb 2006 Feb 2007
Americas 451 483
Europe 454 444
Asia-Pacific 141 187
Total 1,046 1,114
WESTCON GROUP Future Outlook
• Invest in systems and processes which continue to improve efficiency, lower operational costs and increase customer service capabilities
• Further growth to be gained in existing businesses by leveraging our multi-national position with select vendors bringing more value to customers
• NOXS/Crane acquisitions add scale and new customer segments, improve business mix, enhance margins and accelerate earnings capability
• Globalisation of the business is presenting new opportunities
LOGICALIS GROUP
LOGICALIS GROUP Highlights
• Revenues up 37% to $693 million (11% organic growth)
• Gross margin increases by 22.3% (FY2006 21.6%)
• EBITDA up 60% to $26.8 million (FY2006 $16.7 million)
• Robust growth in profitability from both the UK and US
• South America sustains the strong growth achieved in FY2006
• Three acquisitions completed during FY 2007
• Offices opened in Chile and Peru, extended in Germany
• Number of key vendor awards won from IBM and Cisco
LOGICALIS GROUP Financial Performance Summary
($ ‘000s) Feb 2006 (restated) Feb 2007 Growth
Revenue 505,179 693,113 37%
Gross Margin 109,182 154,972 42%
Gross Margin % 21.6% 22.3%
Operating Costs 92,475 128,177 39%
Operating Cost Margin % 18.3% 18.4%
EBITDA 16,707 26,795 60%
EBITDA % 3.3% 3.9%
Operating Profit 11,546 18,783 63%
As % of Revenue 2.3% 2.7%
Growth has produced stronger results in FY 2007
LOGICALIS GROUP Revenue % Geographic Split
FY 2006 Restated FY 2007
North America generated 60% of revenue
North America
South America
UK
Germany
31%
1%
7%
61%
North America
South America
UK
Germany
32%
2%
6%
60%
LOGICALIS GROUP Revenue Segmental Split
Proportion of product in sales mix relatively constant
Product81%
ProfessionalServices
8%
FY 2006 Restated FY 2007
ManagedServices
5%
Product81%
ProfessionalServices
9%Maintenance6%
Managed Services
4%
Maintenance6%
LOGICALIS GROUP Revenue Product Vendor Mix
IBM remains most significant vendor partner
FY 2006 Restated FY 2007
3%
26%HP
23%Cisco
9%Others
EMC39%IBM
HP21%
IBM43% EMC
3%
Others11%
Cisco22%
LOGICALIS GROUP Gross Margin %
23.3
31.1
20.4 19.621.6
23.1
31.3
21.623.1 22.3
0
5
10
15
20
25
30
35
UK Germany NorthAmerica
SouthAmerica
Total
FY2006
FY2007
Overall Gross margin % steady
Note: 2006 Restated
LOGICALIS GROUP EBITDA ($ millions)
7
0
13
2
17
10
-1
22
2
27
(10)
(5)
0
5
10
15
20
25
30
UK Germany North America South America Total
FY2006
FY2007
Robust growth in profitability in UK and US
Note: EBITDA total includes central group management costs
LOGICALIS GROUP Key Financial Measures
($’000) Feb 2006 Feb 2007
Deferred Revenue 15,933 26,222
Inventory 14,536 23,706
Inventory Days (Excluding Spares Stock) 14 16
Accounts Receivable 87,468 147,164
DSO Days 47 50
Accounts Payable 97,145 116,987
DPO Days 82 73
Net Cash 26,605 8,562
Net cash reduction reflects acquisitions and growth driven increased working capital
Note: Net revenue accounting for vendor maintenance contracts means that absolute numbers remain the same but ratios deteriorate compared to previous gross accounting method
LOGICALIS GROUP Headcount by Region
Region Feb 2006 Feb 2007
North America 441 608
South America 201 251
Europe 343 494
Total 985 1,353
Increase due to acquisitions and growth in scale
LOGICALIS GROUP Recent Important Wins
US Manufacturer HP Technologies and managed services $5.8M
US Mobile OperatorStaffing for operations and application development
$5.0M
US Entertainment Three year managed services $0.9M
UK Financial Services IBM z-series (mainframe) $4.9M
UK Major Telco Multi-national managed services $6.0M
UK Leisure Significant Cisco IPT deal $1.5M
South America
Government Cabling and Cisco infrastructure $2.3M
South America
Telecom Security in network backbone $1.0M
South America
Telecom Wi-Max project $400k
LOGICALIS GROUP Future Outlook
• Continuing to execute well defined strategy
• Focused on gaining market share and growing revenues
• Strong growth expected from Cisco solutions
• Emphasis placed on increasing annuity managed service solutions
• Acquisition opportunities continue to be evaluated
• Favourable market conditions should drive further margin expansion
ANALYSYS MASON GROUP
ANALYSYS MASON GROUP Highlights
• International non-UK revenues now 55% of total
• Performance similar to prior year despite completion of large wireless network rollout project
• Restructuring of Catalyst CRM division
• Strong cash generation
• Pioneer in management of world’s 1st 3G network sharing alliance
ANALYSYS MASON GROUP Financial Performance Summary
($ ‘000s) Feb 2006 Feb 2007 Growth
Revenue 59,750 61,352 3%
Gross Margin 21,730 22,265 3%
Gross Margin % 36.4% 36.3%
EBITDA 6,223 6,202 0%
EBITDA % 10.4% 10.1%
Operating Profit 5,835 5,752 0%
Operating Profit % 9.8% 9.4%
ANALYSYS MASON GROUP Revenue % Geographic Split
FY 2006 FY 2007
UK
29%
1%45%
25%
USA
Rest of World
Europe
USA
Rest of World
Europe
UK63%
1%
17%
19%
ANALYSYS MASON GROUP Revenue Segmental Split
FY 2007FY 2006
Analysys Research
8%Analysys Consulting
40%
Catalyst12%
Mason40%
Analysys Consulting
46%
Analysys Research
8%
Mason37%
Catalyst8%
ANALYSYS MASON GROUP Gross Margin %
32.4
44.4
34.7
22.3
36.4
32.6
43.9
29.4
12.9
36.3
0
5
10
15
20
25
30
35
40
45
50
Mason ACL ARL Catalyst Total
FY2006
FY2007
ANALYSYS MASON GROUP EBITDA – ($ millions)
0.5 0.60.1
-0.1
3.9
6.2
2.4
6.2
2.5
4.4
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Mason ACL ARL Catalyst Total
FY 2006FY 2007
Note: EBITDA total includes central group management costs
ANALYSYS MASON GROUP Headcount by Division
Region Feb 2006 Feb 2007
Mason 74 78
Analysys Consulting 80 85
Analysys Research 35 36
Catalyst 21 18
AMG Support Services (FTE’s) 44 45
Full Time Headcount 254 262
Associates 59 40
Total 313 302
ANALYSYS MASON GROUP Recent Important Wins
Analysys Consulting and Research Mason and Catalyst
Business Plan for Etisalat’s mobile service launch in Afghanistan
National Grid divestment due diligence
Advising Singapore regulator on regulatory model reform Review of BSkyB capability for providing voice services
Multiple MLRIC product sales (Denmark, France, SA, UK) Specialist assurance on system integration, fleet mapping and rf optimisation for London Underground
Continuation of Oger/Turk Telecom post-acquisition framework
National review of English ambulance service control rooms to design new operating models
Profitability analysis at Orascom Specification of RFP for OSS/BSS systems to operate new 3G network and PMO support for Time Malaysia
Joint Projects
Vodafone-Orange network-sharing business planning – ACL / Mason
Mobile service launch assistance for Etisalat in Egypt – ACL / Mason / Catalyst
Market segmentation and market-facing BPR at Maltacom – ARL / Catalyst
ANALYSYS MASON GROUP Future Outlook
• Revenue and profit growth expected in the next year
• Continuing to build on the merged brand and broaden consulting capabilities
• Further internationalisation of the operations
• Investment in internal systems and processes to extend growth aspirations
• Telecoms/Internet broadband environment remains robust
EMERGING MARKET OPERATIONS
AFRICA & MIDDLE EAST Highlights
• Historically assets are substantially distribution based
• Recently completed BEE transaction in South Africa
• Development of IT services group in South Africa
• Establishment of Cisco focused Comstor operation in Dubai, Middle East
• Operations include: Westcon SA, Online, Comstor ME & African Legend Indigo
• Expansion planned in Turkey through JV operation
AFRICA & MIDDLE EAST Financial Performance Summary
($ ‘000s) Feb 2006 Feb 2007 Growth
Sales 86,889 141,750 63%
Gross Margin 12,523 21,750 74%
Gross Margin % 14.4% 15.3%
Operating Costs 10,303 16,585 61%
Operating Cost Margin % 11.8% 11.7%
EBITDA 2,220 5,165 133%
EBITDA % 2.6% 3.6%
Operating Profit 1,828 4,765 161%
Operating Profit % 2.1% 3.4%
Net Interest 814 623
Pre-Tax Income 1,014 4,142 308%
Pre-Tax % 1.2% 2.9%
DATATEC GROUP
DATATEC GROUP Market Conditions
• Outlook for the global ICT industry remains favourable
• Europe’s improving growth is offsetting softness in the US
• Rest of the world including emerging markets are showing strong growth
• Leading technology vendors are in much better shape
• Major adoption of broadband is driving new business opportunities
DATATEC GROUP Strategy and Prospects
• Growth trends of the major divisions continue
• Scale and improving business mix is driving operating leverage
• Expecting continued revenue growth and further margin expansion
• Increasing contribution from Europe and Emerging markets
• Targeting $1 billion of annualised revenue growth next year
• Strategy to target accretive acquisitions that can be logically integrated
• Distribution to shareholders to increase 100% to R0.70 ($0.10) per share
QUESTIONS