Chairman's review

Stephen Davidson Nominations Committee Chairman

"During FY19 we undertook a comprehensive programme of shareholder consultation covering governance matters such as Board composition and in particular remuneration. John McCartney, the Chairman of the Remuneration Committee, accompanied me on a series of meetings and consultations with major shareholders covering about 75% of our shareholder base."

Stephen Davidson


The financial year ended 28 February 2019 ("FY19") marked a return to profitability for the Group. While Logicalis continued to perform well, in line with the strategy to build value in this business, the turnaround of the Westcon International business proceeded successfully with management attaining or exceeding the targets set at the start of the year.

Following the distribution of US$350 million to shareholders by way of a special cash dividend of R23, with scrip distribution alternative in January 2018, the Company has undertaken a series of general share repurchases during FY19 amounting to US$43.9 million and totalling 23.8 million shares. Share repurchases of US$7.4 million (3.3 million shares) have been completed between 1 March 2019 and 31 May 2019.

Financial and operational overview

Group revenues increased by 10.4% in FY19 to US$4.33 billion with the revenue growth in both Logicalis and Westcon International. The return to profitability of Westcon International improved Group EBITDA to US$86.8 million from US$26.7 million in the prior year.

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Overall, the underlying* earnings per share for the year of 6.6 US cents was an improvement compared to the underlying* loss per share of 17.2 US cents from continuing operations incurred in the prior period.

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Logicalis is the largest profit contributor to the Group and has the widest geographical footprint. Our strategy to develop and grow Logicalis globally, through organic and acquisition activities, was executed effectively during FY19. The continual shift to cloud-based delivery of IT helps to drive mobility solutions, network security and converged computing applications built in increasingly virtual environments using external data centres. Customers need trusted partners to provide advisory services and support. Logicalis is well positioned in all these areas and we are optimistic about its future.

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The reshaping of the Westcon International business progressed successfully during FY19 in line with the commitments made at the beginning of the year. The division has returned to EBITDA profitability and the central cost base has significantly reduced. Furthermore, the ERP system is now operating effectively after a long and disruptive multi-year implementation process. The Business Process Outsourcing ("BPO") which had a negative impact on business operations was completely reversed in the year and Westcon International now successfully operates with in-house shared service centres in the Philippines and South Africa.

Share repurchases

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The Company undertook three general share repurchases under separate shareholder mandates provided at a general meeting on 24 July 2018, at the Annual General Meeting ("AGM") on 20 September 2018 and at a general meeting on 15 January 2019. These repurchases amounted to US$43.9 million and totalled 23.8 million shares which have been cancelled, reducing the Company's shares in issue to 219.2 million at 28 February 2019. From 1 March to 31 May 2019, the Company repurchased a further 3.3 million shares at a cost of US$7.4 million and the Board intends to continue the share repurchase process.

SYNNEX earn-out

The result of the arbitration to determine the amount of the earn-out receivable relating to the disposal of Westcon Americas to SYNNEX was announced on 29 May 2019 after the effective date of this Integrated Report.

The arbitrator appointed by the parties to determine the quantum of the earn-out has ruled that the amount of US$14 million is payable by SYNNEX to the Group.

The Board has previously stated its intention to return the SYNNEX earn-out to shareholders and intends to make a further special dividend announcement in this regard shortly.

Governance and Board changes

We are acutely aware of the importance of good governance and risk management. We strive for excellence in governance and believe it to be a fundamental contributor to the sustainability of our business. At the head of our governance structure is the Board of directors and there have been several changes in its composition during FY19.

In June 2018, we welcomed Ekta Singh-Bushell as a new independent non-executive director. Ekta brings a wealth of diverse global management experience and expertise in financial, digital technology, cyber security and risk operations. Ekta joined the Audit, Risk and Compliance Committee and subsequently became the lead/senior independent non-executive director.

In November 2018, Maya Makanjee joined the Board as an independent non-executive director. Maya has considerable experience on the boards of leading South African companies and foundations. Maya joined the Social and Ethics Committee and will become its Chairperson on 1 June 2019. She also joined the Remuneration Committee and we intend that she will take over the chair of that committee in due course.

At the AGM in September 2018, Chris Seabrooke retired from the Board after 24 years of service having been a director of Datatec since 1994 when the Company was listed on the JSE. Nick Temple also retired from the Board at the same time having served for 16 years. Both these gentlemen contributed an enormous amount of expertise and experience to the Board and their valuable and always independent contributions to decision-making will be missed.

Funke Ighodaro resigned from the Board in October 2018 as a necessary condition of a new executive role elsewhere. Her eight years of service on the Board, Audit, Risk and Compliance Committee and Nominations Committee were highly appreciated.

The evolution of the Board and succession planning are always at the forefront of our minds and to this end we are engaged in a search process led by our senior independent non-executive director for another non-executive director to bring the Board complement up to eight directors (two executive and six non-executive directors).

Values, Code of Conduct and environmental, social and corporate governance

Our values inform and underpin the way we do business across the Group. They provide a moral framework against which we can measure our behaviour. Our imbedded values together with the talent, skills and the commitment of our workforce are key success factors that position us well for the future.

All employees sign up to the Datatec Code of Conduct which clearly sets out the standards of behaviour we require from our employees and business partners to operate ethically and in accordance with the United Nations Global Compact's 10 principles in the areas of human rights, labour, the environment and anti-corruption. It is a business and moral imperative for Datatec to proactively manage our environmental, social and governance impacts and performance. We have a number of initiatives that bear testimony to our commitment in this regard. As a global organisation we feel strongly about supporting the communities in the areas we operate. Our employees help identify areas where we can make a difference and work collectively towards helping, raising funds and supporting a variety of volunteering and other initiatives.

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More information on our social impact can be read on Corporate Social Investment.

We continue to monitor our carbon footprint and we strive to reduce it as far as possible across all areas of the business.

Our Social and Ethics Committee monitors and regulates the impact of the Group on its stakeholders and reports to the Board which is ultimately responsible for Group sustainability.

Shareholder engagement

I am always pleased to engage with shareholders to ensure their views are heard and understood by the Board. During FY19 we undertook a comprehensive programme of shareholder consultation covering governance matters such as Board composition and in particular, remuneration. John McCartney, the Chairman of the Remuneration Committee, accompanied me on a series of meetings and consultations with major shareholders covering about 75% of our shareholder base. We also participated in a conference call open to all shareholders to contribute to the discussion. This consultation process resulted in some significant changes being made to the Company's remuneration policy and implementation thereof.

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We have considerably enhanced our remuneration report on Remuneration Report of the Integrated Report where the consultation process and its results are set out.

I hope that the changes the Remuneration Committee has made to executive remuneration and the improved disclosures in the remuneration report will meet with the approval of shareholders and enable a more favourable vote on the two non-binding advisory votes on remuneration at the 2019 AGM.

We welcome all shareholders to attend the AGM on 29 August 2019 and we will continue our engagement with shareholders.


As set out in the remuneration report I referenced above, we aim to reward all employees appropriately for their contribution to the Group's operating and financial performance. We apply fair and responsible pay principles to all employees across the Group and seek to promote a common interest with shareholders.

I would like to express my thanks on behalf of the Board to each and every one of our approximately 10 000 employees whose commitment and capabilities contribute to the Group's success.


I am optimistic about the future of Datatec Group.

We have the right strategy in place to unlock value in the Logicalis business. Logicalis is well positioned in all areas of its operations and we are working towards growing the services side of the business further to drive better annuity revenue. This will ultimately enhance our position in the markets we already operate in to gain better scale.

Following the successful turnaround in FY19, Westcon International is expected to deliver a significant improvement in efficiency and execution while further reducing its central costs.

We are building on the value realisation created by the disposals in FY18 and we will continue to analyse opportunities to unlock more value for our shareholders.

Stephen Davidson

31 May 2019

* Excluding impairments of goodwill and intangible assets, profit or loss on sale of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments, fair value movements on acquisition-related financial instruments, restructuring costs relating to fundamental reorganisations and the taxation effect on all of the aforementioned.