Datatec Group Reviewed provisional results for the year ended
28 February 2014
2
Datatec Group Agenda
1
2
3
Results summary, market conditions & strategy
Jens Montanana, Datatec Group CEO
Group financial performance
Rob Evans, Datatec Group CFO
Operational review and outlook
Jens Montanana, Datatec Group CEO
3
Datatec Group
* Excluding goodwill and intangibles impairment, amortisation of acquired intangible assets, acquisition-related adjustments, profit or loss on sale of assets and
businesses, fair value movements on acquisition-related financial instruments and unrealised foreign exchange movements
Results summary
Revenue
8%
to US$5.69bn
FY 2013: US$5.25bn
Underlying* EPS
17%
to 35.7 US¢
FY 2013: 43.1 US¢
Capital distribution
17 US¢
FY 2013: 17 US¢
EBITDA
6%
to US$175.3m
FY 2013: US$185.5m
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
0%
• Solid revenue growth
• Strong Logicalis performance
• Weaker results from Westcon
• Lower EBITDA and earnings
• Capital distribution maintained
4
Datatec Group Market conditions
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Global recovery is mixed with modest growth in US and continental Europe
• UK recovery underway but commodities countries especially Australia weak
• Emerging markets showing some recovery but affected by slower China growth
• ICT infrastructure adoption and new trends becoming disruptive for some incumbents
• Growth in mobility and wireless networking driving new security and data centre solutions
5
Datatec Group
US$m FY 2014 FY 2013 Growth %
Revenue 5,688.0 5,246.7 8%
Gross profit 841.4 780.3 8%
Gross margin % 14.8% 14.9%
Operating costs (666.1) (594.8) 12%
Operating cost margin % 11.7% 11.3%
EBITDA 175.3 185.5 (6%)
EBITDA% 3.1% 3.5%
Depreciation (32.7) (28.6) 14%
Amortisation (15.1) (15.5) (3%)
Intangible impairment (5.4) - 100%
Operating profit 122.1 141.4 (14%)
Operating profit % 2.2% 2.7%
Financial performance
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Reasonable revenue growth
• Gross margins stable
• Acquisitions add to opex
• Over half of operating cost
growth is due to acquisitions
6
Datatec Group
* Excluding goodwill and intangibles impairment, amortisation of acquired intangible assets, acquisition-related adjustments, profit or loss on sale of assets and
businesses, fair value movements on acquisition-related financial instruments and unrealised foreign exchange movements
US$m FY 2014 FY 2013 Growth %
Operating profit 122.1 141.4 (14%)
Net finance costs (21.6) (21.9) (1%)
Profit before tax 101.8 127.2 (20%)
Underlying* EPS (US cents) 35.7 43.1 (17%)
HEPS (US cents) 31.6 40.8 (23%)
Financial performance
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Finance costs stable
• $7m FY13 Afina P&L credit
7
Datatec Group
US$m Revenue %
change
Gross
profit %
change EBITDA %
change
Operating
profit %
change
Westcon 4,065.1 6% 453.4 2% 91.3 (22%) 62.0 (37%)
Logicalis 1,550.3 15% 360.9 16% 90.3 15% 67.5 23%
Consulting 72.6 (2%) 27.1 (1%) 2.1 (34%) 1.0 (52%)
Corporate - - (8.4) (38%) (8.4) (38%)
Total 5,688.0 8% 841.4 8% 175.3 (6%) 122.1 (14%)
Divisional financial performance FY 2014
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Westcon underperforms
• Logicalis performs well
• Consulting impacted by Intact
8
Datatec Group
72%
27%
1%
Revenue | FY 2014
US$5.69b
54%
43%
3%
Gross profit | FY 2014
US$841.4m
50%
49%
1%
EBITDA | FY 2014 *
US$175.3m
73%
26%
1%
Revenue | FY 2013
US$5.25b
57%
39%
4%
Gross profit | FY 2013
US$780.3m
59%
40%
1%
EBITDA | FY 2013
US$185.5m
Contribution per division
Westcon Logicalis Consulting
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
* Contribution to EBITDA is calculated before Corporate costs
9
Datatec Group
• Better geographic mix
• ROW outstrips NA and EU
• Latam has higher margins
• Improving gross profit mix
27%
34%
11%
10%
18%
Revenue | FY 2014
US$5.69b
32%
32%
12%
8%
16%
Revenue | FY 2013
US$5.25b
23%
33% 11%
8%
25%
Gross profit | FY 2014
US$841.4m
28%
29% 12%
7%
24%
Gross profit | FY 2013
US$780.3m
Revenue and gross profit % contribution by geography
North America Europe Asia Pacific AME Latin America
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
10
Datatec Group
US$m FY 2014 FY 2013
Operating profit before working capital changes 183.4 192.1
Working capital changes (151.2) 124.7
Cash (utilised by) / generated from operations 32.2 316.8
Net finance costs paid (21.6) (21.9)
Taxation paid (45.0) (53.2)
Net cash (outflow) / inflow from operating activities (34.4) 241.7
Net cash outflow for acquisitions (16.5) (74.5)
Net cash outflow from other investing activities (42.6) (44.9)
Capital distribution to shareholders (31.6) (32.4)
Net cash inflow/(outflow) from financing activities 15.2 (13.7)
(Decrease) / increase in cash and cash equivalents (109.9) 76.2
Cash & cash equivalents at beginning of period 73.3 1.8
Translation difference on opening cash position (5.2) (4.7)
Cash and cash equivalents at end of period (41.8) 73.3
Net (debt) / cash (86.7) 47.6
Cash flow
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Westcon absorbs working
capital
• Net cash moves to net debt
11
Datatec Group
US$m FY 2014 FY 2013
Equity and Liabilities 2,992.0 2,690.1
Shareholders funds 871.6 865.4
Non-controlling interests 52.9 51.6
Long term liabilities 91.7 81.3
Amounts due to vendors 9.9 12.7
Current liabilities 1,965.9 1,679.1
Assets 2,992.0 2,690.1
Non current assets
Goodwill 438.2 426.6
Acquired intangible assets & software 53.7 50.7
Other non-current assets 181.7 184.0
Current assets 2,318.4 2,028.8
Balance sheet summary
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Acquisitions contribute to
balance sheet expansion
• Longer payment terms in
emerging markets
Westcon Group
13
Westcon Group
US$m FY 2014 FY 2013 Growth %
Revenue 4,065.1 3,822.2 6%
Gross profit 453.4 442.8 2%
Gross margin % 11.2% 11.6%
Operating costs (362.1) (325.5) 11%
Operating cost margin % 8.9% 8.5%
EBITDA 91.3 117.3 (22%)
EBITDA% 2.3% 3.1%
Operating profit 62.0 98.2 (37%)
Operating profit % 1.5% 2.6%
• Revenues increase 6%
› Down in US
• Operating expenses up 11%
• EBITDA decreases 22%
Financial performance
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
14
Westcon Group
29%
35%
12%
13%
11%
Revenue | FY 2014
US$4.07b
33%
34%
13%
10%
10%
Revenue | FY 2013
US$3.82b
19%
36% 12%
15%
18%
Gross profit | FY 2014
US$453.4m
24%
34%
13%
12%
17%
Gross profit | FY 2013
US$442.8m
Revenue and gross profit contribution % by geography
North America Europe Asia Pacific AME Latin America
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Drop in revenue contribution
from North America
• Increased revenue
contribution from Latin
America and AME
• Asia Pac weaker due to poor
Australia
• Overall growth
15
Westcon Group
• Reduction in US Cisco sales
• Continued growth in security
• Gains in other s/w & storage
• Increase in Service Provider
& Reseller sales
• Decrease in large System
Integrator sales
46%
11%
24%
19%
Product category | FY 2014
49%
12%
24%
15%
Product category | FY 2013
62%
22%
16%
Customer | FY 2014
58%
29%
13%
Customer | FY 2013
Revenue % by product category and customer
Cisco Convergence Security Other
Reseller System integrator Service provider
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
16
Westcon Group
834
963 971 951 918
983 948 973
936
1025 1015
1089
0
200
400
600
800
1000
1200
US$m
Historical quarterly sales
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2
FY 2012 FY 2013 FY 2014
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
Qtr 3 Qtr 4
17
Westcon Group
105
73
152
57 56
443
87 83
163
53 67
453
0
50
100
150
200
250
300
350
400
450
500
North America Latin America Europe Asia Pacific AME Total
US$m
FY 2013 FY 2014
Gross profit contribution
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
18
Westcon Group
49
25
53
17 13
-40
117
33 28
52
15 15
-52
91
-80
-60
-40
-20
0
20
40
60
80
100
120
140
North America Latin America Europe Asia Pacific AME Central Costs Total
US$m
FY 2013 FY 2014
EBITDA
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
* FY13 central costs have been restated to include infrastructure, systems and other global support costs
19
Westcon Group
US$m FY 2014 FY 2013
Accounts receivable 988.0 875.6
DSO (days) 82 81
Inventory 375.9 307.3
Inventory turns 10.4x 11.3x
Accounts payable (855.1) (824.4)
DPO (days) 80 86
Net working capital 508.8 358.5
NWC (days) 37 27
Current ratio 1.2 1.2
Net debt (194.8) (23.9)
• High year end inventory in
Europe & Latam
• DPO falls
• Net debt rises
Working capital
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
20
Westcon Group Net (debt) / cash
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
($500)
($450)
($400)
($350)
($300)
($250)
($200)
($150)
($100)
($50)
$0
$50
$100
Fe
b-0
8
Ma
y-0
8
Au
g-0
8
No
v-0
8
Fe
b-0
9
Ma
y-0
9
Au
g-0
9
No
v-0
9
Fe
b-1
0
Ma
y-1
0
Au
g-1
0
No
v-1
0
Fe
b-1
1
Ma
y-1
1
Au
g-1
1
No
v-1
1
Fe
b-1
2
Ma
y-1
2
Au
g-1
2
No
v-1
2
Fe
b-1
3
Ma
y-1
3
Au
g-1
3
No
v-1
3
Fe
b-1
4
Note: Including Datatec loan
21
Westcon Group Future outlook
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Good start to year so far with focus on operating leverage and profit margin expansion
• Formation of Westcon Services unit to include Intact Networks
• Business disruption arising from ERP system transition in North America mainly resolved
• Australia, Canada and South Africa are challenging markets as resources remain weak
• Expect good overall revenue and profit growth with H2 profitability improvement over H1
• Resume SAP implementation in Asia Pac, 1st phase now successfully live in New Zealand
Logicalis Group
23
Logicalis Group
US$m FY 2014 FY 2013 Growth %
Revenue 1,550.3 1,350.4 15%
Gross profit 360.9 310.3 16%
Gross margin % 23.3% 23.0%
Operating costs (270.6) (231.7) 17%
Operating cost margin % 17.5% 17.2%
EBITDA 90.3 78.6 15%
EBITDA% 5.8% 5.8%
Operating profit 67.5 54.7 23%
Operating profit % 4.4% 4.1%
Financial performance
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Total revenue up 15%
• Services revenues up 31%
• EBITDA up 15%
• Strong performance in Brazil
• Includes 2e2 acquisition
24
Logicalis Group
• Strong revenue growth in
Latam and Asia Pacific
• 2e2 acquisitions drive Europe
• Services mix improves gross
margin %
• Brazil lifted by Service
Provider expenditure
25%
35%
31%
9%
Revenue | FY 2014
31%
36%
24%
9%
Revenue | FY 2013
US$1,35b
27%
35%
27%
11%
Gross profit | FY 2014
US$360.9m
33%
36%
20%
11%
Gross profit | FY 2013
US$310.3m
Revenue and gross profit contribution % by geography
North America Latin America Europe Asia Pacific
US$1,55b
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
25
Logicalis Group
69%
12%
19%
Segment | FY 2014
73%
10%
17%
Segment | FY 2013
59% 16%
7%
18%
Vendor | FY 2014
55% 19%
10%
16%
Vendor | FY 2013
Revenue by segment and product revenue by vendor
IBM Cisco HP Other
Product Professional services Maintenance and managed services
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Service revenue now over 30%
› Annuity up 26%
› Professional Services up 40%
• Product sales up 9%
• Cisco growth in all regions
• Strong NetApp growth
• Poor IBM and HP revenues
26
Logicalis Group
62
103 111
34
310
99 98
125
39
361
0
50
100
150
200
250
300
350
400
Europe North America Latin America Asia Pacific Total
US$m
FY 2013 FY 2014
Gross profit contribution
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
27
Logicalis Group
15
23
42
8
-9
79
23 19
47
10
-9
90
-20
0
20
40
60
80
100
Europe North America Latin America Asia Pacific Central Costs Total
US$m
FY 2013 FY 2014
EBITDA
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
28
Logicalis Group
* Excluding lease liabilities and Datatec loans
US$m FY 2014 FY 2013
Deferred revenue 78.9 62.5
Inventory 52.7 49.6
Inventory days (excluding spares stock) 18 18
Accounts receivable 309.3 282.9
DSO (days) 51 60
Accounts payable 242.5 230.8
DPO (days) 83 84
Net cash * 104.8 68.0
• Overall good working capital
management
• Improvement in DSO reflected
in net cash
Key financial measures
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
29
Logicalis Group Future outlook
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• General market for IT products and services is forecast to improve in 2014/15
• Strong growth in cloud infrastructure services expected to continue
• Group well positioned to drive annuity services and improve operating margins
• Latin America impacted by continuing import restrictions in Argentina
• Brazil world cup expected to impact performance in that region in H1
• Trading conditions remain stable
Consulting Services
31
Consulting Services
US$m FY 2014 FY 2013 Growth %
Revenue 72.6 74.0 (2%)
Gross profit 27.1 27.2 (1%)
Gross margin % 37.3% 36.8%
Operating costs (25.0) (24.0) 4%
Operating cost margin % 34.4% 32.4%
EBITDA 2.1 3.2 (34%)
EBITDA% 2.9% 4.3%
Operating profit 1.0 2.1 (52%)
Operating profit % 1.4% 2.8%
Financial performance
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Strong Analysys Mason result
• Difficult year for Intact
• Gross margins trend up
Datatec Group
33
Datatec Group Strategy
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• New services opportunities being developed in Westcon and Logicalis
• Acquisition focus in specific markets and geographies where scale can be achieved
• Developing a business model to provide ICT infrastructure Financial Services to clients
• Improve capital returns and profitability ratios, especially in Westcon
• Defensive dividend distribution policy
34
Datatec Group Current trading and prospects
Overview | Group Financials | Westcon Group | Logicalis Group | Consulting Services | Future outlook
• Expect solid rebound after two disappointing years of declining earnings
• Most markets are continuing to show gradual recovery but not yet synchronised globally
• Resources countries such as Australia could remain weak
• Westcon’s recovery should drive H2 sequential and comparative growth
• Expect revenues to exceed $6bn
• Full year UEPS forecast expected to be above US 40¢
Questions