For management’s internal purposes, the Group is currently organised into three operating divisions which are the basis on which the Group reports its primary segmental information.

Principal activities are as follows:

• Westcon International – Technology distribution of security and networking products;
• Logicalis – ICT infrastructure solutions and services; and
• Corporate, Management Consulting and Financial Services: Includes strategic and technical consulting, capital/leasing business, Group head office companies and Group consolidation adjustments.

		Westcon International			Logicalis		Corporate, Management Consulting and Financial Services		Datatec Group Total
US$'000		Audited   Year ended   February   2021		Audited   Restated^ Year ended   February   2020	Audited  Year ended  February  2021	Audited   Restated^ Year ended   February   2020	Audited  Year ended  February  2021	Audited   Restated^ Year ended   February   2020	Audited  Year ended  February  2021	Audited   Restated^ Year ended   February   2020
REVENUE			2 585 678	2 473 113	1 449 543	1 681 531	74 242	59 777	4 109 463	4 214 421
Revenue from product sales			2 508 973	2 401 138	839 512	1 051 499	1 049	1 041	3 349 534	3 453 678
Revenue from sales of hardware			1 529 146	1 655 212	654 739	896 877	(20 948)	(21 517)	2 162 937	2 530 572
Revenue from sales of software*			946 877	723 223	184 439	154 703	(14 944)	(16 407)	1 116 372	861 519
Revenue from vendor resold services and product maintenance sales			69 736	61 155	747	807	(258)	(375)	70 225	61 587
Inter-segmental revenue			(36 786)	(38 452)	(413)	(888)	37 199	39 340	–	–
Revenue from services			68 010	67 898	209 267	217 796	65 553	51 865	342 830	337 559
Revenue from professional services			68 241	68 216	209 267	217 796	65 322	51 547	342 830	337 559
Inter-segmental revenue			(231)	(318)	–	–	231	318	–	–
Revenue from annuity services			8 695	4 077	400 764	412 236	7 640	6 871	417 099	423 184
Revenue from cloud services			–	–	47 653	49 384	–	–	47 653	49 384
Revenue from software services*			8 754	4 233	–	–	(59)	(156)	8 695	4 077
Revenue from other annuity services			–	–	353 111	362 852	7 640	6 871	360 751	369 723
Inter-segmental revenue			(59)	(156)	–	–	59	156	–	–
Restructuring costs			7 764	–	14 138	–	476	–	22 378	–
EBITDA			44 782	40 038	81 931	123 854	(8 081)	(5 235)	118 632	158 657
RECONCILIATION OF OPERATING PROFIT/(LOSS) TO PROFIT/(LOSS) AFTER TAXATION
Operating profit/(loss)			22 215	18 972	40 265	72 287	(12 507)	(8 722)	49 973	82 537
Interest income			728	1 084	770	11 538	397	2 289	1 895	14 911
Finance costs			(10 933)	(14 733)	(16 373)	(25 608)	(281)	(444)	(27 587)	(40 785)
Share of equity-accounted investment (losses)/earnings			–	(398)	362	(181)	546	375	908	(204)
Acquisition-related fair value adjustments			–	–	–	696	–	–	–	696
Other income			55	918	–	–	–	–	55	918
Loss on disposal of investment			–	415	–	–	–	–	–	415
Profit/(loss) before taxation			12 065	6 258	25 024	58 732	(11 845)	(6 502)	25 244	58 488
Taxation			(3 694)	(5 962)	(13 813)	(21 949)	(2 033)	(3 898)	(19 540)	(31 809)
Profit/(loss) for the year from continuing operations			8 371	296	11 211	36 783	(13 878)	(10 400)	5 704	26 679
Profit for the year from discontinued operations			–	–	–	–	–	1 332	–	1 332
Profit/(loss) for the year			8 371	296	11 211	36 783	(13 878)	(9 068)	5 704	28 011
ASSETS AND LIABILITIES
Total assets			1 336 059	1 155 583	1 296 818	1 303 083	164 381	137 860	2 797 258	2 596 526
Total liabilities			(1 170 444)	(985 859)	(935 536)	(926 877)	(50 657)	(40 697)	(2 156 637)	(1 953 433)

* Includes software as a service revenues.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors who make strategic decisions.

Sales and purchases between Group companies are concluded on normal commercial terms in the ordinary course of business. The inter-group sales of goods and provision of services for the year ended 28 February 2021 amounted to US$37.5 million (FY20: US$39.9 million). During the year, the Group made sales totalling US$58.2 million (FY20: US$51.1 million) and received management fees of US$0.4 million (FY20: US$0.3 million) from its associate Esource Resources, LLC. As at 28 February 2021, US$1.1 million (FY20: US$2. million) was due from Esource Resources, LLC and US$0.03 million (FY20: US$0.1 million) was due to Esource Resources, LLC.

^FY20 REVENUE RESTATEMENT

The Group sells certain software, software services and cloud computing solutions which include Infrastructure as a Service (“IaaS”) and Software as a Service (“SaaS”). During the year these amounts have grown in significance for the Group and the Group has revisited the revenue recognition for these arrangements. The Group’s vendors continuously change the way in which they bring their products and services to market and there is a significant amount of judgement involved in determining whether or not the Group acts as an agent or principal with regards to these arrangements. In its reassessment, the Group concluded that in those arrangements where the software service is delivered entirely by the vendor, or where the updates and cloud access are critical to the effectiveness of the solution and there is no material on-premise component to the solution, the Group will recognise revenue at the time of invoice on a net basis as the Group is acting as an agent in the transaction.

As a result, the Group has restated its consolidated statement of comprehensive income to reflect only the fees earned, for acting as an agent in these arrangements, as revenue. This has resulted in a decrease in revenues and a corresponding decrease in cost of goods sold in the previous financial year. There was no impact on gross profit or items below gross profit in the consolidated statement of comprehensive income. In addition, there was no impact on earnings or earnings per share.

Note that despite the revenues being disclosed on a net basis, the Group has a contractual right to the gross amount of cash related to the gross revenues and therefore, for any amounts remaining unpaid at the period end, the group continues to present these amounts as gross trade receivables in the consolidated statement of financial position. The restatement has no impact on the consolidated statement of financial position or consolidated statement of cash flows.

US$’000		Before  restatement	After  restatement	Total  restatement
2020
Revenue		4 304 845	4 214 421	(90 424)
Cost of sales		(3 563 267)	(3 472 843)	90 424
Gross profit		741 578	741 578	–

A prior year reclassification of US$65.6 million from professional services to software was required in Logicalis Latin America. Previously Logicalis’ Brazilian operation had reported the revenue as services revenue following local Brazilian tax requirements which requires that all software revenue that does not include a media component associated with it to be classified as services revenue.