Presentation on theme: "DATATEC GROUP UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2003 Jens Montanana."— Presentation transcript:
DATATEC GROUP UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2003 Jens Montanana
TRADING ENVIRONMENT > Modest recovery so far > Broader IT CAPEX planning is starting > Significant Rand appreciation > Limited opportunities for improving value added services
PERFORMANCE HIGHLIGHTS > 10 % improvement in dollar revenues > Break even result despite effects of rapidly appreciating Rand > Westcon - Landis businesses had first month of operating profit (normalised) > Logical – growth in revenues and EBITDA > Mason – yet to recover from end-of-cycle contraction
CONTINUED IMPROVEMENT IN FINANCIAL MANAGEMENT > Group Net cash $100 million > Financing capacity in under utilised facilities > Sale of non-core operations -Affinity Logic – R63 million (shares + loans) -Datanet & WCM - R18 million > Corporate overhead cost reductions > Move to US Dollar stated financials > Adoption of AC 133
GROUP REVENUES $1.0 B $1.1 B 1H 04 2H 031H 03 Sequential and comparative improvement
REVENUES BY REGIONS 9% 6% 50% 1% 34% North America South America Europe Asia Africa+ME
GROSS MARGIN – ONGOING OPERATIONS $115.1 M $123.3 M $129.4 M 1H 04 1H 032H 03 Sequential and comparative improvement
EBITDA – ONGOING OPERATIONS $2.3 M $18.0 M 2H 031H 03 1H 04 $10.3 M
TOTAL HEADLINE EARNINGS PER SHARE US cents (8.27) H 03 1H 03 1H
TOTAL HEADLINE EARNINGS PER SHARE SA cents (80.4) H 03 1H 03 1H
BALANCE SHEET $ million ASSETS Current Assets Tangible Fixed Assets (NBV) Intangible Assets (primarily goodwill) Total Assets LIABILITIES & SHAREHOLDER FUNDS Current Liabilities Non-current Liabilities Total Equity Total Liabilities and Shareholder Funds Non-current Assets 28-Feb Aug-03
GROUP NET CASH Cash position remains strong $116 M $69 M FY 031H 03 1H 04 $100 M
OUTLOOK > Recovery underway but remains fragile > Improving indicators but sustainability questionable > Equity markets predicting technology rebound
WESTCON GROUP RESULTS FOR THE 6 MONTHS ENDED 31 AUGUST 2003 Alan Marc Smith
CONSOLIDATED RESULTS Highlights Operating Results: >Stable revenues – 9% revenue growth over comparable period; 2.3% organic growth >Continued gross margin pressure from largest vendor >Planned SG&A reductions realized. Further re-organization and consolidation planned in US and Europe. Westcon I SG&A expenses down 2.7% on a normalized basis over comparable period >Capital expenditures down $4.0 million over comparable period >U.S. economy still uncertain >Interest rates remain low Financial Position and Cash Flow: >Working capital improvements continue to generate positive cash flows and reduce indebtedness. >Cash flow generation has slowed. Will be difficult to repeat prior period performances >Record August cash balance
CONSOLIDATED RESULTS Highlights Financial Position and Cash Flow (cont): >DSO and inventory turnover consistent; DPO increases >$175M US syndicated working capital facility completed >Westcon UK refinancing completed >Syndicated Pan European refinancing in process >Consolidated net debt maintained below zero (net cash position) Westcon II Subsidiaries: >Gross margin improvement; reduction in operating loss >Continued SG&A reductions realized >Subsidiaries properly capitalized with “push down” of loans >No further cash support provided to subsidiaries. >Norway, Sweden, Denmark, Netherlands, and France financings completed
FINANCIAL OVERVIEW >Excludes Lucent inventory reserves of $5.6M, $250K and $3.8M for the six months ended 2/02, 8/02 and 2/03, respectively (COGS) >Excludes $3.9 million UK duty tax refund for the six months ended 2/02 >Excludes Comstor division goodwill write-down of $15 million for the six months ended 2/03 (SG&A) >Excludes US and European restructuring costs of $2.5M for the six months ended 8/03. (COGS & SG&A) Normalized Items
FINANCIAL OVERVIEW Consolidated Balance Sheets - Working Capital – US GAAP (US $, in millions)As ofAs ofAs ofAs of 2/28/028/31/022/28/038/31/03 Accounts Receivable$251$270$236$255 DSO (days) Inventory$179$183$171$175 Inventory Turns8.5x8.2x9.0x9.0x Accounts Payable$207$285$278$303 DPO (days) Current Ratio Note: DSO, DPO, and inventory turns calculated using trailing twelve month amounts.
FINANCIAL OVERVIEW Cash$97$111$141$133 Working Capital Debt Acquisition Debt10--- Net (Debt) / Cash(63)(1)3436 Equity Debt to Capitalization Liabilities to TNW Consolidated Balance Sheets – Capitalization – US GAAP (US $, in millionsAs ofAs ofAs ofAs of 2/28/028/31/022/28/038/31/03 Note: 2/28/03 and 8/31/03 balance sheets include impact of Comstor division goodwill write-down.
FINANCIAL OVERVIEW Operations: Cash Earnings$17$13$4$13 Working Capital855940(7) Total Investing: Fixed Assets(5)(7)(5)(3) Acquisitions(3)(10)(6)(1) Financing: WC Line(80)(48)(41)(2) Acquisition Line(15)(10)-- (To) from Datatec-38- Consolidated Cash Flows – US GAAP Cash generated by (used in) (US $, in millions) 6 months 6 months 6 months 6 months ended ended ended ended 2/02 8/02 2/03 8/03 Note: Chart assumes no change in cash
FINANCIAL OVERVIEW Net Debt Trend - Feb 2000 to Current
WESTCON I NORMALIZED RESULTS Comparison to Comparable Prior Year Period >Revenues: -Organic revenues up 2.3% compared to comparable prior year period -Growth in IP devices sales volume ($196M vs.$177M) >Gross Margin down from 8.8% to 8.3% -Cisco revenue increases as a percentage of total revenue (54.1% vs. 52.6%) -Cisco margins decline -Less vendor sponsored margin enhancement programs -Price wars continue -Higher IP device product sales somewhat offset margin degradation. (13.4% of total revenue opposed to 12.6% for the comparable period)
WESTCON I NORMALIZED RESULTS Comparison to Comparable Prior Year Period >Selling expenses decline by $2.1 million or 11.8% -Lower communication costs -Increased vendor co-op funding in Westcon division. >General and administrative expenses increase by $845K or 3.0% -Increased bad debt expense in Comstor division -Increased insurance costs. >Reduction in outstanding debt and interest rates significantly lower interest expense
FINANCIAL OVERVIEW Sales $748$770$755$778 Gross Profit Gross Profit %9.6%8.9%8.7%8.6% SG&A SG&A %5.9%5.9%6.3%7.3% EBITDA EBITDA %3.6%3.0%2.4%1.3% Dep & Amort D&A %1.3%1.2%3.3%1.4% Interest Exp, Net8102 Int Exp %1.0%0.2%0.1%0.2% Pre-tax Income (Loss)1013(8)(2) Pre-tax %1.3%1.7%-0.9%-0.3% Westcon I Results of Operations – SA GAAP (US $, in millions) 6 months 6 months 6 months 6 months ended ended 2/028/022/038/03
FINANCIAL OVERVIEW Sales $748$770$755$778 Gross Profit Gross Profit %9.8%8.9%9.2%8.6% SG&A SG&A %5.9%5.9%6.3%6.0% EBITDA EBITDA %3.8%3.1%2.9%2.7% Dep & Amort D&A %1.3%1.2%1.3%1.4% Interest Exp, Net8100 Int Exp %1.0%0.2%0.1%0.1% Pre-tax Income Pre-tax %1.5%1.7%1.5%1.3% Westcon I Results of Operations – Normalized (US $, in millions) 6 months 6 months 6 months 6 months ended ended ended ended 2/028/022/038/03
FINANCIAL OVERVIEW >Excludes Lucent inventory reserves of $5.6M, $250K and $3.8M for the six months ended 2/02, 8/02 and 2/03, respectively (COGS). >Excludes $3.9 million UK duty tax refund for the six months ended 2/02. >Excludes Comstor division goodwill write-down of $15 million for the six months ended 2/03 (Dep & Amort). >Excludes US restructuring costs of $311K for the six months ended 8/03. (SG&A) >Excludes impact of capitalization of intercompany debt between Westcon II subsidiaries and Westcon Group for six months ended 8/03 - $10.2 million ($8.1M operating costs, $2.1M interest expense) >Excludes reversal of $2.1M in accrued management fees between Westcon II subsidiaries and Westcon I (Operating costs) Westcon I Normalized Items
WESTCON II NORMALIZED RESULTS Comparison to Previous Six Month Period >Revenues: -Revenue grew $6.0 million or 7.9% over the six months ended 2/28/03. -Revenue growth driven by increased Cisco and 3Com sales >Gross Margin increases from 9.2% to 11.4% -Increased vendor rebates -Cisco MBO achievement -Lower warehouse expense and professional services staffing vs. prior six month period >Headcount reductions drive SG&A expense down by $1.5 million or 13.0% compared to six months ended 2/28/03.
FINANCIAL OVERVIEW Sales $75.8$81.8 Gross Profit Gross Profit %9.2%11.4% SG&A SG&A %15.6%12.6% EBITDA (6.6)(1.7) EBITDA %(8.6%)(2.1%) Dep & Amort D&A %0.3%0.3% Interest Exp, Net Int Exp %1.4%1.1% Pre-tax Income(5.3)(1.6) Pre-tax %(6.9%)(1.9%) Westcon II Results of Operations – Normalized Results (US $, in millions) 6 months 6 monthsended 2/038/03 Note: Six months ended 8/31/03 exclude exceptional costs of 2,142,803 and impact of intercompany debt capitalization and reversal of accrued management fees.
FINANCIAL OVERVIEW Sales $1.0$24.7$34.4$41.5$40.0$42.0 Gross Profit Gross Profit % 6.7%11.3%10.0%8.6%11.0%11.7% SG&A SG&A %125.4%21.6%16.3% %11.2% EBITDA (1.1)(2.7)(2.7)(3.8)(1.7)(0.1) EBITDA %(119.2%)(10.8%)(8.0%)(9.2%)(4.2%)(0.1%) Dep & Amort D&A %5.9%2.1%0.2%(0.5%)0.2%0.3% Interest Exp, Net Int Exp %0.0%1.1%1.4%1.3%1.4%0.8% Pre-tax Income(1.2)(3.4)(2.9)(2.3)(1.8)0.3 Pre-tax %(125.1%)(13.7%)(7.0%)(5.6%)(4.6%)0.6% Westcon II Quarterly Results of Operations - Normalized (US $, in millions)FY 03FY 03FY 03FY 03FY 04FY 04 Qtr. 1Qtr. 2Qtr. 3Qtr. 4Qtr. 1Qtr. 2 Notes: Q1 and Q2 of FY04 exclude exceptional costs of 900,009 and 1,242,794, respectively. Q2 FY04 normalized to exclude impact of intercompany debt capitalization and reversal of accrued management fees.
PRODUCT LINE STRATEGY Strategic product solutions leveraging our leading vendors’ strength and assisting our customers to be more successful in the marketplace by focusing on: Convergence Solutions -Secure market position in anticipated of emerging growth -Forge relationships with key emerging vendors Security -Capitalize on growth and strength of this market -Retain and further develop expertise in this area of increasing complexity IP Devices -Add to network infrastructure solution set -Gain additional profitability from main networking sales -Enhance competitiveness in specific sales situations
FUTURE OUTLOOK Trends show networking and communications market still in an overall “neutral” state with no defined trend on margins -Vendors make quota 1 quarter and fall behind the next and vice versa -WG market share gains 1 quarter are given back the next due to price wars -LAN/WAN market still declining -Large PBX market “soft” -Hybrid/Key systems market very price sensitive and being attacked by “non-traditional” competitors – Panasonic, Hitachi, Siemens -VOIP – growing at a nice rate – projected to be 12% of revenues in FY04, up from 6% -Security – still a strong market. Nokia and Checkpoint, suffering from price attacks and market share losses – Symantec, Netscreen, Watchguard, Network Associates, etc. -IP Devices –revenues from this portfolio now up to 25.8% of sales (including security). Margin is still strong, but off 2-3% from peak.
LOGICAL GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2003 Jens Montanana
HIGHLIGHTS > Challenging trading environment -Demand still subdued (US and UK) -Some evidence of a start of an upturn – product led > 14% growth in revenues -Product sales up -Project based services down -Annuity services up > Australasia operations performing well > Sold loss-making French operation > EBITDA positive, sequential and comparative improvement over last year > Operating costs and working capital well managed
FINANCIAL PERFORMANCE >Revenue and EBITDA improved
FINANCIAL PERFORMANCE Revenue ($M - continuing operations) >Strong revenue growth in US and Australasia $M EuropeNorth AmericaSouth AmericaAustralasia September 2002 August 2003
FINANCIAL PERFORMANCE Gross Margin % (continuing operations ) >Gross Margin % down to 22.2% (24.4% FY 2003) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% EuropeNorth AmericaSouth AmericaAustralasiaTotal August 2003 September 2002
FINANCIAL PERFORMANCE Operating Costs ($M - continuing operations) >Operating costs only marginally higher Up 2.4% $M EuropeNorth AmericaSouth AmericaAustralasiaGroup/JournalsTotal September 2002 August 2003
FINANCIAL PERFORMANCE Headcount (continuing operations) >Total headcount reduced by 5% to 1,039 heads Heads EuropeNorth AmericaSouth AmericaAustralasiaGroup September 2002 August 2003
FINANCIAL PERFORMANCE August Regional Contributions Revenue Split The USA continues to contribute majority of Logical’s revenues EBITDA Split Australasia contributed strongly to Group profitability UK 18% Germany 1% USA 53% Australasia 26% South America 2%
FINANCIAL PERFORMANCE Revenue Streams >Technology product accounted for 71% of total revenue August 2003September 2002 Product 71% Prof. Services 12% Maintenance 11% Managed Services 6% Product 69% Prof. Services 16% Maintenance 10% Managed Services 5%
FINANCIAL PERFORMANCE Working Capital >Tight Working Capital Management has continued Net Cash Improvement from September 2002 to August 2003: $1.119M
BRANDING AND NAME CHANGE > Desire to create a more distinct and differentiated brand name > Logical name was creating brand confusion > Multiple uses of “Logical” in various environments New positioning: LOGICAL + Integration Solutions = LOGICALIS
PROSPECTS > Visibility remains limited > Still experiencing swings in performance from month to month > New executive management team in UK/Europe > Operations very focused on building product and services revenues > Re-branding provides opportunity to communicate with customers > Outlook driven by macro economic environment