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A N N U A L R E P O R T 2 0 0 5
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIMENSION DATA HOLDINGS PLC
0 5 3
We have audited the financial statements of Dimension Data
Holdings plc for the year ended 30 September 2005 which comprise
the consolidated profit and loss account, the consolidated balance
sheet, the parent company balance sheet, the consolidated cash
flow statement, the consolidated statement of total recognised
gains and losses, the reconciliation of movements of reserves and
shareholders’ funds and the related notes 1 to 37. These financial
statements have been prepared under the accounting policies set
out therein. We have also audited the information in the part of the
Directors’ remuneration report that is described as having been
audited.
This report is made solely to the Company’s members, as a body,
in accordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditors’ 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 and the Company’s members
as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
As described in the statement of Directors’ responsibilities, the
Company’s Directors are responsible for the preparation of the
financial statements in accordance with applicable United Kingdom
law and accounting standards. They are also responsible for the
preparation of the other information contained in the annual report
including the Directors’ remuneration report. Our responsibility
is to audit the financial statements and the part of the Directors’
remuneration report described as having been audited in accordance
with relevant United Kingdom legal and regulatory requirements and
auditing standards.
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements and
the part of the Directors’ remuneration report described as having
been audited have been properly prepared in accordance with the
Companies Act 1985. We also report to you if, in our opinion, the
Directors’ report is not consistent with the financial statements, if
the Company has not kept proper accounting records, if we have
not received all the information and explanations we require for
our audit, or if information specified by law regarding Directors’
remuneration and transactions with the Company and other
members of the Group is not disclosed.
We also report to you if, in our opinion, the Company has not
complied with any of the four directors’ remuneration disclosure
requirements specified for our review by the Listing Rules of the
Financial Services Authority. These comprise the amount of each
element in the remuneration package and information on share
options, details of long term incentive schemes, and defined benefit
schemes. We give a statement, to the extent possible, of details of
any non-compliance.
We review whether the corporate governance statement reflects the
Company’s compliance with the nine provisions of the July 2003
FRC Combined Code specified for our review by the Listing Rules
of the Financial Services Authority, and we report if it does not. We
are not required to consider whether the Board’s statements on
internal control cover all risks and controls, or form an opinion on
the effectiveness of the Group’s corporate governance procedures
or its risk and control procedures.
We read the Directors’ report and the other information contained
in the annual report for the above year as described in the contents
section including the unaudited part of the Directors’ remuneration
report and consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies
with the financial statements.
A N N U A L R E P O R T 2 0 0 5
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Basis of audit opinion
We conducted our audit in accordance with United Kingdom
auditing standards issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements and the part
of the Directors’ remuneration report described as having been
audited. It also includes an assessment of the significant estimates
and judgements made by the Directors in the preparation of the
financial statements and of whether the accounting policies are
appropriate to the circumstances of the Company and the Group,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the Directors’
remuneration report described as having been audited are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the
overall adequacy of the presentation of information in the financial
statements and the part of the Directors’ remuneration report
described as having been audited.
Opinion
In our opinion:
▲ the financial statements give a true and fair view of the state of
affairs of the Company and the Group as at 30 September 2005
and of the profit of the Group for the year then ended; and
▲ the financial statements and part of the Directors’ remuneration
report described as having been audited have been properly
prepared in accordance with the Companies Act 1985.
An audit does not provide assurance on the maintenance and
integrity of the website, including controls used to achieve this,
and in particular on whether any changes may have occurred to the
financial statements since first published. These matters are the
responsibility of the Directors but no control procedures can provide
absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements differs from legislation in other
jurisdictions
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
London
15 November 2005
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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Consolidated Profit and Loss Account
For the year ended 30 September 2005
2005 2005 2005 2004
$’000 $’000 $’000 $’000
Pre- Exceptional Total Total
exceptional items
Note (Note 7)
Turnover
Group turnover 3,4 2,727,857 - 2,727,857 2,368,044
Associates turnover 99,052 - 99,052 115,990
Total turnover 3 2,826,909 - 2,826,909 2,484,034
Operating profit before goodwill amortisation,
impairment and exceptional items 3 61,692 - 61,692 25,666
Exceptional operating income/(costs) - 5,895 5,895 (27,632)
61,692 5,895 67,587 (1,966)
Goodwill amortisation (3,248) - (3,248) (366)
Goodwill and investment impairment - (42) (42) (8,402)
Group operating profit/(loss) 4,5 58,444 5,853 64,297 (10,734)
Share of operating profit in associates 7,921 - 7,921 7,343
Goodwill amortisation and impairment and investment
impairment - associates (1,177) (1,280) (2,457) (11,215)
Total operating profit/(loss) 3 65,188 4,573 69,761 (14,606)
(Loss)/profit on sale of fixed assets and investments - (1,027) (1,027) 4,900
Profit/(loss) on ordinary activities before interest 65,188 3,546 68,734 (9,706)
Income from other fixed asset investments 8 2,542 - 2,542 4,614
Net interest (payable)/receivable 9 (19,477) - (19,477) 705
Profit/(loss) on ordinary activities before taxation 48,253 3,546 51,799 (4,387)
Tax on profit/(loss) on ordinary activities 10 (22,682) - (22,682) (33,238)
Profit/(loss) on ordinary activities after taxation 25,571 3,546 29,117 (37,625)
Equity minority interests (11,353) - (11,353) (178)
Retained profit/(loss) for the year transferred to reserves 14,218 3,546 17,764 (37,803)
Earnings/(loss) per ordinary share US cents US cents
Basic before goodwill amortisation, impairment and
exceptional items 11 1.4 0.9
Basic and diluted 11 1.3 (2.8)
All amounts included above relate to continuing operations.
A N N U A L R E P O R T 2 0 0 5
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As at 30 September 2005
2005 2004
Note $’000 $’000
Fixed assets
Intangible assets - goodwill 12 43,076 976
Tangible assets 13 225,167 92,467
Investments in associates 15 26,897 25,781
Other investments 16 35,935 39,013
331,075 158,237
Current assets
Stock 17 104,258 104,871
Debtors 18 637,185 547,205
Short term investments 19,28 12,528 10,946
Cash at bank and in hand 28 404,068 414,093
1,158,039 1,077,115
Creditors: amounts falling due within one year 20 (785,584) (670,245)
Net current assets 372,455 406,870
Total assets less current liabilities 703,530 565,107
Creditors: amounts falling due after more than one year 21 (272,358) (129,004)
Provisions for liabilities and charges 23 (16,755) (41,875)
Total net assets 414,417 394,228
Capital and reserves
Called up share capital 24 13,526 13,499
Share premium account 101,823 100,748
Other reserves 235,768 237,500
ESOP reserve - (219)
Profit and loss account (41,754) (61,677)
309,363 289,851
Equity minority interests 25 105,054 104,377
Equity shareholders’ funds 414,417 394,228
The financial statements were approved by the Board of Directors on 15 November 2005.
Brett Dawson
Chief Executive Officer
Dave Sherriffs
Chief Financial Officer
Consolidated Balance Sheet
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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As at 30 September 2005
2005 2004
Note $’000 $’000
Fixed assets
Tangible assets 13 37 42
Investment in subsidiaries 14 342,391 340,931
342,428 340,973
Current assets
Debtors 18 1,760 2,025
Cash at bank and in hand 574 8,096
2,334 10,121
Creditors: amounts falling due within one year 20 (591) (1,405)
Net current assets 1,743 8,716
Total assets less current liabilities 344,171 349,689
Provisions for liabilities and charges 23 (5,137) (5,882)
Total net assets 339,034 343,807
Capital and reserves
Called up share capital 24 13,526 13,499
Share premium account 101,823 100,748
Special reserve 342,439 342,439
Other reserves (19,402) (17,027)
ESOP reserve - (219)
Profit and loss account (99,352) (95,633)
Equity shareholders’ funds 339,034 343,807
The financial statements were approved by the Board of Directors on 15 November 2005.
Brett Dawson
Chief Executive Officer
Dave Sherriffs
Chief Financial Officer
Parent Company Balance Sheet
A N N U A L R E P O R T 2 0 0 5
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For the year ended 30 September 2005
2005 2004
Note $’000 $’000
Reconciliation of operating profit/(loss) to operating cash flows:
Group operating profit/(loss) 64,297 (10,734)
Depreciation 44,401 42,519
Goodwill amortisation and impairment and investment impairment 3,290 8,768
Loss on sale of tangible fixed assets 395 2,388
Increase in stock (2,449) (14,503)
Increase in debtors (85,108) (30,640)
Increase in creditors 86,578 52,198
Non-cash items - property leased asset impairment 15,755 -
- property onerous lease provision (21,205) 28,569
- retrenchments 4,749 -
- share incentive costs 3,762 -
- insurance captive cells (2,400) -
- other (1,177) (1,094)
Net cash inflow from operating activities 110,888 77,471
Returns on investments and servicing of finance 26 (8,487) 3,044
Taxation 26 (13,127) (21,975)
Capital expenditure and financial investment 26 (58,558) (31,410)
Acquisitions and disposals 26 (39,167) 1,083
Cash (outflow)/inflow before management of liquid resources and financing (8,451) 28,213
Management of liquid resources 26 (1,613) 8,461
Financing 26 (5,485) 2,922
(Decrease)/increase in cash in the year 28 (15,549) 39,596
Consolidated Cash Flow Statement
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ANNUAL FINANCIAL STATEMENTS
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For the year ended 30 September 2005
Issued share
capital
Share premium account
Other reserves
ESOP reserve
Profit and loss account
2005 Total
2004 Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 October 2004 13,499 100,748 237,500 (219) (61,677) 289,851 310,382
Profit/(loss) retained for the year - - - - 17,764 17,764 (37,803)
Sale of ESOP shares - - - 314 - 314 -
Currency adjustments - - 332 - - 332 16,798
Shares issued 27 1,264 - - - 1,291 662
Share issue expenses - (189) - - - (189) (188)
Transfers - - (2,064) (95) 2,159 - -
Balance at 30 September 2005 13,526 101,823 235,768 - (41,754) 309,363 289,851
The transfers between other reserves to the profit and loss account represent transfers required in terms of legislative requirements in
certain European subsidiaries.
For the year ended 30 September 2005
Issued share
capital
Share premium account
Special reserve
Other reserves
ESOP reserve
Profit and loss account
2005 Total
2004 Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 October 2004 13,499 100,748 342,439 (17,027) (219) (95,633) 343,807 420,841
Loss retained for the year - - - - - (3,814) (3,814) (89,715)
Sale of ESOP shares - - - - 314 - 314 -
Currency adjustments - - - (2,375) - - (2,375) 12,207
Shares issued 27 1,264 - - - - 1,291 662
Share issue expenses - (189) - - - - (189) (188)
Transfers - - - - (95) 95 - -
Balance at 30 September 2005 13,526 101,823 342,439 (19,402) - (99,352) 339,034 343,807
Other reserves comprise translation reserves.
Consolidated Statement of Movement of Reserves and Shareholders’ Funds
Company Statement of Movement of Reserves and Shareholders’ Funds
A N N U A L R E P O R T 2 0 0 5
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For the year ended 30 September 2005
2005 2004
$’000 $’000
Profit/(loss) for the year 17,764 (37,803)
Currency translation differences on foreign currency net investments 332 16,798
Realised gain on sale of ESOP shares 95 -
Total recognised gains/(losses) relating to the year 18,191 (21,005)
Consolidated Statement of Total Recognised Gains and Losses
A N N U A L R E P O R T 2 0 0 5
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1. Basis of PreparationThe Dimension Data group (‘the Group’) comprises Dimension
Data Holdings plc (‘the Company’) and its subsidiaries.
The accounts are prepared under the historical cost convention.
The accounts have been prepared in accordance with applicable
United Kingdom law and accounting standards.
The principal accounting policies are summarised below. They
have all been applied consistently throughout the year and the
preceding year.
Prior year comparatives
The comparative balance sheet and cash flow statement at 30
September 2004 have been reclassified to reflect the short term
portion of a long term creditor in creditors.
2. Accounting PoliciesBasis of consolidation
The consolidated financial statements include the financial
statements of the Company and all its subsidiaries and its share
of associated companies. The results of subsidiaries are included
from the effective dates of acquisition until the effective dates of
disposal and are accounted for under the acquisition method.
Accounting policies of subsidiaries that differ from the Group
accounting policies are adjusted on consolidation.
All significant intergroup transactions and balances have been
eliminated on consolidation.
In accordance with Section 230(3) of the Companies Act 1985
a separate profit and loss account for the Company is not
presented.
Turnover
Turnover comprises the aggregate amounts receivable for the sale
of equipment and the amounts receivable from customers for the
provision of services for installation, maintenance and call centre
operations. Turnover is recognised on transfer of risk and rewards
to the customer and when the Group’s obligations have been met.
Installation revenue
Installation revenue comprises both time and materials used on site
when performing work for customers on initial installations, adds,
moves, changes, redeployment and decommissioning. Additionally
installation revenue may include recoveries for disbursements.
Maintenance revenue and licence fees
Maintenance revenue and licence fees are recognised over the
relevant contract periods.
Call centre revenue
Turnover on contracts is recognised according to the stage of
completion of the contract by reference to the value of work
performed. The amount by which turnover differs from payments
on account is shown under debtors as accrued revenue, or under
creditors as deferred revenue, as appropriate.
Research and development
Research and development costs are recognised as an expense in
the period in which they are incurred.
Goodwill
Where an investment in a subsidiary, joint venture or associated
company is made, any difference between the purchase price
and the fair value of the attributable net assets is recognised as
goodwill. Goodwill arising on acquisitions prior to 1 October 1998
was set off against reserves in the year of acquisition. Goodwill
arising on acquisitions after 1 October 1998 is recognised within
intangible fixed assets in the year of acquisition, and amortised.
Amortisation is calculated on a straight line basis so as to write
off the goodwill over its economic life, depending on the nature
of the acquisition, for a period generally not exceeding five years.
The unamortised balance is reviewed on a regular basis, and, if an
impairment in value has occurred, it is written off in the period in
which the impairment has been identified.
NOTES TO FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
A N N U A L R E P O R T 2 0 0 5
A N N U A L R E P O R T 2 0 0 5
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Tangible fixed assets
Tangible fixed assets are stated at historical cost less accumulated
depreciation and any provision for impairment.
Depreciation is provided on a straight line basis at rates considered
appropriate to reduce their book values to estimated residual
values over the useful lives of the assets.
The following rates are generally applied:
Capitalised property finance lease Over 50 years
Leasehold land, buildings and improvements Over the lease term
Computer and workshop equipment 20 - 33% per annum
Motor vehicles 25% per annum
Office furniture and equipment 10% per annum.
Associated companies
Associated companies are those companies over which the
Group exercises significant influence and in which it holds a long
term equity interest. Investments in associated companies are
accounted for using the equity method, from the date they became
investees, whereby the Group’s share of the associated companies’
retained income for the year is included in the consolidated profit
and loss account. Attributable earnings or losses, less dividends
received, are included with the book value of the investment in the
consolidated balance sheet. Provision is made where there has
been an impairment in the carrying value of the investment.
Investments
Investments, other than investments in associated companies and
joint ventures, are reflected at the lower of cost and fair value in the
balance sheet. Fair value for unquoted investments represents the
Directors’ valuation after taking into account any impairment. Fair
value of quoted investments represents market value. Investments
held by Protocol are stated at valuation in terms of the standards
endorsed by the British Venture Capital Association. Valuations,
for unquoted investments, are based on arm’s length transactions
that took place and valuation surpluses or losses are included
in operating income. Where no such transaction took place, the
investment is assessed for impairment and any valuation losses
written off to operating income. No account is taken of valuation
surpluses indicated by the impairment review. In the case of listed
investments, the quoted share price at year end is used to value
the investment. All subsidiaries of Protocol are consolidated in
accordance with Group accounting policies.
Investments in subsidiaries are carried in the parent Company
balance sheet at cost less provisions for impairment.
Accounting for foreign investments
The balance sheets of consolidated foreign subsidiaries, together
with investments in overseas associated companies, are translated
into US dollars at the rates of exchange ruling at the balance
sheet date. The results of overseas subsidiaries and associated
companies are translated at the weighted average rates of exchange
for the year. The exchange differences arising on the retranslation
of the opening net investment, and profit for the financial year at
the closing rate, are taken to reserves.
Taxation
Current tax, including UK corporation tax and foreign tax, is
provided at amounts expected to be paid (or recovered) using the
tax rates and laws that have been enacted or substantially enacted
by the balance sheet date.
Deferred tax is provided in full on timing differences that result in
an obligation at the balance sheet date to pay more tax, or a right to
pay less tax, at a future date, at rates expected to apply when they
crystallise based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in
taxation computations in periods different from those in which they
are included in the financial statements. Deferred tax assets are
recognised to the extent that it is regarded as more likely than not
they will be recovered. Deferred tax assets and liabilities are not
discounted.
NOTES TO FINANCIAL STATEMENTS
A N N U A L R E P O R T 2 0 0 5
A N N U A L R E P O R T 2 0 0 5
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Stock
Stock is valued at the lower of the weighted average cost and net
realisable value. Cost comprises the cost of materials, direct labour
and directly attributable overheads. Net realisable value is based
on estimated normal selling price less further costs expected to be
incurred to completion and disposal. Redundant and slow-moving
stocks are identified and written down to the lower of cost or net
realisable value.
Foreign currency transactions
Transactions denominated in foreign currencies are recorded
in the local currencies at actual exchange rates at the date of
the transaction or, where appropriate, at the rate of exchange of
a related forward exchange contract. As a result of this, gains
and losses arising on forward foreign currency contracts are
recognised in the profit and loss account when the hedged
transaction is recognised in the Group’s accounts. Monetary
assets and liabilities denominated in foreign currencies at the year
end are retranslated at the rates of exchange prevailing at the year
end or, where appropriate, at the rate of exchange of a related
forward exchange contract. Any gain or loss arising from a change
in exchange rates subsequent to the date of the transaction is
included as an exchange gain or loss in the profit and loss account,
unless hedged.
The results of overseas operations are translated at the average
rates of exchange during the period and their balance sheets at the
rates ruling at the balance sheet date. Exchange differences arising
on translation of the opening net assets and on foreign currency
borrowings, to the extent that they hedge the Group’s investment
in such operations, are recorded directly in reserves and are
reported in the statement of total recognised gains and losses.
This balance represents cumulative translation differences arising
from the translation of the net assets of foreign subsidiaries into US
dollars at differing exchange rates. All other exchange differences
are included in the profit and loss account.
Finance costs
Finance costs of debt are recognised in the profit and loss account
over the term of such instruments at a constant rate on the carrying
amount.
Operating leases
Rentals are charged to the profit and loss account on a straight line
basis over the minimum lease term.
Finance leases
Assets held under finance leases and other similar contracts, which
confer rights and obligations similar to those attached to owned
assets, are capitalised as tangible fixed assets and are depreciated
over the shorter of the lease terms and their useful lives. The capital
elements of future lease obligations are recorded as liabilities, while
the interest elements are charged to the profit and loss account
over the period of the leases to produce a constant rate of charge
on the balance of capital repayments outstanding.
Pensions
The Group maintains various defined contribution pension schemes
for the benefit of employees. The amount charged to the pension
costs in the profit and loss account comprise contributions payable
to the Group’s various defined contribution schemes.
Debt
Debt is initially stated at the amount of the net proceeds after
deduction of issue costs. The carrying amount is increased by the
finance cost in respect of the accounting period and reduced by
payments made in the period. Convertible debt is reported as a
liability until conversion occurs. No gain or loss is recognised on
conversion.
NOTES TO FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
A N N U A L R E P O R T 2 0 0 5
A N N U A L R E P O R T 2 0 0 5
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Derivative financial instruments
The Group uses derivative financial instruments to reduce
exposure to foreign exchange risk and interest rate movements.
The Group does not hold or issue derivative financial instruments
for speculative purposes.
For a forward foreign exchange contract to be treated as a hedge,
the instrument must be related to actual foreign currency assets or
liabilities or to a probable commitment. It must involve the same
currency or similar currencies as the hedged item and must also
reduce the risk of foreign currency exchange movements on the
Groups’ operations. Gains and losses arising on these contracts
are deferred and recognised in the profit and loss account, or as
adjustments to the carrying amount of fixed assets, only when the
hedged transaction has itself been reflected in the Group’s financial
statements.
For an interest rate swap to be treated as a hedge the instrument
must be related to actual assets or liabilities or a probable
commitment and must change the nature of the interest rate by
converting a fixed rate to a variable rate or vice versa. Interest
differentials under these swaps are recognised by adjusting net
interest payable over the periods of the contracts.
If an instrument ceases to be accounted for as a hedge, for
example because the underlying hedged position is eliminated,
the instrument is marked to market and any resulting profit or loss
recognised at that time.
Reporting currency
As permitted by UK Company law, the Group reports in US dollars,
the currency in which a significant amount of its business is
conducted.
NOTES TO FINANCIAL STATEMENTS
A N N U A L R E P O R T 2 0 0 5
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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2005 2005 2005 2004 2004 2004
$’000 $’000 $’000 $’000 $’000 $’000
TurnoverOperating
profit/(loss)Net operating
assets TurnoverOperating
profit/(loss)Net operating
assets
Continuing operations
Africa 482,871 42,501 251,829 445,172 27,560 89,603
Asia 455,977 17,470 178,161 362,280 6,897 174,427
Australia 598,738 18,580 71,244 481,078 14,014 81,858
Continental Europe 449,585 6,927 67,841 438,841 7,353 86,473
United Kingdom 247,053 11,741 76,269 218,260 12,744 51,182
United States 481,046 7,719 41,431 416,811 4,573 39,689
Centre* 12,587 (43,246) - 5,602 (47,475) -
Group 2,727,857 61,692 686,775 2,368,044 25,666 523,232
Associates 99,052 7,921 - 115,990 7,343 -
2,826,909 69,613 686,775 2,484,034 33,009 523,232
Goodwill amortisation (4,425) (1,520)
Operating exceptional items 4,573 (46,095)
Total 2,826,909 69,761 686,775 2,484,034 (14,606) 523,232
* Comprises net holding company costs, investment in global Solutions and Services development and Group share incentive costs.
Net operating assets are total net assets excluding convertible bonds, loans and the capitalised finance lease. The significant increase in
net operating assets is as a result of the fixed asset capitalisation of a property finance lease (Note 13).
Turnover by destination is not materially different to turnover by origin.
The Directors consider that they operate one generic class of business and that business is primarily managed regionally.
3. Segmental Analysis
A N N U A L R E P O R T 2 0 0 5
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2005 2004
$’000 $’000
Group turnover 2,727,857 2,368,044
Cost of sales (2,171,872) (1,877,789)
Gross profit 555,985 490,255
Administrative expenses (491,688) (500,989)
Goodwill amortisation (3,248) (366)
Investments written down (42) (8,402)
Other operating expenses (494,293) (464,589)
Exceptional operating income/(costs) 5,895 (27,632)
Group operating profit/(loss) 64,297 (10,734)
4. Analysis of Continuing Operations
2005 2004
$’000 $’000
Group operating profit/(loss) is after charging:
Depreciation - owned 41,790 41,673
- leased 2,611 846
Goodwill amortisation 3,248 366
Investments written down 42 8,402
Loss on sale of tangible fixed assets 395 2,388
Rentals under operating leases
Hire of plant and machinery 1,408 5,718
Other operating leases 32,110 26,186
Property lease (now capitalised) 1,802 14,181
Foreign currency losses 424 3,921
Share incentive costs 3,762 -
Auditors’ remuneration
Audit fees 2,980 2,606
Other assurance services 570 343
Taxation - compliance 236 326
- advisory 816 1,129
Other 286 86
The depreciation on leased assets includes an amount of US$1.9 million relating to the capitalised property finance lease, for the period
commencing on 15 November 2004.
The Company auditors’ remuneration has been borne by the Group in both years.
5. Group Operating Profit/(Loss)
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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Information regarding Directors and Employees
2005 2004
Average number of persons employed by the Group:
Africa 3,168 3,557
Asia 1,196 1,119
Australia 1,108 992
Continental Europe 1,056 977
United Kingdom 1,609 1,316
United States 558 602
8,695 8,563
2005 2004
$’000 $’000
Staff costs included in administrative expenses incurred during the year in respect of these employees were:
Wages and salaries 475,488 420,642
Social security costs 36,212 36,631
Pension costs 17,400 16,775
529,100 474,048
Disclosures on Directors’ remuneration, pension entitlements, shareholding and share options required by the Companies Act 1985, the
Directors’ Remuneration Report Regulations 2002 and those specified for audit by the Financial Services Authority, are set out in the
Remuneration Report on pages 38 to 45.
6. Information Regarding Directors and Employees
A N N U A L R E P O R T 2 0 0 5
0 6 8
2005 2004
Note $’000 $’000
Exceptional operating income/(costs)
Property leased asset impairment (a) (15,755) -
Release/(provision) of property onerous lease (b) 21,205 (25,064)
Insurance captive cells (c) 2,400 -
Retrenchments (d) (5,180) -
Other (e) 3,225 (2,568)
5,895 (27,632)
Investments written down (42) (8,402)
Goodwill and investment impairment - associates (1,280) (10,061)
(1,322) (18,463)
Total exceptional operating income/(costs) 4,573 (46,095)
Other exceptional items
(Loss)/profit on sale of fixed assets and investments (f) (1,027) 4,900
Total other exceptional items (1,027) 4,900
Total exceptional items before taxation and equity minority interests 3,546 (41,195)
a) Impairment of land and buildings in South Africa subsequent to the capitalisation of the property lease obligation.
b) Release of the prior period onerous lease provisions in respect of the property lease obligation.
c) Recognition of insurance captive cell assets, previously expensed.
d) Retrenchment and restructuring expenses predominantly in Europe.
e) Other includes a write back of a prior year creditor of US$1.8 million in relation to the Proxicom acquisition and the release of a fair
value provision of US$3.2 million relating to the Comparex acquisition. It also includes a write down of long outstanding work in
progress and debtors balances of US$2.5 million in respect of the cabling business in the UK.
f) Includes an impairment of US$2.4 million of an endowment investment in South Africa. This endowment was part settled in October
2005, subsequent to year end (Note 35).
7. Exceptional Items
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 6 9
2005 2004
$’000 $’000
Subsidiaries:
Interest receivable on bank balances and investments 12,929 10,938
Interest payable (32,864) (10,544)
Capitalised finance lease (20,002) -
Convertible bonds (6,158) (6,017)
Bank overdraft and other borrowings (6,704) (4,527)
Associates:
Interest receivable 458 418
Interest payable - (107)
Net interest (payable)/receivable (19,477) 705
The finance lease was capitalised on 15 November 2004.
2005 2004
$’000 $’000
Yield on endowment policy 1,734 3,373
Other 808 1,241
2,542 4,614
8. Income from Other Fixed Asset Investments
9. Net Interest (Payable)/Receivable
A N N U A L R E P O R T 2 0 0 5
0 7 0
2005 2004
$’000 $’000
Payable in respect of the current year
UK corporation tax - 2,833
Foreign 18,844 18,893
Share of associates’ taxation 2,137 2,584
Withholding taxes 594 270
21,575 24,580
Adjustments to prior years’ tax provision
UK corporation tax - (547)
Foreign (991) (4,177)
Total current tax 20,584 19,856
Deferred taxation
Current 3,401 (4,852)
Adjustments to prior years (1,303) 18,234
Total tax charge 22,682 33,238
Reconciliation of expected tax charge using the standard tax rate to the actual current tax charge
The differences between the Group’s expected tax charge, using the Group’s standard corporation tax rate of 29% in 2005 (2004: 30%),
and the Group’s current tax charge, were as follows:
2005 2004
$’000 $’000
Total profit/(loss) before taxation 51,799 (4,387)
Goodwill amortisation and impairment and investment impairment 5,747 19,983
Other non-operating exceptional items 1,027 (4,900)
Adjusted profit before goodwill amortisation and non-operating exceptional items 58,573 10,696
Expected tax charge at standard tax rate on profit before goodwill amortisation and
non-operating exceptional items 16,986 3,209
Expenses not deductible 12,192 2,484
Short term timing differences (1,977) (18,174)
Net tax losses created/utilised 7,145 44,468
Adjustments with respect to prior years (991) (4,724)
Non-taxable profits (16,821) (9,559)
International corporate tax differentials and other 4,050 2,152
Actual current tax charge 20,584 19,856
10. Tax on Profit/(Loss) on Ordinary Activities
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 7 1
2005 2004
$’000 $’000
Profit before goodwill amortisation, impairment and exceptional items 18,643 11,434
Goodwill amortisation (4,425) (1,520)
14,218 9,914
Exceptional items (net of tax and minorities) 3,546 (47,717)
Profit/(loss) for the year 17,764 (37,803)
2005 2004
’000 ’000
Weighted average number of ordinary shares in issue 1,343,895 1,342,286
2005 2004
US cents US cents
Basic earnings per ordinary share before goodwill amortisation, impairment and exceptional items* 1.4 0.9
Basic loss per ordinary share on goodwill amortisation (0.3) (0.1)
Basic earnings/(loss) per ordinary share on exceptional items 0.2 (3.6)
Basic and diluted earnings/(loss) per ordinary share 1.3 (2.8)
* Basic earnings per ordinary share before goodwill amortisation, impairment and exceptional items is shown to reflect continuing trading
results.
Basic earnings/(loss) per share represents the net profit/(loss) attributable to ordinary shareholders, being the profit/(loss) on ordinary
activities after taxation and minority interests.
In the current year the Share Option Schemes, the Share Appreciation Rights Scheme, the Long Term Incentive Plan and the convertible
bonds had no impact on basic earnings per share, therefore diluted earnings per share is the same as basic earnings per share.
11. Earnings/(Loss) per Ordinary Share
A N N U A L R E P O R T 2 0 0 5
0 7 2
2005 2004
$’000 $’000
Cost
At beginning of the year 5,058,457 5,057,115
Acquisitions during the year 43,947 1,079
Fair value adjustments - (1,047)
Other movements 1,307 1,310
Cost at end of the year 5,103,711 5,058,457
Accumulated amortisation
At beginning of the year (5,057,481) (5,057,115)
Charge for the year (3,248) (366)
Other movements 94 -
At end of the year (5,060,635) (5,057,481)
Net carrying value at end of the year 43,076 976
12. Intangible Fixed Assets: Goodwill
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 7 3
Group Leasehold land, buildings and
improvements
Computer and workshop
equipmentMotor
vehiclesOffice furniture and equipment Total
$’000 $’000 $’000 $’000 $’000
Cost
At 1 October 2004 41,931 194,098 1,363 74,771 312,163
Foreign exchange translation differences 2,074 1,108 10 593 3,785
Additions 137,633 46,911 313 7,262 192,119
Subsidiaries acquired 27 372 239 163 801
Disposals (including subsidiaries) (1,207) (18,447) (280) (1,776) (21,710)
At 30 September 2005 180,458 224,042 1,645 81,013 487,158
Accumulated depreciation
At 1 October 2004 (21,306) (141,110) (1,002) (56,278) (219,696)
Foreign exchange translation differences 108 (1,193) (7) (610) (1,702)
Charge for the year (4,989) (30,696) (183) (8,533) (44,401)
Asset impairments (15,793) - - (15) (15,808)
Subsidiaries acquired (6) (179) (163) (78) (426)
Disposals (including subsidiaries) 928 17,198 274 1,642 20,042
At 30 September 2005 (41,058) (155,980) (1,081) (63,872) (261,991)
Net book value
30 September 2004 20,625 52,988 361 18,493 92,467
30 September 2005 139,400 68,062 564 17,141 225,167
The carrying amount of the land and buildings, included in additions, in respect of assets held under finance lease amounts to US$114.1 million.
The land and buildings consist of the Dimension Data leased property, located in South Africa. The land portion of US$11.3 million is not depre-
ciated. The cost of the bare dominium was US$4.6 million. The land and buildings are encumbered as security for the finance lease.
A portion of the land and buildings, being the space occupied by third party tenants and the space not occupied, was subject to impairment
on capitalisation date, being 15 November 2004, and again at the year end. The market value used during the impairment consideration was
based on the current estimated realisable value of the land and buildings. The value used in the impairment calculation on capitalisation date
and at the 2005 financial year end has been determined based on a valuation completed by management. This valuation is comparable with
an offer received from an independent third party. The impairment loss amounted to US$15.8 million.
The buildings are depreciated over 50 years, with no residual value.
The Company has office furniture and fittings amounting to a net book value of US$37,000 (2004: US$42,000)
13. Tangible Fixed Assets
A N N U A L R E P O R T 2 0 0 5
0 7 4
Company Company
2005 2004
$’000 $’000
Shares in subsidiaries 235,101 227,609
Amounts due from subsidiary undertakings 107,290 113,322
342,391 340,931
Analysis of movements in shares in subsidiaries
Balance at beginning of the year 227,609 247,952
Net acquisitions and transfers - recapitalisation of subsidiary 11,059 860
Impairment - Dimension Data Network Services Ltd (3,567) (21,203)
Balance at end of the year 235,101 227,609
Investment in subsidiaries represents the investments in Spectrum Holdings Inc., Dimension Data (South Africa) (Pty) Ltd, Dimension Data
Network Services Ltd, Dimension Data Global Management Services (Pty) Ltd, Dimension Data (South Africa) Holdings (Pty) Ltd and the
preference share in Dimension Data Commerce Centre Ltd. Note 37 contains details of the principal subsidiaries.
The investment in subsidiaries has been impaired to reflect the tangible net asset values. The investment in Dimension Data Network
Services Ltd has been impaired by US$3.6 million (2004: US$18.5 million).
14. Investment in Subsidiaries
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 7 5
2005 2004
$’000 $’000
The carrying value consists of:
Unquoted - share of net assets 10,415 12,475
- goodwill 814 1,626
Loans, less provisions 7,310 3,901
18,539 18,002
Quoted - share of net assets 8,358 7,779
Total 26,897 25,781
Directors’ values
Unquoted 11,229 14,101
Loans, less provisions 7,310 3,901
18,539 18,002
Market value
Quoted 18,720 13,581
Analysis of movements in investments in associates:
Balance at beginning of the year 25,781 39,067
Acquired 12 202
Share of current year profits 8,334 7,343
Tax on current year profits (2,137) (2,584)
Share of associates’ reserves - (3,020)
Current year amortisation of goodwill (1,177) (1,154)
Impairment of goodwill - (7,399)
Revaluation/(impairment) of loan to associate 307 (2,662)
Dividends received (2,597) (3,366)
Disposals and transfers (513) (4,793)
Currency movements (129) 5,882
Movement in loans to associates (984) (1,735)
Balance at end of the year 26,897 25,781
Futher details of associates are included in Note 37.
15. Investments in Associates
A N N U A L R E P O R T 2 0 0 5
0 7 6
2005 2004
$’000 $’000
Unquoted 35,935 39,013
35,935 39,013
Other investments include an endowment policy of US$21.8 million (2004: US$22.4 million) and various
investments in the Group’s venture capital arm, Protocol. Part of the endowment was surrendered after
the year end (Note 35).
Directors’ values 35,935 39,013
Analysis of movements in other investments:
Balance at beginning of the year 39,013 33,136
Acquired 195 1,522
Yield on endowment policy 1,734 3,373
Impairment of investments (3,844) (2,412)
Disposals (1,035) (1,261)
Transfers (117) 1,614
Currency movements (11) 3,041
Balance at end of the year 35,935 39,013
16. Other Investments
2005 2004
$’000 $’000
Resale and demonstration 67,767 70,549
Work-in-progress 11,548 7,364
Maintenance 24,943 26,958
104,258 104,871
17. Stock
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 7 7
Company Company Group Group
2005 2004 2005 2004
$’000 $’000 $’000 $’000
Trade debtors - - 474,176 421,593
Other debtors 1,743 2,025 49,898 27,955
Prepayments 17 - 74,218 59,521
Accrued income - - 12,522 12,556
Taxation authorities - - 17,057 15,606
Deferred taxation (Note 23) - falling due within one year - - 1,814 1,347
- falling due after more than one year - - 7,500 8,627
1,760 2,025 637,185 547,205
18. Debtors
2005 2004
$’000 $’000
Deposits 12,528 10,946
12,528 10,946
The deposits are short term cash deposits earning interest at interbank linked rates.
19. Short Term Investments
A N N U A L R E P O R T 2 0 0 5
0 7 8
Company Company Group Group
2005 2004 2005 2004
$’000 $’000 $’000 $’000
Bank loans and overdrafts - - 6,038 372
Trade creditors - - 244,424 262,596
Taxation and social security 117 - 96,057 98,926
Other creditors - 501 108,655 73,917
Accruals 474 904 177,465 126,195
Deferred income - - 139,419 104,093
Trading current liabilities 591 1,405 772,058 666,099
Deferred consideration - - 9,506 111
Current portion of convertible bonds (Note 21) - - 4,020 4,035
Other current liabilities - - 13,526 4,146
Total creditors 591 1,405 785,584 670,245
Deferred consideration relates to amounts due in respect of certain purchase agreements to be paid in cash. These amounts are interest
free and will, with the exception of US$4.2 million, be settled in the next financial year. This amount includes US$4.2 million in respect
of Dimension Data Limited (Nigeria), US$3.8 million in respect of Bellerephon Group Pty Ltd (Australia) and US$1.4 million in respect of
Euricom NV (Belgium). These amounts represent management’s current best estimate of the amounts to be paid and are based on future
profitability.
20. Creditors: Amounts Falling Due Within One Year
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 7 9
2005 2004
$’000 $’000
Capitalised finance lease 142,805 -
Convertible bonds 105,405 104,941
Loan 28,168 28,098
276,378 133,039
Less: current portion of convertible bonds (Note 20) (4,020) (4,035)
272,358 129,004
The finance lease relates to land and buildings capitalised on 15 November 2004 (Note 13). The 15 year lease agreement was entered into
on 3 February 2003 and terminates on 31 January 2018. The lease incorporates interest at 16.79%. The current monthly lease payments
of US$1.08 million are payable in advance and escalate at 11% per annum. The Company acts as surety and guarantor against any default.
In addition, the obligation under the finance lease is secured by the lessor’s charge over the leased assets.
The minimum lease payments do not service the interest until 2010. Accordingly, no capital will be repaid for the first seven years.
21. Creditors: Amounts Falling Due After More Than One Year
Obligation under capitalised finance lease
Minimum lease payments
2005 2004
$’000 $’000
Amounts payable under finance lease agreement:
Within one year 17,517 -
Between one and five years 91,574 -
After five years 307,802 -
416,893 -
Less: finance charges allocated to future periods (274,088) -
142,805 -
The terms of the convertible bonds are set out in Note 22.
The loan of US$28.2 million, which was used to purchase equipment, is unsecured. Interest is payable semi-annually in arrears and is
linked to South African interbank rates. This loan was settled subsequent to the year end (Note 35).
A N N U A L R E P O R T 2 0 0 5
0 8 0
22. Terms of Convertible Bonds
On 31 December 2002 ten seven year unsecured convertible bonds
(‘the bonds’) of US$10 million each were issued to provide working
capital for the Group. The bonds were issued by Howper 266 Ltd
(a wholly owned subsidiary of Dimension Data) and unconditionally
and irrevocably guaranteed by the Company. The bonds were
purchased by R&V Technology Holdings (R&V), an associate of
VenFin Ltd, a quoted investment holding company incorporated
in South Africa and listed on the JSE Securities Exchange, South
Africa. If converted, the bonds will provide R&V with an additional
equity holding equivalent to about 12.3% of the enlarged share
capital of the Company. The maximum number of Dimenson Data
ordinary shares to be issued on conversion is 188,121,978 ordinary
shares.
The bonds’ principal amount is US$100 million with a coupon rate
of 5.375% per annum payable annually in arrears. The bonds
are unlisted and, if not previously redeemed or converted into
ordinary shares of the Company, will be redeemed at 103.125% of
the principal amount on 31 December 2009. The bonds’ yield to
maturity is 5.750%.
The bonds are convertible at the option of the bondholder at any
time. The conversion price equates to 53.157 US cents, being
34.075 UK pence converted at a fixed exchange rate of £1 equal
to US$1.56.
The issuer may redeem the bonds, together with a prorata portion
of the redemption premium and accrued interest, at any time after
31 December 2005, subject to the share price, translated into US
dollars at the ruling exchange rate, exceeding 79.736 US cents
(being 150% of 53.157 US cents), for each of not less than 20
trading days within a period of 30 consecutive trading days.
The bondholder may require the issuer to redeem the bonds,
together with a prorata portion of the redemption premium and
accrued interest, on 31 December 2007 or quarterly thereafter.
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 8 1
Group
Restructuring and redundancy
Deferred taxation Other Total
$’000 $’000 $’000 $’000
Balance at 1 October 2004 4,115 6,387 31,373 41,875
Created 1,832 - 835 2,667
Released to the profit and loss account - (698) (20,396) (21,094)
Utilised (2,564) - (4,443) (7,007)
Other movements - 627 - 627
Currency movements (53) (2) (258) (313)
Balance at 30 September 2005 3,330 6,314 7,111 16,755
Restructuring and redundancy provisions relate to the US and Europe. These provisions are expected to be utilised in the next financial
year.
Other provisions include US$5.7 million in respect of onerous leases.
The Company has a deferred tax liability of US$5.1 million (2004: US$5.9 million) relating to foreign exchange differences. The Company
has an unprovided deferred tax liability of US$37.2 million (2004: US$30.0 million), relating to translation differences on loan accounts
included in equity. Tax is not provided on these differences as this tax is unlikely to arise as the loans are equity in nature and will not be
repaid.
The amounts of deferred taxation and timing differences provided and unprovided in the Group accounts are as follows:
Group
Provided Unprovided Provided Unprovided
2005 2005 2004 2004
$’000 $’000 $’000 $’000
Provisions (9,043) (9,431) (3,407) (11,353)
Assets 15 (115,458) - (68,373)
Losses (1,007) (215,247) (4,244) (293,994)
Foreign exchange differences 5,132 37,227 5,877 30,000
Other 1,903 (15,643) (1,813) 577
(3,000) (318,552) (3,587) (343,143)
Analysed as:
Deferred tax asset (Note 18) (9,314) (9,974)
Deferred tax provision 6,314 6,387
(3,000) (3,587)
23. Provisions for Liabilities and Charges
A N N U A L R E P O R T 2 0 0 5
0 8 2
Group and Company
Number of shares $’000
Number of shares $’000
2005 2005 2004 2004
Authorised:
Deferred shares of £1 each 50,000 75 50,000 75
Ordinary shares of 1 US cent each 3,000,000,000 30,000 3,000,000,000 30,000
30,075 30,075
Called up, allotted and fully paid:
Deferred shares of £1 each 50,000 75 50,000 75
Ordinary shares of 1 US cent each 1,345,050,505 13,451 1,342,437,229 13,424
13,526 13,499
Ordinary shares issued during the year ended
30 September 2005
Nominal Value
Number $’000
Opening balance 1,342,437,229 13,424
Employee share option schemes 2,613,276 27
Closing balance 1,345,050,505 13,451
2,598,125 ordinary shares were issued in terms of the Share Option Scheme, for a total consideration of US$1.3 million.
In terms of the agreement for the acquisition of the oustanding interests in Dimension Data Australia Pty Ltd (‘DD Australia’) in 2000, DD
Australia option holders are entitled to Dimension Data shares, on an agreed ratio, when their options vest. During the year 15,151 ordinary
shares were issued in terms thereof. There are no further options outstanding as at the year end.
The terms of the deferred shares appear in the Directors’ Report on page 28.
24. Called Up Share Capital
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 8 3
2005 2004
$’000 $’000
Balance at beginning of the year 104,377 99,052
Share of current year profits (excluding associates) 11,307 151
Subsidiaries acquired (6,270) 106
Share of reserves and changes in holdings (4,390) 5,537
Dividends paid - (1,561)
Exchange differences 30 1,092
Balance at end of the year 105,054 104,377
The subsidiaries acquired includes an amount of US$10.3 million representing the 20% increase in the Group’s interest in Internet
Solutions (Pty) Ltd.
25. Equity Minority Interests
Employee Incentive Schemes
2005 2004
Number of options on ordinary shares in the Company outstanding in terms of the Option Schemes
Opening balance 153,018,535 140,900,490
Granted - 37,663,165
Exercised and paid (2,598,125) (382,875)
Lapsed (21,891,648) (25,162,245)
Closing balance 128,528,762 153,018,535
Prior to the Company’s listing on the LSE, options related to shares in Dimension Data Holdings Ltd. Subsequent to the listing the options
were varied to enable participants to acquire shares in the Company in place of Dimension Data Holdings Ltd.
Details of the Employee Incentive Schemes appear in Note 36.
24. Called Up Share Capital (Continued)
A N N U A L R E P O R T 2 0 0 5
0 8 4
2005 2004
Note $’000 $’000
Returns on investments and servicing of finance
Interest and other investment income received 13,909 11,060
Interest paid (24,993) (9,935)
Dividends received from associates 2,597 3,480
Dividends paid to minority shareholders - (1,561)
(8,487) 3,044
Taxation
Reconciliation to taxation paid:
Taxation charge (18,447) (17,272)
Movement in taxation payable 5,436 (4,703)
Taxation acquired with subsidiaries 27 (116) -
(13,127) (21,975)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (59,709) (32,893)
Receipts from sales of fixed assets 312 635
Sale of fixed asset investments 839 848
(58,558) (31,410)
Acquisitions and disposals
Purchase of subsidiary undertakings - current acquisitions 27 (43,175) (1,249)
- other acquisitions (461) (4,761)
Deferred consideration paid (55) (5,702)
Net cash acquired with subsidiaries 1,210 94
Sale of subsidiaries 2,468 7,115
Movement in investment in associates 846 5,586
(39,167) 1,083
Management of liquid resources
Purchase of short term investments (1,614) (5)
Sale of short term investments 1 8,466
(1,613) 8,461
Financing
Issue of ordinary share capital net of expenses 1,291 191
Changes in minority shareholdings (6,776) 2,731
(5,485) 2,922
26. Notes to the Cash Flow Statement
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 8 5
Total
$’000
Net assets acquired:
Tangible fixed assets 375
Stock 51
Debtors 4,474
Cash at bank and in hand 1,210
Creditors (3,687)
Taxation (116)
Deferred tax 81
Equity minority interests 6,270
8,658
Goodwill 43,947
52,605
Satisfied by:
- Cash 43,175
Deferred consideration
- Cash 9,430
52,605
Acquisitions include a 20% increase in Internet Solutions (Pty) Ltd (effective 19.48%), a 50% increase in Pebbletree Consulting (Pty) Ltd,
a 51% interest in Bellerephon Group Pty Ltd, a 100% interest in Euricom NV and a 51% interest (effective 50%) in Dimension Data Ltd
(Nigeria).
All the above acquisitions were accounted for on the acquisition basis.
27. Acquisitions
A N N U A L R E P O R T 2 0 0 5
0 8 6
At 1 October
2004Cash flow
Reclassi-fication
Other non-cash changes
Exchange movements
At 30 September
2005
$’000 $’000 $’000 $’000 $’000 $’000
Cash at bank and in hand 414,093 (9,883) - - (142) 404,068
Bank overdraft (372) (5,666) - - - (6,038)
413,721 (15,549) - - (142) 398,030
Short term investments 10,946 1,613 - - (31) 12,528
424,667 (13,936) - - (173) 410,558
Debt due within two to five years (28,098) 5,390 (100,906) (5,836) (103) (129,553)
Debt due more than five years (100,906) - 100,906 (140,058) (2,747) (142,805)
Total 295,663 (8,546) - (145,894) (3,023) 138,200
Other non-cash changes include an amount of US$133.7 million, being the capitalisation of the finance lease, the capitalised interest
amounting to US$20.0 million and the interest paid of US$13.7 million.
2005 2004
$’000 $’000
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in the year (15,549) 39,596
Cash outflow from decrease in debt 5,390 5,375
Cash outflow/(inflow) from increase/(decrease) in liquid resources 1,613 (8,461)
Change in net cash resulting from cash flows (8,546) 36,510
Non-cash movement in debt - interest and
premium accrued on convertible bonds (5,836) (6,157)
Non-cash movement in debt - capitalised finance lease (140,058) -
Non-cash movement in short term investments - (9,070)
Translation differences (3,023) 14,617
Movement in net cash for the year (157,463) 35,900
Net cash at beginning of the year 295,663 259,763
Net cash at end of the year 138,200 295,663
28. Analysis of Net Funds
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
0 8 7
At the end of the year the Group was committed to making the following payments during the next year in respect of:
2005 2004
$’000 $’000
Within one year 17,456 31,968
Within two to five years 29,037 112,921
After five years 3,802 337,414
50,295 482,303
The Company has no operating lease commitments (2004: nil).
29. Operating Lease Commitments
A N N U A L R E P O R T 2 0 0 5
0 8 8
30. Financial Instruments
The Group’s funding, liquidity and exposure to interest rate and
foreign exchange rate risks are managed by the Group’s treasury
operations. Treasury operations are conducted within a framework
of policies and guidelines authorised by the Board. The Group
uses derivative instruments for risk management purposes only,
and these are transacted by specialist treasury personnel. The
internal control environment is reviewed regularly.
The Group hedges its transactional foreign exchange rate risk, using
forward exchange contracts as soon as there is a firm contractual
commitment. The gain or loss on the hedge is recognised at the
same time as the underlying transaction. The Group also uses
interest rate swaps to manage its interest rate profile.
Credit risk: a number of major international financial institutions
are counterparties to the foreign exchange contracts and deposits
transacted by the Group. The Group continually monitors its
position and the credit ratings of its counterparties and credit
exposure to each counterparty.
Speculative use of financial instruments or derivatives is not
permitted and none has occurred during any period presented.
The Group has transactional currency exposures arising from sales
or purchases by an operating unit in currencies other than the unit’s
functional currency. Under the Group’s foreign exchange policy,
such transaction exposures are hedged once they are known,
mainly through the use of forward foreign exchange contracts.
The Group has undrawn borrowings facilities of US$6.9 million
(2004: US$12.6 million).
Short term debtors and creditors have been omitted from all
disclosures.
30(a) Maturity Profile of Financial Liabilities
2005 2005 2005 2004 2004 2004
Bank borrowings, convertible bonds and
loans Other Total
Bank borrowings, convertible bonds and
loans Other Total
$’000 $’000 $’000 $’000 $’000 $’000
Within one year or less or on demand 6,038 9,506 15,544 372 111 483
Within two to five years 129,553 - 129,553 28,098 - 28,098
More than five years 142,805 - 142,805 100,906 - 100,906
Gross financial liabilities 278,396 9,506 287,902 129,376 111 129,487
Included in the US$278.4 million are guaranteed convertible bonds of US$101.4 million (2004: US$100.9 million), the terms of which are
detailed in Note 22, a capitalised finance lease of US$142.8 million (2004: nil) and a US$28.2 million loan (2004: US$28.1 million) (Note 21).
The amount in Other relates to deferred consideration (Note 20).
0 8 8
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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30(b) Interest Rate and Currency Profiles
The main functional currency of the Group is the US dollar, being the currency in which the majority of purchases are denominated and to
which most of the selling prices are linked. Other major currencies are the South African rand, Sterling, Australian dollar, Singapore dollar
and the Euro. Monetary assets and liabilities are generally economically hedged and therefore there are limited transactional exposures
that would give rise to net currency gains or losses in the profit and loss account.
The interest rate and currency profiles of the Group’s financial liabilities are as follows:
Financial Liabilities
2005 2005 2005 2005 2004 2004 2004 2004
Fixed
rate
financial
liabilities
Floating
rate
financial
liabilities
Non-interest
bearing
financial
liabilities Total
Fixed
rate
financial
liabilities
Floating
rate
financial
liabilities
Non-interest
bearing
financial
liabilities Total
Currency $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
US dollars 101,385 42 4,313 105,740 100,906 7 111 101,024
South African rand 142,805 34,128 - 176,933 - 28,343 - 28,343
Euro - 36 1,384 1,420 - 120 - 120
Australian dollars - - 3,809 3,809 - - - -
Gross financial liabilities 244,190 34,206 9,506 287,902 100,906 28,470 111 129,487
The fixed rate financial liability relates to the convertible bonds, which bear interest at 5.375%, and the capitalised finance lease, as
detailed in Notes 21 and 22. Floating rate balances relate to bank loans, overdrafts and loans. Interest is based on the relevant interbank
rate. The non-interest bearing financial liabilities relate to deferred consideration.
30. Financial Instruments (Continued)
A N N U A L R E P O R T 2 0 0 5
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30. Financial Instruments (Continued)
30(b) Interest Rate and Currency Profiles (continued)
Financial Assets
2005 2005 2005 2004 2004 2004
Floating rate financial assets
Equity investments Total
Floating rate financial assets
Equity investments Total
Currency $’000 $’000 $’000 $’000 $’000 $’000
US dollars 180,928 1,080 182,008 160,799 1,104 161,903
South African rand 85,279 30,226 115,505 88,258 33,020 121,278
Australian dollars 86,976 - 86,976 77,419 - 77,419
Euro 43,553 4,629 48,182 68,470 2,880 71,350
Sterling 13,531 - 13,531 23,204 2,009 25,213
Swiss Francs 4,286 - 4,286 5,190 - 5,190
Other 2,043 - 2,043 1,699 - 1,699
Gross financial assets 416,596 35,935 452,531 425,039 39,013 464,052
Floating rate financial assets comprise cash at bank and in hand of US$404.1 million (2004: US$414.1 million) and deposits of
US$12.5 million (2004: US$10.9 million). Interest on floating rate bank deposits is based on the relevant interbank rate.
The equity investments are unquoted equities, as detailed in Note 16.
30(c) Fair Values of Financial Assets and Liabilities
Gross Financial Liabilities
The estimated fair value of the gross financial liabilities amounting to US$287.9 million (2004: US$129.5 million) equates to the carrying
amount.
The fair value of the capitalised finance lease is deemed to be the same as the carrying value, as the lease has been capitalised at a fixed
interest rate, which was market related at the time of entering into the lease, based on the credit risk rate of the Group.
The fair value of the convertible bonds is deemed to be the same as the carrying value as it is not practical to estimate the fair value with
sufficient reliability due to the uncertainty of the future cash flows of the various options contained in the terms of the convertible bonds
(Note 22).
Gross Financial Assets
The estimated fair value of the gross financial assets amounting to US$452.5 million (2004: US$464.1 million) approximates the carrying
amount.
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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30(c) Fair Values of Financial Assets and Liabilities (continued)
Estimated fair value Estimated face value
Derivative financial instruments held to manage the Group’s currency profile
2005 2004 2005 2004
$’000 $’000 $’000 $’000
US dollars 1,013 (324) 67,505 49,846
South African rand 70 35 19,650 16,008
Australian dollars (20) - 2,506 -
Euro (60) (425) 1,770 916
Sterling 65 2 1,637 407
Forward exchange contracts 1,068 (712) 93,068 67,177
The carrying value of derivative financial instruments at each year end is nil.
The Group has entered into certain forward foreign exchange contracts that do not relate to specific items appearing in the balance sheet.
These contracts were entered into to cover foreign commitments not yet due. Market values have been used to determine the fair values of
these forward foreign exchange contracts.
30. Financial Instruments (Continued)
30(d) Hedging
The Group’s policy is to hedge all material transactional currency exposure.
An analysis of the unrecognised hedging gains and losses is as follows:
Gains Losses
Total net gains/(losses)
$’000 $’000 $’000
Unrecognised gains and losses on hedges at 1 October 2004 414 (1,126) (712)
Gains and losses arising in previous years that were recognised this year (414) 1,126 712
Gains and losses arising before 1 October 2004 that were not recognised in the year - - -
Gains and losses arising in the year to 30 September 2005 that were not recognised in that
year 2,121 (1,053) 1,068
Unrecognised gains and losses on hedges at 30 September 2005 expected to be
recognised in the year to 30 September 2006 2,121 (1,053) 1,068
A N N U A L R E P O R T 2 0 0 5
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Group 2005 2004
$’000 $’000
Guarantees 14,386 8,038
Other 15,739 9,583
30,125 17,621
Other includes US$5.3 million (2004: US$1.4 million) in respect of contract performance and US$7.7 million (2004: US$1.0 million) in respect
of bills under discount.
31. Pension Schemes
In most countries, the employing company provides either defined
contribution or insured retirement plans to their employees. The relevant
company, and in some cases the employees, pay regular contributions
to the plans. Once contributions are made, the relevant company has no
liability in respect of these plans. Pension costs are disclosed in Note 6.
Employees in France, Japan and Korea are entitled to lump-sum
termination indemnity payments upon leaving. Provisions have
been established in respect of these liabilities.
32. Related-party Transactions
Related parties are entities with common direct or indirect
shareholders and/or directors. The principal shareholders of the
Group are listed on page 50. The Group and its subsidiaries, in the
ordinary course of business, enter into various sale, purchase, service
and investment transactions with associates and others in which the
Group has an interest. These transactions are under terms that are no
more favourable than those arranged with third parties.
The Company has taken advantage of the exemption under
Financial Reporting Standard 8 from disclosing transactions with
entities that are part of the Group.
There were no significant related-party transactions during the
current year that require disclosure.
33. Contingencies
Group 2005 2004
$’000 $’000
Authorised, contracted for 11,952 3,099
Authorised but not yet contracted 42,052 16,757
54,004 19,856
Capital commitments for 2006 include computer equipment amounting to US$34.9 million and office furniture and fittings amounting to
US$4.4 million.
34. Capital Commitments
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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36(a) Option Schemes
Options oustanding at year end:
Grant Price Latest expiry date Weighted average price
Number of share options
2005
R17.95 - R30.00 29/07/2007 - 03/11/2009 R23.41 35,343,903
R30.01 - R63.30 03/04/2008 - 05/06/2010 R40.39 516,845
£0.16 - £0.30 01/08/2012 - 03/08/2014 £0.25 39,430,679
£0.31 - £0.40 18/11/2013 - 24/05/2014 £0.36 29,483,970
£0.41 - £0.55 04/04/2012 - 01/07/2012 £0.52 290,000
£0.56 - £0.80 08/10/2006 - 03/05/2012 £0.70 17,503,802
£0.81 - £6.33 02/10/2010 - 22/08/2011 £2.61 5,959,563
128,528,762
36. Employee Incentive Schemes
35. Post Balance Sheet Event
On 28 October 2005 a South African loan amounting to US$28.2 million was settled. Simultaneously we part surrendered an endowment
policy in the amount of US$18.5 million.
A N N U A L R E P O R T 2 0 0 5
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36(b) Share Appreciation Rights Scheme
Share Appreciation Rights (SARS) outstanding at year end:
Grant price Grant dateLatest
expiry date
Number of SARS
2005
£ 0.36 05/01/2005 05/01/2011 17,522,572
£ 0.39 15/02/2005 15/02/2011 2,300,000
£ 0.36 25/02/2005 25/02/2011 4,348,148
£ 0.36 07/03/2005 07/03/2011 5,700,890
£ 0.33 08/07/2005 08/07/2011 1,161,643
31,033,253
There is no amount payable by participants on exercise. They will receive an amount equal to the increase in value between the grant date
and the exercise date.
36(c) Long Term Incentive Plan
Long Term Incentive Plan awards (LTIPs) outstanding at year end:
Grant price Grant dateApproximate vesting date
Number of LTIPs
2005
£ 0.36 05/01/2005 December 2007 10,151,470
£ 0.39 15/02/2005 December 2007 2,300,000
£ 0.36 25/02/2005 December 2007 2,590,940
£ 0.36 07/03/2005 December 2007 3,253,390
£ 0.33 08/07/2005 December 2007 315,990
18,611,790
There is no amount payable by participants on vesting. They will be awarded rights to ordinary shares in the Company.
36. Employee Incentive Schemes (Continued)
A N N U A L R E P O R T 2 0 0 5
ANNUAL FINANCIAL STATEMENTS
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Subsidiary undertakings
Name
Country of incorporation/ registration and operation Activity
Effective interest
Effective interest
2005 2004
% %
Bellerephon Group Pty Ltd Australia IT Solutions and Services 51 -
Comtech Holdings SA Belgium Investment Holding and Management 100 100
Conscripti (Pty) Ltd South Africa IT Solutions and Services 77.91 77.91
Core People (Pty) Ltd South Africa IT Solutions and Services 56.10 42.07
Datacraft Asia Limited Singapore IT Solutions and Services 51.52 51.49
Dimension Data Ltd Nigeria IT Solutions and Services 50 -
Dimension Data (Pty) Ltd South Africa IT Solutions and Services 97.39 97.39
Dimension Data Advanced Infrastructure Ltd Great Britain IT Solutions and Services 100 100
Dimension Data Algeria Spa Algeria IT Solutions and Services 70 70
Dimension Data Australia Pty Ltd Australia IT Solutions and Services 100 100
Dimension Data Australian Holdings SA Belgium Investment Holding and Management 100 100
Dimension Data Belgium SA Belgium IT Solutions and Services 100 100
Dimension Data Botswana (Pty) Ltd Botswana IT Solutions and Services 97.39 97.39
Dimension Data Commerce Centre Ltd Isle of Man IT Solutions and Services 100 100
Dimension Data Deutschland Holdings GmbH Germany Investment Holding and Management 100 100
Dimension Data Espaňa SL Spain IT Solutions and Services 100 100
Dimension Data Facilities (Pty) Ltd South Africa IT Solutions and Services 97.39 97.39
Dimension Data Finance Ltd Isle of Man Investment Holding and Management 100 100
Dimension Data France SA France IT Solutions and Services 100 100
Dimension Data Germany AG & Co Germany IT Solutions and Services 100 100
Dimension Data Global Management Services Ltd Isle of Man Investment Holding and Management 100 100
Dimension Data Holdings France SA France Investment Holding and Management 100 100
Dimension Data Holdings Netherlands BV Netherlands Investment Holding and Management 100 100
Dimension Data International Ltd Malta Investment Holding and Management 100 100
Dimension Data Italia SRL Italy IT Solutions and Services 100 100
Dimension Data Luxembourg SA Luxembourg IT Solutions and Services 100 100
Dimension Data Management Services (Pty) Ltd South Africa Investment Holding and Management 100 100
Dimension Data Network Services Ltd Great Britain IT Solutions and Services 100 100
Dimension Data Nederland BV Netherlands IT Solutions and Services 100 100
Dimension Data North Africa Holdings Ltd Belgium Investment Holding and Management 70 70
Dimension Data North America Inc United States of America IT Solutions and Services 100 100
37. Principal Subsidiaries and Associates
A N N U A L R E P O R T 2 0 0 5
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Subsidiary undertakings
Name
Country of incorporation/ registration and operation Activity
Effective interest
Effective interest
2005 2004
% %
Dimension Data Protocol BV Netherlands Protocol 100 100
Dimension Data (South Africa) (Pty) Ltd South Africa Investment Holding and Management 97.39 97.39
Dimension Data (South Africa) Holdings (Pty) Ltd South Africa Investment Holding and Management 100 100
Dimension Data Sverige AB Sweden IT Solutions and Services 100 100
Dimension Data Switzerland SA Switzerland IT Solutions and Services 100 100
Dimension Data (US) Inc United States of America Investment Holding and Management 100 100
Dimension Data (US) II Inc United States of America Investment Holding and Management 100 100
Dimension Data (Zurich) AG Switzerland IT Solutions and Services 100 100
Euricom NV Belgium IT Solutions and Services 100 -
GK Communications Group Ltd Great Britain Investment Holding and Management 100 100
Howper 266 Ltd Great Britain Investment Holding and Management 100 100
Internet Solutions (Pty) Ltd South Africa IT Solutions and Services 77.91 58.43
Linx Holdings (Pty) Ltd South Africa IT Solutions and Services 77.91 58.43
Merchants SA (Pty) Ltd South Africa IT Solutions and Services 100 100
Pebbletree Consulting (Pty) Ltd South Africa IT Solutions and Services 75 50
Planet CTI Belgium IT Solutions and Services 100 100
Plessey Corporation Ltd South Africa Investment Holding and Management 97.39 97.39
Protocol (A&NZ) Pty Ltd Australia Protocol 100 100
Protocol Venture Capital (Pty) Ltd South Africa Protocol 100 100
Spectrum Holdings Inc British Virgin Islands Investment Holding and Management 100 100
The Merchants Group Ltd Great Britain IT Solutions and Services 100 100
Associated undertakings
Dataflo SA (Pty) Ltd South Africa IT Solutions and Services 48.70 48.70
Automate Dealer Management Systems (Pty) Ltd
(formerly Dimension Data Messaging (Pty) Ltd) South Africa IT Solutions and Services 45 45
Paracon Holdings Ltd South Africa IT contracting and e-business solutions 26.68 26.68
Plessey (Pty) Ltd South Africa IT Solutions and Services 47.72 47.72
Plessey Solutions (Pty) Ltd South Africa IT Solutions and Services 68.17 68.17
37. Principal Subsidiaries and Associates (Continued)
A N N U A L R E P O R T 2 0 0 5
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UK Company Secretary
JM Duck
Registered Office
Fleet Place House
2 Fleet Place
London EC4M 7RT
United Kingdom
Auditors
Deloitte & Touche LLP
London
United Kingdom
UK Transfer Secretaries
Computershare Investor Services PLC
P O Box 82, The Pavilions
Bridgwater Road
Bristol BS99 7NH
United Kingdom
UK Legal Advisers
Linklaters & Alliance
One Silk Street
London EC2Y 8HQ
United Kingdom
Investor Relations
Karen Cramér
+44 20 7651 7000
Dimension Data Holdings plc
(Incorporated in England and Wales under the Companies Act 1985 with registered number 3704278)
(Registered as an external company in the Republic of South Africa with registration number 2000/009053/10)
CONTACTS AND CORPORATE INFORMATION
South African Company Secretary
ML Taylor
Head Office
The Wanderers
The Campus
57 Sloane Street, Bryanston
Sandton 2191, South Africa
Telephone: +27 11 575 0000
Postal Address
Private Bag X127
Bryanston 2021, South Africa
South African Transfer Secretaries
Computershare Investor Services 2004 (Pty) Ltd
70 Marshall Street
Johannesburg 2001, South Africa
(P O Box 61051, Marshalltown, 2107)
South African Legal Advisers
Routledge Modise Moss Morris
2 Pybus Road (Cnr Rivonia Road)
Sandton, South Africa
Dimension Data Website
www.dimensiondata.com