h1 2017 consolidated presentation - final - the vault technology distribution integration &...

Technology Distribution Integration & Managed Services Consulting & Research

DATATEC GROUPUNAUDITED INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 AUGUST 2016

© Datatec 2016 2

DATATEC GROUPAGENDA

Results summary, market conditions & operational strategyJens Montanana, Datatec Group CEO

Financial resultsIvan Dittrich, Datatec Group CFO

Operational reviewJens Montanana, Datatec Group CEO

Current trading & prospectsJens Montanana, Datatec Group CEO

© Datatec 2016


RESULTS SUMMARY, MARKET CONDITIONS & OPERATIONAL STRATEGY

© Datatec 2016 LOGICALIS

GROUPWESTCON

GROUPDATATEC GROUP OUTLOOK

4OVERVIEW OPERATIONAL

STRATEGY

DATATEC GROUPFINANCIAL RESULTS SUMMARY

RevenueH1 FY17 $3.04bnH1 FY16 $3.29bn

EBITDAH1 FY17 $69mH1 FY16 $81m

Gross marginH1 FY17 13.8%H1 FY16 13.1%

DividendsH1 FY17 4.2 US¢H1 FY16 8 US¢

Underlying EPSH1 FY17 12.5 US¢H1 FY16 16.6 US¢

© Datatec 2016 WESTCON

GROUPLOGICALIS

GROUPDATATEC GROUP 5

OUTLOOKOVERVIEW OPERATIONAL STRATEGY

DATATEC GROUPMARKET CONDITIONS

Macro conditions still challenging

Improved confidence in emerging markets

Strong demand for cloud services & security infrastructure

Strong US$ persists


GROUPWESTCON



DATATEC GROUPOPERATIONAL STRATEGY – CORE FOCUS AREAS

Westcon transformation (SAP/BPO) expected to end by June 2017

Improve operating margins

Increase ROIC

Grow managed services

Embracing new & disruptive cloud technologies

© Datatec 2016


FINANCIAL RESULTS


GROUPWESTCON



DATATEC GROUPFINANCIAL PERFORMANCE

US$m H1 FY17 H1 FY16 Growth %

Revenue 3,036.9 3,285.9 (8%)

Gross profit 419.8 430.2 (2%)

Gross margin % 13.8% 13.1%

Operating costs (350.9) (349.6) 0.4%

Operating cost margin % 11.6% 10.6%

EBITDA 68.9 80.6 (15%)

EBITDA% 2.3% 2.5%

Depreciation & amortisation (28.2) (24.2) 17%

Operating profit 40.7 56.3 (28%)

Operating profit % 1.3% 1.7%

Revenues impacted by strong US$

Gross margins expanded to 13.8%

EBITDA impacted by ongoing restructuring costs in Westcon


GROUPWESTCON



DATATEC GROUPFINANCIAL PERFORMANCE – CONTINUED



Net finance costs (10.3) (11.3) (9%)

Profit before tax 34.3 44.9 (24%)

Underlying EPS (US cents) 12.5 16.6 (25%)

HEPS (US cents) 9.1 12.0 (24%)

Lower finance charges in Logicalis LATAM

Effective tax rate 34%

Underlying EPS excludes restructuring costs

Adhering to dividend policy of fixed 3x cover


GROUPWESTCON



69

79 81 7

3

Reported EBITDA Restructuring costs Logicalis UK Normalised EBITDA H1 FY16 EBITDA

7

DATATEC GROUPEBITDA BRIDGE

US$m EBITDA adjustments


GROUPWESTCON



DATATEC GROUPCONTRIBUTION PER DIVISION

* Contribution to EBITDA is calculated before Corporate costs

74%

25%

1%

H1 FY17

76%

23%

1%

H1 FY16

REVENUE GROSS PROFIT

Westcon Logicalis Consulting & Financial Services

56%

42%

2%

H1 FY17

59%39%

2%

H1 FY16

EBITDA*

56%

43%

1%

H1 FY17

60%

40%

H1 FY16

Larger contribution from

Logicalis


GROUPWESTCON



DATATEC GROUPREVENUE AND GROSS PROFIT % CONTRIBUTION BY GEOGRAPHY

35%

14%

33%

11%

7%

H1 FY17

35%

14%

32%

10%9%

H1 FY16


30%

19%

33%

13%

5%

H1 FY17

28%

22%32%

10%8%

H1 FY16

North America Latin America Europe Asia-Pacific MEA

Revenues impacted by strong US$

Increased GP contribution from North America and Asia-Pacific

Geographic mix affected margins


GROUPWESTCON



DATATEC GROUPBALANCE SHEET SUMMARY

US$m H1 FY17 FY 2016 H1 FY16

Assets 3,425.7 3,382.9 3,231.5Non-current assets

Goodwill 463.3 462.6 447.3Acquired intangible assets & software 54.2 59.8 40.2Other non-current assets 266.5 243.7 217.7

Current assets 2,641.7 2,616.8 2,526.3

Equity and Liabilities 3,425.7 3,382.9 3,231.5Shareholders’ funds 870.4 830.3 848.7Non-controlling interests 47.9 39.1 38.8Long-term liabilities 113.7 100.7 116.6Amounts due to vendors 7.1 10.5 5.0Current liabilities 2,386.6 2,402.3 2,222.4

Net debt (251.7) (205.4) (145.8)

Increase in receivables

$4.12 NAV per share

1.1 current ratio

Increase in net debt


GROUPWESTCON



DATATEC GROUPCASH FLOW

US$m H1 FY17 H1 FY16

EBITDA 68.9 80.6Working capital changes (41.1) (40.6)Other working capital changes (4.7) (22.5)Other movements 1.1 4.1

Cash generated from operations 24.2 21.6Net finance costs paid (9.6) (11.3)Taxation paid (21.3) (24.3)

Net cash outflow from operating activities (6.7) (14.0)Net cash outflow for acquisitions (1.9) (1.3)Net cash outflow from other investing activities (39.4) (24.8)Capital distributions & dividends – shareholders (14.7) (8.7)Net cash inflow from financing activities 18.7 38.7

Decrease in cash and cash equivalents (44.0) (10.1)Cash & cash equivalents at beginning of year (132.7) (22.1)Translation difference on cash & cash equivalents 11.2 (9.3)

Cash and cash equivalents at end of period (165.5) (41.5)

Improved cash flows from operating activities

Increased capital expenditure


GROUPWESTCON



DATATEC GROUPCASH FLOW FROM OPERATING ACTIVITIES

US$m

(32.9)

12.3

69

(7)(78)

1

36

(5)

1

(10)(21)

EBITDA Increase inreceivables

Decrease ininventories

Increase inpayables

Other workingcapital

changes

Othermovements

Net financecosts

Taxation paid Net cashoutflow from

operatingactivities

© Datatec 2016


OPERATIONAL REVIEW

© Datatec 2016


WESTCON GROUP


GROUPWESTCON



WESTCON GROUPFINANCIAL PERFORMANCE


Revenue 2,256.1 2,510.6 (10%)

Gross profit 236.5 253.7 (7%)


Operating costs (193.6) (201.4) (4%)


EBITDA 42.9 52.3 (18%)

EBITDA% 1.9% 2.1%



Revenue decreases across all regions except

Asia-Pacific

Improved gross margins: driven by product mix with growth in Security

sales

Smaller foreign exchange expense drives decreased operating costs

Decrease in EBITDA due to lower profitability in Latin America

and increased transformation costs


GROUPWESTCON



WESTCON GROUP

36%

10%34%

11%

9%

H1 FY17

37%

9%33%

10%

11%

H1 FY16


26%

15%

37%

13%

9%

H1 FY17

26%

17%33%

11%

13%

H1 FY16

North America

Latin America

Europe

Asia-Pacific

MEA

REVENUE AND GROSS PROFIT % CONTRIBUTION BY GEOGRAPHY


GROUPWESTCON



WESTCON GROUPREVENUE % BY BUSINESS UNIT, CUSTOMER AND TECHNOLOGY CATEGORY

42%

58%

H1 FY17

45%

55%

H1 FY16

BUSINESS UNIT CUSTOMER

Comstor Westcon

70%

20%

10%

H1 FY17

65%

20%

15%

H1 FY16

TECHNOLOGY

38%

22%

26%

14%

H1 FY17

33%

26%

24%

17%

H1 FY16

ResellerSystem integrator

Service provider

Security Unified communications

Networking Data centre & other


GROUPWESTCON



WESTCON GROUPHISTORICAL QUARTERLY SALES

US$m

Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2

FY 2015

1 031

1 254

1 068

1 210 1 257 1 188

1 276 1 190

1 338

1 169

FY 2016 FY 2017


GROUPWESTCON



WESTCON GROUPGROSS PROFIT AND EBITDA BY GEOGRAPHY

3.3%

GROSS PROFIT EBITDA

US$m US$m

6743

84

28 32

254

62 36

87

30 22

237

-

50

100

150

200

250

300

350

NorthAmerica

Latin America Europe Asia-Pacific MEA Total

H1 FY16 H1 FY17

37

16 20

8 2

(31)

52

34

10 23

6 3

(33)

43

(60)

(40)

(20)

-

20

40

60

80

NorthAmerica

LatinAmerica

Europe Asia-Pacific MEA Centralcosts

Total

H1 FY16 H1 FY17


GROUPWESTCON



US$m H1 FY17 FY 2016 H1 FY16

Accounts receivable 1,281.4 1,219.9 1,208.2

DSO (days) 69 70 63

Inventory 359.2 387.4 362.2

Inventory turns 11.6x 9.8x 11.4x

Accounts payable (1,161.4) (1,093.0) (1,108.7)

DPO (days) 73 73 67

Net working capital 479.2 514.3 461.7

NWC (days) 27 34 28

Current ratio 1.1 1.1 1.2

Net debt (248.6) (271.0) (158.6)

WESTCON GROUPWORKING CAPITAL

Extended receivables in many emerging markets

Improved inventory performance

Net debt impacted by capital expenditure and purchase of

Angola bonds


GROUPWESTCON



WESTCON GROUP

(700)

(600)

(500)

(400)

(300)

(200)

(100)

-

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

NET DEBT

© Datatec 2016 WESTCON

GROUPDATATEC GROUP

LOGICALIS GROUP 25


WESTCON GROUPOUTLOOK

Continued growth in security, cloud and services

Emerging markets still challenging, but improving

BPO & SAP transformation to end by June 2017

US dollar expected to remain strong

Developing international Microsoft Cloud Service Provider relationship


GROUPWESTCON

GROUP 27DATATEC GROUP OUTLOOKOVERVIEW OPERATIONAL

STRATEGY

LOGICALIS GROUPFINANCIAL PERFORMANCE


Revenue 757.2 751.4 1%

Gross profit 175.4 169.2 4%


Operating costs (142.4) (133.7) 7%


EBITDA 33.0 35.5 (7%)

EBITDA% 4.4% 4.7%



Total revenue up 1%

Services revenue up 9%

Gross margin up to 23.2%

EBITDA down 7%


GROUPWESTCON


STRATEGY

LOGICALIS GROUP

31%

26%

32%

11%

H1 FY17

32%

29%

31%

8%

H1 FY16


36%

25%

27%

12%

H1 FY17

30%

30%

31%

9%

H1 FY16

North America

Latin America

Europe

Asia-Pacific

REVENUE AND GROSS PROFIT % CONTRIBUTION BY GEOGRAPHY


GROUPWESTCON


STRATEGY

LOGICALIS GROUPREVENUE BY SEGMENT AND PRODUCT REVENUE BY VENDOR

SEGMENT

66%

12%

22%

H1 FY17

69%

11%

20%

H1 FY16

Product

Professional services

Maintenance and managed services

VENDOR

50%

11%

6%

33%

H1 FY17

59%12%

7%

22%

H1 FY16

Cisco

IBM

HPE

Other


GROUPWESTCON


STRATEGY

LOGICALIS GROUP

GROSS PROFIT EBITDA

US$m US$m

51 50 52

16

169

6244

47

22

175

-

20

40

60

80

100

120

140

160

180

200

North America Latin America Europe Asia-Pacific Total

H1 FY16 H1 FY17

11

18

8

3

(5)

35

16 15

14

(3)

33

(10)

(5)

-

5

10

15

20

25

30

35

40

NorthAmerica

Latin America Europe Asia-Pacific Central costs Total

H1 FY16 H1 FY17

GROSS PROFIT AND EBITDA BY GEOGRAPHY


GROUPWESTCON


STRATEGY

LOGICALIS GROUPWORKING CAPITAL

US$m H1 FY17 FY 2016 H1 FY16

Deferred revenue 78.8 77.9 77.3

Inventory 61.6 47.2 53.7

Inventory days (excluding spares stock) 23 18 24

Accounts receivable 302.8 279.8 263.4

DSO (days) 50 45 52

Accounts payable (259.1) (266.4) (191.4)

DPO (days) 90 82 75

Net working capital 105.3 60.6 125.7

Net cash * 11.3 77.6 54.5

* Excluding lease liabilities, Datatec loans and other borrowings

Reduced net cashposition due to $47m spent

on acquisitions in last 12 months


GROUPWESTCON



LOGICALIS GROUPOUTLOOK

Global markets for IT products and services remain resilient

Signs of recovery in Brazil with growing order backlog

Logicalis developing its position in higher growth segments such as analytics and security

Interesting opportunities to expand in LATAM and Asia


GROUPWESTCON



DATATEC GROUPCURRENT TRADING AND PROSPECTS

Expect H2 to be sequentially & comparatively better

Underlying EPS for the full year expected to improve

Expect emerging markets to continue with slow recovery

Continue internal focus to drive further operating leverage

© Datatec 2016 36

DATATEC GROUPDEFINITIONS

UNDERLYING EARNINGS

Excluding impairment of goodwill and intangible assets, profit or loss on sale of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments, fair value movements on acquisition-related financial instruments, restructuring costs relating to fundamental reorganisations and the taxation effect on all of the aforementioned

CONSTANT CURRENCY

The pro forma constant currency information, which is the responsibility of the Datatec directors, presents the Group’s revenue for the current year had it been translated at the average foreign currency exchange rates of the prior year. This information is for illustrative purposes only and because of its nature, may not fairly present the Group’s revenues. To determine the revenues in constant currency terms, the current financial reporting period’s monthly revenues in local currency have been converted to US dollars at the average monthly exchange rates prevailing over the same period in the prior year. The calculation has been prepared for each of the Group’s currencies, materially being that of the British Pound, Euro, Brazilian Real, Australian Dollar, Canadian Dollar, Singapore Dollar, Mexican Peso and South African Rand

© Datatec 2016 37

DATATEC GROUP

This presentation may contain statements regarding the future financial performance of the Group which may be considered to be forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty, and although the Group has taken reasonable care to ensure the accuracy of the information presented, no assurance can be given that such expectations will prove to have been correct.

The Group has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. It is important to note, that:

unless otherwise indicated, forward-looking statements indicate the Group’s expectations and have not been reviewed or reported on by the Group’s external auditors;

actual results may differ materially from the Group`s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate;

the Group cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on these forward-looking statements; and

the Group disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason, other than as required by the JSE Limited Listings Requirements.

DISCLAIMER

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