Datatec Limited · JSE:DTC
Datatec — H1 2005 Earnings Presentation
43 slides from Datatec's earnings presentation, 2004
Slide 1: Datatec Group Unaudited Results for the Six Months Ended 31 August 2004
DATATEC GROUP UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31AUGUST 2004 Jens Montanana CEO
Slide 2: Trading Environment
DATATEC GROUP Trading Environment • General market conditions have remained stable, greater demand for IT products and services is evident in the US and Asia-Pac, Europe remains weak • Latest results and guidance from the leading manufacturers such as Cisco, IBM and HP have been mixed, while current
Slide 3: Performance Highlights
DATATEC GROUP Performance Highlights • Continued strengthening of the balance sheet, cash position and profitability • Westcon’s revenues grew over 20% • Logicalis’ first operating profit in three years • Doubled size of consulting group with Analysys-Mason merger • Westcon’s IPO process temporarily
Slide 4: Revenue
DATATEC GROUP Revenue $1.22 B $1.25 B $1.13 B 1H 04 2H 04 1H 05
Slide 5: Revenue By Regions
DATATEC GROUP Revenue By Regions North America 53.0% South Africa+ME 3.1% Asia 6.2% Europe South America 36.5% 1.2%
Slide 6: Gross Margin
DATATEC GROUP Gross Margin $142.23 M $133.19 M $124.72 M 1H 04 2H 04 1H 05
Slide 7: EBITDA
DATATEC GROUP EBITDA $12.32 M $11.47 M $10.25 M 1H 04 2H 04 1H 05
Slide 8: Total Headline Profit / (Loss) Per Share (Restated)
DATATEC GROUP Total Headline Profit / (Loss) Per Share (Restated) US Cents (0.40) (6.29) 0.10 1H 04 2H 04 1H 05
Slide 9: Net Cash
DATATEC GROUP Net Cash Cash position remains strong $99.66 M $97.40 M $88.70 M 1H 04 2H 04 1H 05 Shows investment into working capital – revenue growth
Slide 10: Segmental Analysis
DATATEC GROUP Segmental Analysis Revenue Gross Margin EBITDA 15% 27% 12% 6% *12% 73% 2% 67% 86% Westcon AMG Logicalis * Excludes $1.68 M non trading EBT closure costs
Slide 11: Prospects
DATATEC GROUP Prospects • Modest growth in corporate IT spend • Improved operating profits from all subsidiaries • Volatile tax rate
Slide 12: Westcon Group Results for the Six Months Ended August 2004
WESTCON GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004
Slide 13: Highlights
WESTCON GROUP Highlights • Consolidated revenue grows 21.4% over comparable period • Revenue increases across all divisions and geographic regions • Unexpected drop in gross margins to 7.6% from 8.9% (mainly as a result of Europe)
Slide 14: Highlights
WESTCON GROUP Highlights • FOREX losses declined • SG&A decreased to 6.6% from 6.8% • Non-recurring exceptional costs of $8 million
Slide 15: Actions Initiated
WESTCON GROUP Actions Initiated • New Westcon Group CEO • Reorganisation and streamlining of senior management • Rationalisation of warehouse facilities in US and Europe • Steps taken with key vendors to enhance margins
Slide 16: Historical Six Month Period Sales – US GAAP
WESTCON GROUP Historical Six Month Period Sales – US GAAP (Includes intercompany revenue relating to non-Westcon group Datatec subsidiaries) 1,065 $ 1,004 1,100 842 880 1,000 807 900 800 700 600 931 969 500 903 400 756 781 767 798 300 200 100 0 Mar-Aug Sep-Feb Mar-Aug Sep-Feb Mar-Aug Sep-Feb Mar-Aug
Slide 17: Consolidated Sales by Vendor %
WESTCON GROUP Consolidated Sales by Vendor % Vendor 2H03 1H04 2H04 1H05 (% of total revenue) Cisco 51.7% 53.3% 57.0% 57.3% Nortel 11.6% 10.6% 10.0% 11.3% Avaya 11.5% 10.3% 8.8% 9.0% Security 10.6% 11.1% 10.2% 9.0% IP Devices 14.6% 14.7% 14.0% 13.4% Total 100.0% 100.0% 100.0% 100.0%
Slide 18: Consolidated Sales by Geography
WESTCON GROUP Consolidated Sales by Geography Region 2H03 1H04 2H04 1H05 (% of total revenue) Americas 58% 57% 54% 55% Europe 37% 37% 40% 38% Asia Pacific 5% 6% 6% 7% Total 100% 100% 100% 100%
Slide 19: Headcount by Region
WESTCON GROUP Headcount by Region Region 2H03 1H04 2H04 1H05 Americas 499 401 432 439 Europe 711 604 509 486 Asia-Pac 118 128 124 129 Consolidated 1,328 1,132 1,065 1,054
Slide 20: Consolidated Results – IFRS – As Reported
WESTCON GROUP Consolidated Results – IFRS – As Reported (US $, in millions) 2H03 1H04 2H04 1H05 Sales $831 $860 $981 $1,044 Gross Profit 73 76 86 79 Gross Profit % 8.8% 8.9% 8.8% 7.6% SG&A 59 58 68 69 SG&A % 7.1% 6.8% 6.9% 6.6% EBITDA 14 18 18 10 EBITDA % 1.7% 2.1% 1.9% 1.0% Dep & Amort 25 11 13 5 D
Slide 21: Operational Improvement Plan
WESTCON GROUP Operational Improvement Plan • Plan to improve gross margins and return Europe to profitability by applying the proven US model to Europe • The plan will be implemented over the next two quarters and could cost up to $4 million
Slide 22: Consolidated Balance Sheets – Working Capital – US GAAP
WESTCON GROUP Consolidated Balance Sheets – Working Capital – US GAAP (US $, in millions) 2H03 1H04 2H04 1H05 Accounts Receivable $236$255 $311$299 DSO (days) 5154 6053 Inventory $171$175 $222$204 Inventory Turns 9.0x9.0x 7.8x9.3x Accounts Payable $278$303 $364$285 DPO (days) 6670 7755 Current Ratio
Slide 23: Consolidated Balance Sheets – Capitalization – US GAAP
WESTCON GROUP Consolidated Balance Sheets – Capitalization – US GAAP (US $, in millions) 2H03 1H04 2H04 1H05 Cash $141 $133 $114 $99 Working Capital Debt 72 63 84 97 Datatec Intercompany Loan 35 35 38 38 Net (Debt) / Cash 34 36 (8) (36) Equity 261 268 284 279 Debt to Capitalization 0.29 0.27 0.30 0.
Slide 24: Net Cash Trend - FY 2000 to Current
WESTCON GROUP Net Cash Trend - FY 2000 to Current $100,000,000 ($30,701,555) $50,000,000 ($59,842,704) ($87,655,105) $0 -$50,000,000 ($139,544,122) -$100,000,000 -$150,000,000 ($224,336,852) -$200,000,000 -$250,000,000 -$300,000,000 Net Cash -$350,000,000 Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb-
Slide 25: Future Outlook
WESTCON GROUP Future Outlook • Vendors increasingly committed to distribution • Voice and convergence markets growing; traditional voice and data switching and routing markets steady • Customer base stable • Group-wide program implemented to increase future operating income performance
Slide 26: Logicalis Group Results for the Six Months Ended August 2004
LOGICALIS GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004
Slide 27: Highlights
LOGICALIS Highlights • First operating profit recorded in over three years • Revenues up 12% sequentially (2% on comparative basis) • Margins steady • Operating expenses tightly controlled • US producing a stronger performance • Working capital effectively managed (DSO at 41 days) • Launched focused
Slide 28: Financial Performance - Summary
LOGICALIS Financial Performance - Summary Trading in the first half of FY2005 has produced an operating profit US $000 6 months to 6 months to Aug 2003 Feb 2004 Aug 2004 Continuing Continuing Discontinued Total Revenue 138,153 125,528 140,896 7,593 148,489 Gross profit 29,442 27,537 29,395 1,919 31,
Slide 29: Revenue (continuing operations)
LOGICALIS Revenue (continuing operations) North America comprises two-thirds of continuing operations (% of revenue) Regions 1H04 2H04 1H05 UK 24.5% 27.9% 25.9% Germany 1.9% 1.7% 1.6% North America 70.2% 65.9% 67.8% South America 3.4% 4.5% 4.7% 100.0% 100.0% 100.0%
Slide 30: Revenue Streams (continuing operations)
LOGICALIS Revenue Streams (continuing operations) Revenue mix consistent 1H04 1H05 Prof Services Prof Services 8% 8% Maintenance Maintenance 7% 8% Managed Managed Services Services 8% 8% Product Product 77% 76% Note: Continuing operations exclude Australia and New Zealand
Slide 31: Gross Margin % (continuing operations)
LOGICALIS Gross Margin % (continuing operations) Gross margin percentages held relatively steady - mix change impact in US 35% 33.5% 6 months to 30.8% Aug 2003 30% 29.3% 30.1% 27.0% Feb 2004 25.0% 25.2% Aug 2004 25% 23.5% 21.9% 21.3% 20.9% 20.4% 19.7% 19.4% 20% 18.1% 15% 10% 5% UK Germany North Amer
Slide 32: EBITDA ($000 - continuing operations)
LOGICALIS EBITDA ($000 - continuing operations) A stronger performance from the US with the UK improving 6 months to $’000 Aug 2003 2,500 Feb 2004 2,000 Aug 2004 1,500 1,000 500 0 (500) (1,000) UK Germany North America South America Note: Continuing operations exclude Australia and New Zealand
Slide 33: Key Financial Measures
LOGICALIS Key Financial Measures Working capital remains effectively managed 1H04 2H04 1H05 ($000) Deferred Revenue 18,467 20,224 17,506 Inventory($000) 16,250 16,766 11,622 Inventory Turns (excluding spares stock) 17 14 17 Accounts Receivable ($000) 46,902 48,097 37,138 DSO Days 47 43 41 Accounts P
Slide 34: Headcount by Region
LOGICALIS Headcount by Region Region 2H03 1H04 2H04 1H05 Americas 490 469 448 452 Europe 280 226 211 207 Asia-Pac 330 344 324 - Consolidated 1,100 1,039 983 659
Slide 35: Key Product Vendors (Product Revenue %)
LOGICALIS Key Product Vendors (Product Revenue %) HP and Cisco remain our dominant vendors – Cisco stronger in first half of FY2005 % HP 50 Cisco Others 40 EMC IBM 30 20 10 0 Sep-02 Feb-03 Aug- Feb-04 Aug-04 03 Note: Continuing operations
Slide 36: Recent Important Wins
LOGICALIS Recent Important Wins • US – Exxon Mobile – large IBM win ($1.5M) • US – Swiss Re Insurance – new customer for IBM solutions ($1.5M) • US – LA County Sheriff – strong municipal reference story ($7.0M) • UK – Haringey Council – won against 3Com and another Cisco partner ($943K) • UK – Canad
Slide 37: Prospects
LOGICALIS Prospects • Acquisition of STI in USA will yield benefits - improves critical mass - creates a better balanced business • UK services division gaining momentum • South American operations now stable after difficult economic times • Markets remain challenging and competitive • Seeking to ma
Slide 38: Analysys Mason Group
ANALYSYS MASON GROUP DATATEC connecting minds
Slide 39: Overview
ANALYSYS MASON GROUP Overview Analysys Mason Group Consultancy Analysys Analysys Mason Catalyst IT Consulting Research Communications Partners Strategic Independent Telecommunications Contact Centre & Telecommunications Telecommunications Consultants & Change Mgt Consultants research Implementation
Slide 40: Highlights
ANALYSYS MASON GROUP Highlights • Significant recovery since Mason restructured in Jan 04 • Telecoms operators now spending again on consultancy services • Rate pressures of recent years beginning to ease • Mason turnover + 12% on 1H04 • After reductions in infrastructure cost, Mason EBITDA + 53% on
Slide 41: Financial Performance
ANALYSYS MASON GROUP Financial Performance 1H05 Performance (6 mths Mason – 1mth Analysys) 1H05 1H05 1H05 1H05 Mason Analysys AMG Company AMG Consolidated £000 % £000 % £000 % £000 % Turnover 9,598 895 0 10,493 Cost of sale 6,848 572 0 7,420 Gross profit 2,750 28.7% 323 36.1% 0 0.0% 3,073 29.3% Oper
Slide 42: Joint Bids
ANALYSYS MASON GROUP Joint Bids • Development Agency - a regional planning instrument and toolkit • Development Agency - commercial and technical options for a national broadband network • Development Agency - commercial and technical due diligence • Ofcom - allocating available spectrum within VHF
Slide 43: Prospects
ANALYSYS MASON GROUP Prospects • Steady recovery taking place in Telecoms sector • Increasing demand from operators across a range of issues including; implementation, support, business planning, consolidation and triple play (voice, data & TV) • Continuing global diversification • Identifying new c