Datatec

Datatec is an international ICT solutions and services group operating in more than 50 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific. The Group's offerings span the technology distribution, integration and management consulting sectors of the ICT market.

• Logicalis (Integration and managed services): ICT infrastructure solutions and services; and
• Westcon International (Technology distribution): distribution of security, collaboration, networking and data centre products and solutions.

The specialist activities of Management Consulting and Datatec Financial Services are included with the corporate head office functions in the "Corporate, Management Consulting and Financial Services" segment of the Group.

Datatec's strategy is to improve shareholder returns over the medium term through a combination of corporate and business development actions aimed at enhancing the competitiveness and profitability of its subsidiaries and operating divisions.

Logicalis is the largest profit contributor to the Group. The division also has the widest geographical exposure and Datatec intends to continue to develop and grow Logicalis globally, both organically and through acquisitions.

Datatec issued a cautionary announcement on 2 March 2020, informing shareholders that it is exploring the possibility of a listing (the "Potential Listing") of Logicalis' Latin American business (the "Latin American business") on the B3 S.A. – Brasil, Bolsa, Balcão (www.b3.com.br – Brazilian stock exchange). This would result in the Latin American business and its shareholders potentially carrying out a primary and secondary offering of the shares of the Latin American business, subject to satisfactory market conditions. A further cautionary announcement in this regard was issued on 15 April 2020.

Whilst the Potential Listing remains of high interest, current market conditions are making the timing of the Potential Listing increasingly undeterminable. As a result, the Board has decided to withdraw the cautionary announcement.

Westcon International is 90% owned by Datatec following the sale of Westcon Americas to SYNNEX Corporation ("SYNNEX") together with 10% of Westcon International in FY18. The Group's strategy is to reshape the Westcon International business in order to improve profitability and reduce the central cost base which was retained after the SYNNEX transaction.

Westcon International returned to profitability in FY20 supported by excellent costs containment with the previously published target reduction in central costs for FY20 successfully exceeded. Following multiple years of restructuring, as well as system and process changes in Westcon International, no restructuring charges were incurred in FY20.

Following an arbitration process by an independent accountant, the earn-out payment relating to the disposal of Westcon Americas to SYNNEX was determined to be US$14 million on 29 May 2019. This was returned to shareholders by way of a special dividend of R1.00 per share on 29 July 2019, which totalled US$15.4 million.

Group revenues in FY20 of US$4.30 billion were flat compared to the financial year ended 28 February 2019 ("FY19") in reported US Dollar terms. In constant currency*** terms, Group revenues increased by 3.6% reflecting the impact of foreign currency translation effects on the results.

EBITDA for FY20 was US$158.7 million, representing an increase of 83% on FY19 (US$86.8 million). Excluding the adoption of IFRS 16**, EBITDA would have been US$123.5 million, representing a 42% increase over the prior year.

Underlying* earnings per share ("UEPS") increased by 50% to 9.9 US cents in FY20 (FY19: 6.6 US cents).

IFRS 16 Leases has been adopted for FY20 which has had a significant effect on the Group's financial reporting in several areas. Operating expenses have reduced as the majority of rental costs of leased assets are no longer included and depreciation and interest expense have both increased by an approximately commensurate amount. On the statement of financial position, fixed assets have increased with the inclusion of right-of-use assets and borrowings have increased with the equivalent lease liabilities affecting the net debt metric. The detail of this accounting change is set out in the summarised financial statements below and reference is made to the effect on the key metrics in the text.

The Group balance sheet remains strong with net debt at 29 February 2020 of US$139.9 million compared to US$100.8 million at 28 February 2019. Excluding the IFRS 16 adoption, net debt would have reduced to US$55.1 million.

During FY20, the Company undertook general share repurchases under three separate shareholder mandates provided at general meetings on 15 January 2019 and 26 June 2019 and at the annual general meeting ("AGM") on 29 August 2019. These repurchases amounted to US$44.3 million and totalled 19.0 million shares which have been cancelled, reducing the Company's shares in issue to 201.45 million at 29 February 2020.

The declaration of COVID-19 as a pandemic by the World Health Organisation ("WHO") on 11 March 2020, at the start of the Group's new financial year, heralded an unprecedented global economic and humanitarian crisis.

The Group's immediate response was to keep employees safe in accordance with government guidelines in all geographies of operation which typically involved maximising working from home, social distancing and all advised measures to limit the spread of COVID-19.

The multi-year investments in Westcon International's advanced systems and business automation enabled business continuity plans to be deployed effectively with almost the entire workforce switching to remote working. Most of Logicalis' global workforce is also working from home, limiting operational disruptions during lockdown periods.

Trading has remained steady since the beginning of the 2021 financial year, although some delays and supply disruptions were experienced especially in countries with highly restrictive lockdowns. Initial indications are that Westcon International revenues and order intake for the first quarter of FY21 ("Q1 FY21") are similar to the same period last year. For Logicalis, order intake for Q1 FY21 is similar to the corresponding period last year, with revenues for Q1 FY21 slightly lower than Q1 FY20.

The foreign currency exchange effects have been exacerbated so far in Q1 FY21 with the Rand and the Brazilian Real in particular depreciating dramatically against the US Dollar. Sustained emerging markets' currency weakness is expected for the near term.

Collections from customers during the first few months of FY21 have remained in line with historic norms. As intermediaries in the supply chain, both Logicalis and Westcon International are working with vendors to provide support to customers experiencing adverse effects from the pandemic.

Increased demand for the Group's technology solutions is being experienced to support remote working during the lockdowns enforced throughout the world. In particular, demand for cloud computing, remote access solutions, virtualisation, security and unified communications remains strong. The positioning of the Group's divisions remains strategically sound with good demand for their solutions and services expected to continue as the world emerges from the current crisis and investments towards digital transformation accelerate.

The COVID-19 pandemic has created a lot of uncertainty over the macroeconomic outlook, both in the short and medium term. As a result, the Group will not be issuing any forward-looking guidance. Our focus will remain on optimising our business for the current environment which will include cost and liquidity management.

Revenue

Group revenues for the year were US$4.30 billion (FY19: US$4.33 billion) and are analysed by division and by geography shown below.

• Contribution to Group revenue

  

• Revenue % contribution by geography

  

Group gross margins in FY20 were 17.2% (FY19:15.9%). Gross profit was US$741.6 million (FY19: US$687.7 million) analysed by division and by geography shown below.

• Contribution to Group gross profit

  

• Gross profit % contribution by geography

  

Overall operating costs were US$582.9 million (FY19: US$600.9 million). There are no fundamental restructuring costs within operating costs in FY20 (FY19: US$17.5 million restructuring costs). EBITDA was US$158.7 million (FY19: US$86.8 million) and EBITDA margin was 3.7% (FY19: 2.0%). Excluding the adoption of IFRS 16**, EBITDA would have been US$123.5 million and EBITDA margin would have been 2.9%.

Operating profit was US$82.6 million, a notable increase on the US$48.4 million operating profit in FY19.

The net interest charge increased to US$25.9 million (FY19: US$22.6 million), mainly as a result of the adoption of IFRS 16** which added US$4.6 million to the net interest charge during the year. Profit before tax was US$58.5 million (FY19: US$24.2 million).

A tax charge of US$31.8 million has arisen on pre-tax profits from continuing operations for the year of US$58.5 million. The effective tax rate of 54.4% continues to be adversely affected by losses arising in Westcon International's UK and Asia operations for which no deferred tax assets have been recognised. As at 29 February 2020, there are estimated tax loss carry forwards of US$215.6 million with an estimated future tax benefit of US$46.2 million, of which only US$17.8 million has been recognised as a deferred tax asset.

Underlying* earnings per share were 9.9 US cents (FY19: 6.6 US cents). Headline earnings per share were 5.9 US cents (FY19: 0.7 US cents).

Cash

The Group generated US$215.6 million of cash from operations during FY20 (FY19: US$69.0 million) and ended the year with a net debt of US$139.9 million (FY19: US$100.8 million and H1 FY20: $193.7 million). The net debt has been calculated as: cash of US$83.4 million (FY19 US$40.4 million); short-term borrowings and current portion of long-term debt of US$109.5 million (FY19: US$109.8 million); and long-term debt of US$113.8 million (FY19: US$31.4 million).

The adoption of IFRS 16 lease accounting has added US$84.8 million to net debt. For comparative purposes, excluding IFRS 16, net debt would have reduced to US$55.1 million. The net debt excluding IFRS 16 has been calculated as: cash of US$83.4 million (FY19: US$40.4 million); short-term borrowings and current portion of long-term debt of US$88.1 million (FY19  US$109.8 million); and long-term debt of US$50.4 million (FY19: US$31.4 million).

Acquisitions

On 1 March 2019, Analysys Mason Limited acquired 100% of the issued share capital of Stelacon Holding AB ("Stelacon"), a Swedish consulting company, for US$2.6 million (including a deferred purchase consideration of US$1.2 million). This was an important further step in building a pan-Scandinavian presence, after Analysys Mason's successful expansion into Norway. Stelacon brings experience in areas including smart cities, regional development, digital services, policy and regulation, and telecoms and digital communications.

Effective 30 June 2019, Logicalis SA (Pty) Ltd, acquired 100% of the issued share capital of Mars Investment Holdings (Pty) Ltd ("Mars Technologies"), a South African IT services business, with offices in Cape Town, Johannesburg, Port Elizabeth, Durban and East London for US$0.4 million (including a deferred purchase consideration of US$0.1 million). This acquisition strengthens and expands Logicalis' South African managed services offering.

Logicalis Group purchased a 70% interest in Cilnet – Communicações e Projectos Especiais S.A. ("Cilnet") on 2 September 2019. Cilnet is a Cisco systems integrator and managed services business in Portugal. The purchase consideration was US$8.8 million (including a deferred purchase consideration of US$2.3 million and US$0.7 million non-controlling interest that was raised at acquisition). The acquisition increases Logicalis' Cisco technical expertise in the Iberian region and complements the existing Spanish operation with data centre, collaboration, networking, infrastructure and managed services capabilities, expanding the offering to the region.

Logicalis Group also acquired 100% of Orange Networks GmbH ("Orange Networks") on 2 September 2019. Orange Networks is a Microsoft services business focused on Microsoft cloud and managed services, with Germany-wide presence. The purchase price was US$2.9 million (including a deferred purchase consideration of US$0.6 million). This acquisition advances Logicalis Germany to Microsoft Gold-Certified Partner status and enhances its hybrid cloud offering.

As a result of these acquisitions, goodwill and other intangible assets increased by US$13.0 million and US$3.9 million respectively. None of the goodwill recognised is expected to be deductible for income tax purposes. The revenue and EBITDA included from the acquisitions in FY20 are US$23.3 million and US$2.6 million respectively; profit after tax included from these acquisitions was US$1.7 million. Had the acquisition dates been 1 March 2019, revenue and EBITDA attributable to these acquisitions would have been approximately US$42.8 million and US$4.9 million respectively. It is not practical to establish profit after tax that would have been contributed to the Group if they had been included for the entire year. All trade receivables are measured at amortised cost. The carrying value of trade receivables balances approximates their fair value. All identifiable intangible assets have been recognised and accounted for at fair value.

Acquisition-related costs of the above acquisitions of US$0.3 million are included in operating costs in the summarised consolidated statement of comprehensive income.

Liquidity and borrowing facilities

In light of the COVID-19 crisis, particular attention has been given to assessing the outlook for liquidity across the Group and ensuring that sufficient cash will continue to be generated to settle liabilities as they fall due. Each division has carried out scenario planning and stress testing for the twelve months following the date of this report and has contingency plans in place to adapt to the more severe scenarios.

In January 2020, Logicalis completed a new three-year US$155 million banking facility for its subsidiaries. This new senior facility covers Logicalis' operations throughout the world, excluding Latin America, which has its own separate credit facilities. The facility is used to fund working capital requirements and also includes a new acquisition credit line. In addition, the Latin American credit facilities are considered adequate in the current environment.

On 14 May 2020, Westcon International extended its expiring European Invoice Financing facility of US$280 million for a further twelve months until 4 June 2021. The facility has been reduced with effect from 4 June 2020 to US$224 million with an accordion provision to increase the facility to US$280 million during the period from November 2020 to February 2021 when working capital utilisation is typically at its highest. This extended facility is considered adequate for Westcon International's working capital requirements, based on historical utilisation as well as projected headroom requirements as per the scenario modelling and stress testing.

The Group performed covenant projections for the next twelve months to confirm that banking covenants will continue to be met.

The Group's liquidity is dependent upon customers continuing to pay their invoices on a timely basis. In the first two trading months of FY21, customers have continued to pay largely in line with historic norms. Suppliers have also been willing to provide extended payment terms where required.

Working capital was very well controlled across the Group in FY20 and net working capital days continued to improve in Westcon International as detailed in the divisional review below. Trade receivables and inventory are of a sound quality and adequate provisions are held against both.

Shareholder distributions: dividend policy and share repurchases

The Group's policy is to maintain a fixed three times cover relative to underlying* earnings when declaring dividends. However, as a result of the current COVID-19 pandemic and stated focus on preserving cash, the Board has decided not to declare a dividend for FY20.

Following an arbitration process by an independent accountant, the earn-out payment relating to the disposal of Westcon Americas to SYNNEX was determined to be US$14 million and was returned to shareholders by way of a cash dividend of R1.00 per share with scrip distribution alternative on 29 July 2019, which totalled US$15.4 million. The special dividend resulted in US$12.2 million of cash being distributed to shareholders who did not elect the scrip distribution alternative and 1.25 million shares were issued to shareholders who elected the scrip distribution alternative.

The Board had previously instituted a structured programme of general share repurchases in order to return cash to shareholders. During FY20, the Company undertook general share repurchases under three separate shareholder mandates:

• General meeting on 15 January 2019 – 4.40 million shares
• General meeting on 26 June 2019 – 4.05 million shares
• AGM on 29 August 2019 – 10.55 million shares

These repurchases amounted to US$44.3 million and totalled 19.0 million shares which have been cancelled, reducing the Company's shares in issue to 201.45 million at 29 February 2020.

The Company has undertaken all its share repurchases in accordance with the JSE Listings Requirements.

Datatec has completed its share repurchase programme.

Foreign exchange translation

Losses of US$38.2 million (FY19: losses of US$54.7 million) arising on translation to presentation currency are included in total comprehensive loss of US$8.1 million (FY19: US$36.0 million). The majority of these losses arise from weakening in the Rand/US$ exchange rate from 13.94 at 28 February 2019 to 15.61 at 29 February 2020 and weakening in the Brazilian Real/US$ exchange rate from 3.73 at 28 February 2019 to 4.47 at 29 February 2020.

Logicalis

Logicalis accounted for 40% of the Group's revenues (FY19: 40%).

Logicalis is an international multi-skilled solution provider providing digital enablement services to help customers harness digital technology and innovative services to deliver powerful business outcomes.

Revenue decreased by 2.34% to US$1.7 billion (FY19: US$1.7 billion). In constant currency*** terms, Logicalis' revenue increased by 4.28% in FY20. Services revenues were up 6.32% with growth in both professional services and annuity revenue.

Logicalis revenue % contribution by geography

Revenue increased across North America, Asia-Pacific and Africa in absolute terms. The decrease in Europe was attributable to the rightsizing of the UK business and the decrease in Latin America was attributable to worsening exchange rates, although local currency revenue showed an increase over FY19.

Revenues from product sales were down 7.5%, affected mainly by Latin America which benefited from large volumes of Cisco business in FY19.

Logicalis' gross margin was 25.9% (FY19: 23.6%).

This increase was partly due to the major multi-year Latin American contract which included a large product component in FY19 that transitioned to include a more substantial services element as the contract progressed. In addition, a once-off tax credit in Brazil increased gross profit by US$13.6 million in FY20, following a court ruling in favour of Logicalis with regards to certain overpaid indirect taxes. This ruling is not subject to appeal by the Brazilian tax authorities. Logicalis Brazil also recognised interest income of US$7.5 million on these multi-year overpaid taxes during FY20.

Gross profit was up 7.6% to US$441.2 million (FY19: US$410.1 million).

Logicalis gross profit % contribution by geography

EBITDA was US$123.9 million (FY19: US$93.4 million), with a corresponding EBITDA margin of 7.3% (FY19: 5.4%). Operating profit was US$72.3 million (FY19: US$65.9 million). Excluding the effects of IFRS 16**, EBITDA and operating profit would have been US$103.9 million and US$69.3 million respectively.

Argentina continued as a hyperinflation economy during FY20 although the impact on the Group results was not material.

The net interest charge decreased by US$2.7 million, largely as a result of interest receivable on the tax credit received in Brazil, which offset increased finance lease interest charges resulting from the application of IFRS 16.

Net debt of US$156.7 million (FY19: US$109.2 million) consisted of: net cash of US$12.6 million (FY19: US$16.4 million); short-term borrowings and current portion of long-term debt of US$100.8 million (FY19: US$94.4 million); and long-term debt of US$68.5 million (FY19: US$31.2 million). Excluding the impact of IFRS 16**, net debt would have been US$112.4 million. The increase in net debt compared to FY19 was driven primarily by financing related to multi-year deals in Germany, offset by seasonal outflows associated with the Americas and the reduction in working capital requirements associated with the large multi-year Latin American contract. The working capital requirements linked to both the German and Latin America contracts are expected to unwind as the projects advance.

Logicalis continues to have a contingent liability in respect of a possible tax liability at its subsidiary in Brazil.

On 30 June 2019, Logicalis completed the acquisition of Mars Technologies, a South African IT services business, offering managed IT services ranging from the remote monitoring of networks and servers, managed desktop, anti-virus, cloud backup, and printers, to full outsourcing, with a strong offering to small and mid-market enterprises.

On 2 September 2019, Logicalis Group purchased a 70% interest in Cilnet, a Cisco systems integrator and managed services business in Portugal, which increases Logicalis' Cisco technical expertise in the Iberian region and complements the existing Spanish operation with data centre, collaboration, networking, infrastructure and managed services capabilities, expanding the offering to the region.

In addition, Logicalis acquired Orange Networks on 2 September 2019, a Microsoft services business focused on Microsoft cloud and managed services, with Germany-wide presence including Hamburg, Munich, Offenbach and Düsseldorf. This acquisition advances Logicalis Germany to Microsoft Gold-Certified Partner status and enhances its hybrid cloud offering.

Logicalis continues to seek enhancements in its long-term capabilities within cloud, IoT, software, security, data management and intelligent networks to promote long-term value and insight-led transformation to its customers.

Whilst it is certain that technology will be even more firmly embedded in customers' operations following this pandemic, the exact impact of COVID-19 on Logicalis' short-to-medium-term trading is difficult to establish at this stage.

Regional leadership teams within Logicalis have prepared action plans to respond to different scenarios that they may encounter. At the same time, each region has put together compelling offers to customers and markets, including rapid remote deployment of essential solutions and services. These are designed to support customers in the areas that are most relevant to them right now, including secure remote working solutions, collaboration packages and improvements to IT resilience.

Logicalis remains confident about the long-term prospects for the industry and its positioning within it. Emerging markets currencies are expected to remain volatile over the short term.

Westcon International

Westcon International accounted for 59% of the Group's revenues (FY19: 59%).

Westcon International is a value-added speciality distributor of industry-leading cyber security and network infrastructure, unified communications products, data centre solutions and channel services, with a global network of service providers, systems integrators and speciality resellers. Westcon International has operations in more than 50 countries, and goes to market under the Westcon and Comstor brands. Westcon International's portfolio of market-leading vendors includes: Cisco, Palo Alto, Avaya, Juniper, Check Point, F5 and Symantec.

Westcon International's revenues for FY20 were flat at US$2.54 billion (FY19: US$2.54 billion) as higher sales in Asia-Pacific and Middle East and Africa ("MEA") were offset by lower sales in Europe. In constant currency*** terms, Westcon International's revenues increased by 2.7% and revenues in all regions except Europe, were up year-on-year.

Westcon International's gross profit increased by 5.9% to US$275.7 million (FY19: US$260.4 million) with increases across all regions. Gross margins increased to 10.8% (FY19: 10.2%) with higher margins in Europe and Asia-Pacific.

• Westcon International revenue % contribution by geography

  

• Westcon International gross profit % contribution by geography

  

Westcon International revenue % by technology category

Operating costs decreased 7.5% to US$235.7 million (FY19: US$254.8 million). Operating costs in FY19 benefited from a US$15.0 million SYNNEX transitional costs credit in the first half. Part of the decrease in FY20 operating costs has resulted from the adoption of IFRS 16.

Following several years of transformation, systems and process investments, no restructuring costs were incurred in FY20. Central costs of US$29 million were incurred in FY20, coming in significantly below the published target of US$33 million.

EBITDA was US$40.0 million (FY19: US$5.6 million), benefiting by $13.0 million from the adoption of IFRS 16**.

Net working capital days decreased to 22 days (FY19: 28 days) primarily due to lower days sales outstanding ("DSO") and increased inventory turns. Net debt was US$48.7 million (FY19: US$109.5 million) reflecting the adoption of IFRS 16 in FY20 which increased debt by US$31.3 million. Excluding the effect of IFRS 16**, net debt decreased to US$17.4 million.

The net debt consisted of: net overdrafts of US$4.5 million (FY19: US$94.4 million); short-term borrowings and current portion of long-term debt of US$6.6 million (FY19: US$15.0 million); and long-term debt of US$37.6 million (FY19: US$0.1 million).

In September 2019, the Group announced a change in the black economic empowerment ("BEE") partner of its subsidiary Westcon Southern Africa Holdings (Pty) Ltd ("Westcon SA"). This followed the disposal by MIC Investment Holdings (Pty) Ltd of its 40% equity interest in Westcon SA to Ascension Capital Partners (Pty) Ltd, a South African private equity investor. Westcon SA has maintained its level 1 BEE rating pursuant to this transaction.

Westcon International continues to monitor and respond to the COVID-19 pandemic with its priority on maintaining the health and welfare of its staff in compliance with relevant government directives, while limiting business impacts for channel and vendor partners.

Westcon International's key logistics centres in the UK, Netherlands, Middle East, South Africa and Asia-Pacific remain open and are being managed under strict measures to assure the wellbeing of logistics and warehousing teams while maintaining service levels. This has enabled the division to take an active role in servicing the needs of critical business sectors alongside partners during the pandemic.

The multi-year investments in Westcon International's advanced systems and business automation enabled business continuity plans to be deployed seamlessly, with almost the entire workforce switching to remote working.

The reshaping of Westcon International is proceeding according to plan and the business is now operating profitably. While the near term remains very uncertain, current conditions are driving demand for technologies that support remote access computing, cloud computing, virtualisation, security and unified communications.

Corporate, Management Consulting and Financial Services

This segment accounted for 1% of the Group's revenues (FY19: 1%).

The Management Consulting unit comprises Analysys Mason, a provider of strategic, trusted advisory, modelling and market intelligence services to the telecoms, media and technology industries.

Analysys Mason delivered an excellent performance in FY20. Management Consulting revenues were US$58.7 million (FY19: US$45.7 million) and EBITDA was US$9.4 million (FY19: US$2.8 million). This strong performance was reflected across all 16 offices worldwide and across the main propositions of Strategy, Transaction Support, Regulatory Advice and Research. In particular, areas such as 5G and fibre, where Analysys Mason has unrivalled deep domain expertise, were significant drivers of revenue growth.

Effective 1 March 2019, Analysys Mason acquired Stelacon Holding AB in Sweden as the next step in building a pan-Scandinavian team, following the earlier acquisition of Nexia Management Consulting in Norway.

On 1 April 2020, Analysys Mason acquired Allolio&Konrad, a consultancy based in Bonn, Germany with an extensive track record in the telecommunications industry and long-term client relationships with Europe's leading telecom operators. The acquisition of Allolio&Konrad builds logically on other recent acquisitions, strengthening Analysys Mason's position in the strategic, digital transformation, IT transformation, and performance consulting market, and broadening its skills base to support the accelerating demand for 5G expertise.

The Datatec Financial Services business provides financing/leasing solutions for ICT customers. The business recorded revenues of US$1.0 million in FY20 (FY19: US$0.9 million) and an EBITDA loss of US$1.2 million (FY19: US$1.7 million).

The Corporate reporting segment includes the net operating costs of the Datatec head office entities, which were US$15.3 million (FY19: US$16.8 million). These costs include the remuneration of the Board and head office staff, consulting and audit fees. In FY20, foreign exchange gains were US$1.9 million (FY19: US$3.5 million).

As at 29 February 2020, Datatec head office entities held cash of US$67.5 million of which US$14.5 million (the equivalent of ZAR226.8 million) is held in South Africa and subject to the South African Reserve Bank regulations.

COVID-19

On 11 March 2020, the World Health Organisation ("WHO") declared COVID-19 a global pandemic. This was followed by most countries in which the Group operates instituting lockdown restrictions to slow the spread of the disease. The Group responded by ensuring the safety and wellbeing of its employees and enabling working from home to maintain social distancing. Travel and face-to-face meetings were quickly reduced and eliminated completely in accordance with prevailing regulations. Most of the Group's business activities are able to continue under lockdown conditions and the provision of IT and communications equipment and services is often an essential component of the global response to the pandemic. The effect on the Group's business at the date of this report has been considered in detail by the board in approving the annual financial statements for FY20.

The countries in which the Group operates are all in different stages of lockdown, including travel and trade restrictions as well as social distancing measures. Outcomes range from successful virus containment with a short-term economic impact, to a prolonged global contagion resulting in a potential global recession or recessions in countries in which the Group operates. At the same time, there are a number of policy and fiscal responses emerging across the globe intended to mitigate potential negative economic impacts. Datatec is monitoring the developments closely and continuously adjusting across all its operations. The Group follows guidelines from the WHO and abides by the requirements as activated by local governments. Contingency plans have been implemented as far as possible to mitigate the potential adverse impact on the Group's employees and operations.

As the WHO declared COVID-19 a global pandemic on 11 March 2020 after the reporting date of the Group, the Group considers this to be a non-adjusting event after the reporting date as the directors are of the view that the impact of the pandemic on the global markets and economy could not have sufficiently been anticipated at 29 February 2020. As a result the financial effects resulting from the impact of COVID-19 have not been reflected in the Group's financial statements as at 29 February 2020.

As the situation remains fluid and rapidly evolving (due to continuing changes in government policy and evolving business and customer reactions thereto) as at the date the Group's consolidated annual financial statements for FY20 are authorised for issue, the directors of the Company considered that the financial effects of COVID-19 on the Group's consolidated financial statements cannot be reasonably estimated. Nevertheless, the economic effects arising from the COVID-19 pandemic may materially affect the consolidated results of the Group for the first half and full year of its FY21 financial year.

Westcon International facility

Westcon International extended its Europe financing facility on 14 May 2020 (refer above).

Acquisition

Effective 1 April 2020, Analysys Mason acquired 100% of the shares in Allolio&Konrad for €7 million cash, a consultancy based in Bonn, Germany, with an extensive track record in the telecommunications industry and long-term client relationships with Europe's leading telecom operators. Due to the timing of this acquisition, the at acquisition accounting has not been finalised and the fair value assessments of assets and liabilities acquired is still in progress; thus the goodwill and intangible asset values related to this acquisition have not been determined. Acquisition-related costs of €0.2 million have been incurred on this acquisition.

No other matter or circumstance has occurred subsequent to year-end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the entity at the reporting date.

As previously announced:

• Rick Medlock joined the Board as an independent non-executive director and member of the Audit, Risk and Compliance Committee ("ARCC") with effect 1 January 2020;
• Maya Makanjee was appointed as the Chairman of the Social and Ethics Committee on 1 June 2019 and also became the Chairman of the Remuneration Committee on 1 September 2019; and
• Johnson Njeke and Ekta Singh-Bushell stepped down from the Social and Ethics Committee on 30 November 2019.

In addition, Stephen Davidson, the Group Chairman, and John McCartney will step down from their committee roles on the ARCC and Remuneration Committee on 31 May 2020.

Ekta Singh-Bushell will be appointed to the Remuneration Committee effective 31 May 2020.

The provisional summarised consolidated financial statements are prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS") in effect for the Group at 29 February 2020, and further comply with the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, at a minimum contain the requirements of IAS 34 Interim Financial Reporting, as well as the requirements of the Companies Act 71 of 2008 of South Africa and the JSE Limited Listings Requirements.

The accounting policies applied in the preparation of these summarised financial statements are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements except as stated below:

The Group has applied IFRS 16 Leases using the modified retrospective approach. The impact of the adoption of this standard and the amended accounting policies are disclosed in the summarised financial statements below. The other new or amended standards did not have an impact on the Group's accounting policies and did not require retrospective adjustments.

The preparation of these summarised financial statements and the consolidated financial statements from which these summarised financial statements were derived from for FY20 was supervised by the Chief Financial Officer, Mr Ivan Dittrich, CA(SA).

The independent auditor, Deloitte & Touche, has issued its unmodified audit opinions on the consolidated financial statements and on these summarised consolidated financial statements for the year ended 29 February 2020 in accordance with International Standards on Auditing. These summarised consolidated financial statements have been derived from the audited consolidated annual financial statements and are consistent in all material respects, with the Group's consolidated financial statements. The consolidated financial statements and the auditor's unmodified reports on the consolidated financial statements and on these summarised consolidated financial statements are available for inspection at the Company's registered office.

The auditor's reports do not necessarily report on all of the information contained in this announcement/ financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement, they should obtain a copy of the reports together with the accompanying financial information from the Company's registered office.

The full set of consolidated financial statements and unmodified audit opinion from Deloitte & Touche containing the key audit matters is available for inspection at the Company's registered office and at https://www.datatec-reports.co.za/annual-2020/pdf/afs-2020.pdf.

Any reference to future financial performance included in this announcement, has not been audited or reported on by the Company's auditor.

This announcement may contain statements regarding the future financial performance of the Group which may be considered to be forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty, and although the Group has taken reasonable care to ensure the accuracy of the information presented, no assurance can be given that such expectations will prove to have been correct.

The Group has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. It is important to note, that:

On behalf of the Board

SJ Davidson
Chairman

JP Montanana
Chief Executive Officer

IP Dittrich
Chief Financial Officer

27 May 2020