DATATEC GROUP
UNAUDITED RESULTS FOR THE
SIX MONTHS ENDED
31AUGUST 2004
Jens Montanana
CEO
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 performance seems to be improving, the
outlook remains uncertain
• Revenues met or exceeded expectations in all major divisions
• H1performance impacted by Westcon performance in Q2
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 suspended due to environment
DATATEC GROUP
Revenue
$1.22 B
$1.25 B
2H 04
1H 05
$1.13 B
1H 04
DATATEC GROUP
Revenue By Regions
North America
53.0%
South Africa+ME
3.1%
Asia
6.2%
Europe
36.5%
South America
1.2%
DATATEC GROUP
Gross Margin
$142.23 M
$133.19 M
$124.72 M
1H 04
2H 04
1H 05
DATATEC GROUP
EBITDA
$12.32 M
$11.47 M
$10.25 M
1H 04
2H 04
1H 05
DATATEC GROUP
Total Headline Profit / (Loss) Per Share (Restated)
US Cents
(0.40)
1H 04
(6.29)
2H 04
0.10
1H 05
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
DATATEC GROUP
Segmental Analysis
Revenue
EBITDA
Gross Margin
15%
27%
12%
2%
*12%
6%
67%
86%
Westcon
AMG
* Excludes $1.68 M non trading EBT closure costs
Logicalis
73%
DATATEC GROUP
Prospects
• Modest growth in corporate IT spend
• Improved operating profits from all subsidiaries
• Volatile tax rate
WESTCON GROUP
RESULTS FOR THE
SIX MONTHS ENDED
31 AUGUST 2004
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)
WESTCON GROUP
Highlights
• FOREX losses declined
• SG&A decreased to 6.6% from 6.8%
• Non-recurring exceptional costs of $8 million
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
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
1,000
807
842
880
900
800
700
600
500
400
931
756
781
767
798
903
969
300
200
100
0
Mar-Aug
Sep-Feb
2002
Mar-Aug
Sep-Feb
2003
Mar-Aug
Sep-Feb
2004
Mar-Aug
2005
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%
100.0%
100.0%
100.0%
100.0%
Total
WESTCON GROUP
Consolidated Sales by Geography
Region
2H03 1H04
2H04
1H05
(% of total revenue)
Americas
58%
57%
54%
55%
Europe
37%
37%
40%
38%
5%
6%
6%
7%
100%
100%
100%
100%
Asia Pacific
Total
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
1,328
1,132
1,065
1,054
Consolidated
WESTCON GROUP
Consolidated Results – IFRS – As Reported
(US $, in millions)
Sales
Gross Profit
Gross Profit %
SG&A
SG&A %
EBITDA
EBITDA %
Dep & Amort
D&A %
Interest Exp, Net
Int Exp %
Pre-tax Income (Loss)
Pre-tax %
2H03
1H04
2H04
1H05
$831
73
$860
76
$981
86
$1,044
79
8.8%
8.9%
8.8%
7.6%
59
58
68
69
7.1%
6.8%
6.9%
6.6%
14
18
18
10
1.7%
2.1%
1.9%
1.0%
25
11
13
5
3.0%
1.3%
1.3%
0.5%
1
1
3
3
0.2%
0.1%
0.4%
0.3%
(12)
6
2
2
(1.5)%
0.7%
0.2%
0.2%
Note: Excludes Datatec Intercompany transactions
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
WESTCON GROUP
Consolidated Balance Sheets – Working Capital – US GAAP
(US $, in millions)
Accounts Receivable
2H03
1H04
2H04
1H05
$236
$255
$311
$299
51
54
60
53
$171
$175
$222
$204
9.0x
9.0x
7.8x
9.3x
$278
$303
$364
$285
DPO (days)
66
70
77
55
Current Ratio
1.5
1.5
1.5
1.5
DSO (days)
Inventory
Inventory Turns
Accounts Payable
Note: DSO, DPO, and inventory turns calculated using trailing
twelve month amounts.
WESTCON GROUP
Consolidated Balance Sheets – Capitalization – US GAAP
(US $, in millions)
Cash
2H03
1H04
2H04
1H05
$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
0.33
Liabilities to TNW
1.61
1.68
1.87
1.65
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- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug00
00
00
00
01
01
01
01
02
02
02
02
03
03
03
03
04
04
04
Note: Amounts noted on graph represent the average net debt during FY 01, 02, 03, 04 and 05 to date.
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
LOGICALIS GROUP
RESULTS FOR THE
SIX MONTHS ENDED
31 AUGUST 2004
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 services division in UK
• Acquisition of STI in the USA completed 1 September 2004 – $90M
IBM partner
LOGICALIS
Financial Performance - Summary
Trading in the first half of FY2005 has produced an operating profit
US $000
6 months to
Aug 2003
6 months to
Feb 2004
Continuing
Revenue
Aug 2004
Continuing Discontinued
Total
138,153
125,528
140,896
7,593
148,489
Gross profit
29,442
27,537
29,395
1,919
31,314
As % of revenue
21.3%
21.9%
20.9%
25.3%
21.1%
Operating expenses
28,530
28,811
27,666
1,662
29,328
As % of revenue
20.7%
23.0%
19.6%
21.9%
19.8%
912
(1,274)
1,729
257
1,986
0.7%
(1.0%)
1.2%
3.4%
1.3%
(1,735)
(4,047)
89
102
191
(1.3%)
(3.2%)
0.1%
1.3%
0.1%
-
-
-
44,853
44,853
EBITDA
As % of revenue
Operating profit/(loss)
As % of revenue
Exceptional profit
Notes: 1) Includes Datatec level inter-company transactions which eliminate on Datatec consolidation
2) The exceptional profit arises on the sale of the Australian and New Zealand 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%
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%
Germany
LOGICALIS
Revenue Streams (continuing operations)
Revenue mix consistent
1H04
1H05
Prof Services
8%
Prof Services
8%
Maintenance
8%
Maintenance
7%
Managed
Services
8%
Managed
Services
8%
Product
77%
Product
76%
Note: Continuing operations exclude Australia and New Zealand
LOGICALIS
Gross Margin % (continuing operations)
Gross margin percentages held relatively steady - mix change impact in US
35%
6 months to
33.5%
30.8%
30%
29.3%
Aug 2003
30.1%
Feb 2004
27.0%
25%
Aug 2004
25.2%
25.0%
23.5%
21.3%
19.7%
20%
21.9%
20.4%
19.4%
18.1%
15%
10%
5%
UK
Germany
North America
South America
Note: Continuing operations exclude Australia and New Zealand
Total
20.9%
LOGICALIS
EBITDA ($000 - continuing operations)
A stronger performance from the US with the UK improving
$’000
2,500
2,000
6 months to
Aug 2003
Feb 2004
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
LOGICALIS
Key Financial Measures
Working capital remains effectively managed
1H04
2H04
1H05
Deferred Revenue ($000)
18,467
20,224
17,506
Inventory ($000)
16,250
16,766
11,622
17
14
17
46,902
48,097
37,138
47
43
41
Inventory Turns
(excluding spares stock)
Accounts Receivable ($000)
DSO Days
Accounts Payable ($000)
DPO Days
Net Cash ($000)
40,376
42,568
37,667
71
73
79
18,026
25,797
64,991
Note: 1 Aug 2003 and Feb 2004 figures include Australia and New Zealand
These operations held net cash of $2M at Aug 2003 and $3M at Feb 2004
2 August 2004 net cash includes $41.7M after disposal of Australia/New Zealand
operations and repayment of Datatec long term debt
LOGICALIS
Headcount by Region
Region
2H03 1H04
2H04
1H05
Americas
490
469
448
452
Europe
280
226
211
207
Asia-Pac
330
344
324
-
1,100
1,039
983
659
Consolidated
LOGICALIS
Key Product Vendors (Product Revenue %)
HP and Cisco remain our dominant vendors – Cisco stronger in first half of FY2005
%
50
HP
Cisco
40
Others
EMC
IBM
30
20
10
0
Sep-02
Feb-03
Note: Continuing operations
Aug-03
Feb-04
Aug-04
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 – Canada Life – VOIP single converged network structure ($808K)
• UK/South America – Major cross border education project won in UK, delivered by
South American operations ($909K)
• South America – Multi-country contract with major oil company ($1.6M)
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 make further acquisitions, but based on strict criteria
• Cautiously optimistic for continuing performance improvement
ANALYSYS MASON
GROUP
ANALYSYS MASON GROUP
Overview
Analysys Mason
Group
Consultancy
Analysys
Consulting
Analysys
Research
Mason
Communications
Catalyst IT
Partners
Strategic
Telecommunications
Consultants
Independent
Telecommunications
research
Telecommunications
Consultants &
Implementation
Contact Centre &
Change Mgt
Consultants
The Analysis Mason Group is an umbrella consultancy powerhouse
•
Created in August 2004 with a projected first year turnover of £35m
•
300 staff based in 4 UK offices (London, Cambridge, Edinburgh and Manchester)
and France, Ireland, Italy, Spain and the USA
•
Management own 14% (max of 24% in future)
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 1H04
• Charge to close Employee Benefit Trust (EBT) due to AMG merger
• Annualised integration savings of approx £400k which will only
impact next financial year
ANALYSYS MASON GROUP
Financial Performance
1H05 Performance (6 mths Mason – 1mth Analysys)
Turnover
Cost of sale
Gross profit
Operating costs
EBITDA
Depreciation
PBIT
Interest paid/(received)
Profit before tax
1H05
Mason
£000
%
9,598
6,848
2,750 28.7%
1,993
757
7.9%
66
691
7.2%
10
681
7.1%
1H05
Analysys
£000
%
895
572
323
36.1%
267
56
6.3%
8
48
5.4%
-4
52
5.8%
1H05
AMG Company
£000
%
0
0
0
0.0%
29
-29
0.0%
0
-29
0.0%
18
-47
0.0%
1H05
AMG Consolidated
£000
%
10,493
7,420
3,073
29.3%
2,289
784
7.5%
74
710
6.8%
24
686
6.5%
Note - The above results excludes the Mason EBT closure.
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 band III and
L-Band
• Ofcom - Cost Benefit assessment of Ultra Wide Band
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 cross-selling opportunities among the new Group’s existing
clients
• Should achieve further growth in revenues and margins in the second half