On 11 March 2020, the 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 Datatec Group’s priority during this pandemic is its people.
- Implementing business continuity plans
- Ensuring consistent communication regarding the symptoms of the virus and prevention methods
- Taking full advantage of virtual meetings using collaboration technology
- Working remotely
- Training employees on how to react in crises
- Building infrastructure capable of supporting employees in remote work
- Putting procedures in place to deal with short or prolonged absence of colleagues
- Implementing disease prevention controls to delay the spread of the virus
- Implementing business continuity plans
- Implementing workplace and travel restrictions and enabling employees to work from home
- Providing secure applications access and communications facilities for all teams, enabling employees to work flexibly, providing continuity of support for partners and customers
- Establishing management protocols and implementing formal training for remote working to mitigate possible feelings of isolation, supporting closer collaboration and maintaining wellbeing and focus
- Continuously updating policies and communications in line with recommendations from the WHO, local government and health organisations
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. Datatec is monitoring 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.
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, visualisation, 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 toward digital transformation accelerate.
In Asia, Logicalis teams designed and quickly implemented a brand new network infrastructure for a community hospital that is being used as extra capacity to support COVID-19 patients.
In the USA, Logicalis scaled the computing resources in an Indiana state hospital to staff who normally had no means of remote working. This enabled them to continue to assist those seeking critical care in a race against time before the governor announced the lockdown.
In Latin America, Logicalis was able to support a large financial institution with its immediate need to enable a remote workforce. This involved providing 50 000 collaboration licences in addition to training and monitoring activity.
Hybrid infrastructure solutions, which have been increasingly common in recent years, have also become more sought after. Logicalis has been responding to a significant rise in demand for its production-ready cloud platform, which provides a pre-packaged, pre-configured cloud environment, designed to get a business cloud-enabled in a matter of weeks.
Solutions like these support businesses in the resilience and agility of their operations.
Westcon International has expertise in collaboration, infrastructure and security which is essential in assisting businesses to implement and extend their remote working capabilities.
Westcon International has a wide range of technology solutions which include remote professional services and virtual learning offerings.
The Datatec 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. Contingency plans have been implemented as far as possible to mitigate the potential adverse impact on the Group’s employees and operations.
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 impact of the pandemic on global markets could not have been sufficiently anticipated at 29 February 2020 and the financial effects of COVID-19 have not been reflected in the financial statements. The financial effects of COVID-19 on the Group’s financial statements cannot be reliably estimated and the economic effects arising from COVID-19 may materially affect the consolidated results of the Group for the first half and full year of its FY21 financial year.
The impact of COVID-19 on business performance remains unclear, but Logicalis has focused on cash preservation activities to ensure it can withstand the pressure that may come from short-term delays to orders from customers, or an inability to deliver and install due to the response from national governments.
In determining the possible extent of future credit losses as a consequence of COVID-19, a range of possible scenarios has been considered. While some of the scenarios suggest that credit losses could be incurred if COVID-19 affects the ability of large sections of Logicalis’ customer base to delay payment for a period of six to 12 months, collections from customers subsequent to the year-end were in line with historic norms.
COVID-19 could have a significant impact on the performance of the Logicalis Group during FY21. Logicalis’ order book remains strong in the period immediately following the end of FY20. However, Logicalis expects there to be some difficulty in delivering these orders in the short term due to supply chain problems and difficulties accessing client sites. Revenues for the first quarter of FY21 are slightly lower than the corresponding period last year.
Action plans have been prepared to respond to various scenarios during this period of uncertainty, including cost reduction initiatives.
COVID-19 is likely to have some impact on the ability of customers to settle debts and could cause an increase in the level of exposure to credit risk and therefore expected credit losses that Westcon International may incur in the future.
Westcon International has also considered a range of possible scenarios to determine the extent of possible credit losses.
While some of the scenarios suggest that credit losses could be incurred if COVID-19 affects the ability of large sections of Westcon International’s customer base to delay payment for a period of six to 12 months, collections from customers subsequent to the year-end were in line with historic norms.
There have been some disruptions in the business, especially in countries under complete lockdown, but conversely there has been an increase in demand for remote access computing solutions: software, security and unified communications.
Westcon International has specific actionable plans to ensure the continuation of the business based on identified scenarios of reduced sales and/or cash collection.
Initial indications are that Westcon International’s revenues and order intake for the first quarter of FY21 are similar to the same period last year.
The Board has undertaken a rigorous assessment of whether the Group is a going concern in light of the current economic conditions and available information about future risks and uncertainties.
The projections of the Group have been prepared on a sum-of-the-parts basis to determine the ability of each of its core segments to continue as a going concern. These projections covered future financial performance, solvency and liquidity for a period of 12 months from the date of approval of the annual financial statements, including performing sensitivity analyses and stress testing of various possible scenarios, varying in severity, related to COVID-19. These scenarios included contingency planning for restructuring actions to be taken in response to the more severe scenarios. It is, however, difficult to predict the overall outcome and impact of COVID-19.
The Group’s liquidity is dependent on customers continuing to pay their invoices. Between the reporting date and effective date of the Integrated Report, customers have continued to pay largely in line with historic norms. Suppliers have also provided extended payment terms where required.
The Group’s forecasts and projections of its current and expected financial performance, show that the Group is expected to operate within the levels of its banking facilities for at least 12 months from the authorisation date of its annual financial statements.
Trading has remained steady since the beginning of the FY21 year, although some delays and supply disruptions were experienced, especially in countries with highly restrictive lockdowns.
The multi-year investment in systems and processes in Westcon International was a key enabler to move all its employees to working remotely, with the exception of warehouse staff who continue to work in the warehouses subject to increased safety protocols. Most of the Logicalis global workforce also successfully works from home in the current environment.
The Group’s projections and sensitivity analyses show that the Group has sufficient capital and liquidity to continue to meet its short-term obligations. As a result, it is appropriate to prepare the financial statements on a going concern basis. This is further supported by trading after the financial year-end, as outlined above.
In line with other South African businesses, Datatec pledged its support towards The Solidarity Fund created by the South African government in response to the COVID-19 pandemic. Datatec has donated R1 million to The Solidarity Fund and this has been matched by a personal contribution of R1 million from the CEO, Jens Montanana.