Interview with the Chairman of the Board

We have demonstrated our ability to execute on our strategy, unlocking significant value for shareholders through the recent transactions.
Stephen Davidson

Stephen Davidson

Chairman

 

  • What were Datatec's most significant achievements and challenges in the past year?

It was a challenging transitional year for Datatec marked by two major disposals realising excellent value while the remaining part of the Westcon business is still going through transformation changes which have severely impacted its performance. We successfully concluded the sale of Westcon Americas to SYNNEX Corporation for US$600 million in cash and SYNNEX took a 10% interest in the remaining Westcon International business (covering Europe, Middle East, Africa and Asia-Pacific) for a further US$30 million. In addition, we disposed of a non-core unit of Logicalis called SMC for US$42 million. These disposals unlocked significant value for our shareholders.

The Board has distributed US$350 million of the SYNNEX proceeds to shareholders. A special cash dividend of R23, with scrip distribution alternative, was paid to shareholders in January 2018. This resulted in the distribution of US$244 million cash and the issue of 43.8 million new shares as the scrip alternative. A general share buy-back through the market, as per the authority received at our last Annual General Meeting ("AGM") was then undertaken in February to repurchase just under 5% of the issued share capital, being 12.8 million shares. The Board will undertake any further share repurchases in a form and manner that is prudent for the Group, taking into account the Group's ongoing liquidity needs.

As communicated throughout the year, we have experienced a tough trading environment, particularly in our Westcon International division, due to ongoing challenges with ERP implementation and the BPO transformation, all of which has impacted the EMEA region and in turn Datatec's operating results for FY18.

The Westcon International business includes all the central costs of the Westcon Group prior to the disposal. This business has faced difficult trading for a number of years but we are reshaping it through a combination of cost-cutting measures and operational efficiency initiatives. This is an ongoing priority.

  • Datatec implemented a set of core values across the Group. Has there been a strategic shift in the business?

This has been a complex but rewarding project due to the geographic spread and the nature of the Group's organisational structure and diversity. We have always placed a strong emphasis on values, ethics and compliance in our organisation. The need was there to align the organisation through shared meaning and a common set of values to drive culture and business performance.

Our values drive the behaviours we implement across our business to enhance our offering to customers, partners and vendors. These values underpin the way we do business and provide a moral framework against which we can measure our behaviour. Our employees have embraced this initiative and we believe that this foundation together with the talent, skills and the commitment of our workforce bode well for our future.

Our values also inform and guide our strategy which we remain committed to. Datatec will continue to aim to deliver long-term, sustainable and above-average returns to shareholders through portfolio management and the development of our principal operating divisions providing technology solutions and services to targeted customers in identified markets.

  • How do you manage risk in a volatile environment?

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.

Datatec operates in a fast paced, fast changing, complex global environment where risk management is vital. We continually review processes and implement measures to improve procedures that help us identify, manage and mitigate risks at the Group's divisions at an early stage.

Our risk management policy is set by the Board and reviewed on a regular basis to ensure that the risk management framework is effectively implemented across all areas of the Group.

  • What are the priorities for the Board going forward?

We remain internally focused on fixing the operational issues we are experiencing with ERP and Business Process Outsourcing ("BPO") in our Westcon International business. We are in the process of reshaping the business to rebase the operations appropriately by substantially reducing our central costs as well as improving our efficiency and execution to improve profitability.

Logicalis is an excellent business which we intend to grow in line with our strategy. The continual shift to cloudbased delivery of IT helps to drive mobility solutions, network security and converged computing applications built in increasingly virtual environments using external data centres. Logicalis is well positioned in all these areas and we are optimistic about its future.

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.

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

  • What is your approach to addressing environmental, social and governance ("ESG") issues across such a widespread organisation?

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.More information on our social impact can be read on pages 56 to 63.

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.

Committed to the highest standards of corporate governance, the Board is not only responsible for the strategic direction of the Group but it also controls the factors that affect its ability to create value for all stakeholders. We engage in proactive dialogue with key stakeholder groups at all levels of the business aimed at establishing and maintaining an open and transparent relationship based on trust and mutual respect.

Conclusion

It has been an extraordinary year for us and the Board would like to express its deep appreciation to the more than 8 500 Datatec employees across the world whose commitment and capabilities contribute positively towards our success.

We thank our shareholders for their loyalty and support and we value our interactions with them. Addressing shareholder concerns is a major priority for us and we welcome engagement with shareholders at any time, not just at our AGM on 20 September 2018.

I would like to thank my fellow Board members for their contribution during the year. Their dedication and guidance has been invaluable.

A special thank you also goes to Chris Seabrooke who will be retiring from the Board in September after 24 years of service. Chris became a director of Datatec in 1994 when the Company was listed on the JSE and has served on all Board committees during his tenure, including as Chairman of the Audit, Risk and Compliance Committee for 11 years. The contribution of his expertise to the Board and to the direction and success of the business has been enormous. His guidance, provided throughout those 24 years with completely undiminished independence, will be sorely missed.

I am delighted to welcome Ms Ekta Singh-Bushell as an independent non-executive director to the Board. She will bring a great deal of valuable experience to Datatec from her exceptional career in the management and governance of technology.

Stephen Davidson
Chairman

31 May 2018