Chair's review

The past 12 months provided a new set of challenges as global supply chain disruptions persisted and inflationary pressures took hold. This continued to drive backlogs across our operations although the situation started easing towards the end of the financial year.

Against this backdrop, our businesses continued to take advantage of opportunities created by the positive trends for our services and successfully assisted a wide range of organisations ensure that they had the necessary systems in place to transform and navigate future disruptions.

Importantly, the year was also marked by a significant value realisation event for our shareholders through the successful sale of our management consulting division, Analysys Mason.

Westcon International produced another excellent set of results building on the improvements of recent years as the leadership team delivered on its multi-year turnaround strategy.

This success drove an increased valuation of the division resulting in a high once-off accounting charge for the year relating to its share-based remuneration plan. Under IFRS 2, the continuing share-based payment charge included in operating expenses was US$52.6 million, more than triple the equivalent charge in FY22 of US$15.5 million which reflected the increasing valuation of the division's cash-settled share-based payment plans. Whilst we anticipate this charge will be substantially lower in future years, it significantly impacted all the earnings metrics of the Group for the year.

We are implementing new executive long-term incentive schemes for our subsidiaries that will enable divisional executive management to invest in the equity of their businesses alongside Datatec to better align with shareholders in value generation.

At the start of the year, Datatec made the decision to split its investment in Logicalis Group into two divisions. Logicalis International, with operations in Europe, North America, Asia-Pacific and Africa, maintained good results for the year and Logicalis Latin America, which operates across South America, Mexico and the Caribbean, had a much improved second half, supported by improvements in its supply chain.

The Group's revenues increased 13% to US$5.1 billion compared to US$4.5 billion in the prior year on a continuing basis excluding the results of Analysys Mason which was sold during the year. Adjusted EBITDA also rose 13% to US$180.2 million compared to US$158.9 million in the prior year on the same continuing basis. uEPS was 7.9 US cents per share compared to 18.7 US cents in FY22 because of the high accounting charge for share-based payments noted above which is not expected to recur in future.

Our overall balance sheet remained strong during the year, supported by excellent working capital management and liquidity enhancements, positioning the business well as we entered a higher interest rate environment.

In August 2021, the Board engaged Lazard to assist with a comprehensive Strategic Review to unlock and maximise shareholder value.

The Strategic Review has continued to address the persistent gap between Datatec's valuation and the inherent value of its underlying assets while also ensuring that the Group is positioned to take full advantage of the positive market dynamics for its technology solutions and services.

In June 2022, we announced that the Strategic Review process had led to Datatec entering into a transaction to sell its interest in Analysys Mason to Bridgepoint Development Capital, an international alternative private asset management group. We believed that the time was right to realise our investment in Analysys Mason which had developed significantly with Datatec's support over the past 20 years to become one of the world's leading telecommunications, media and technology management consultancies. Bridgepoint Development Capital is the ideal partner for Analysys Mason's next growth phase, supported by significant reinvestment from management and employee shareholders.

The completion of the transaction in September 2022 represented a significant liquidity event for shareholders with all proceeds distributed by means of a GBP135.1 million special dividend, equating to approximately 38% of Datatec's market capitalisation at the time. It is worth noting that the division's contribution to Group EBITDA was about 6% for the year ended 28 February 2022.

The Strategic Review continues to focus on improving shareholder returns over the medium term through a combination of corporate activity and business development actions aimed at enhancing the competitiveness and profitability of subsidiaries and operating divisions.

Better aligning divisional executive management remuneration with Datatec shareholder needs was also an area of focus. To this end, we engaged a leading corporate advisory firm during the year to develop the new executive long-term incentive schemes for our subsidiaries. The management incentive plans are focused on maximising shareholder value and designed to achieve strong equity value creation alignment. Key individuals in the divisional leadership teams are able to invest their own funds to become shareholders alongside Datatec in their businesses at fair value. Their investment will only realise at the same time as Datatec's through future value realisation events.

The new incentive scheme for Logicalis International was implemented in March 2023 and Westcon International's is expected to be implemented during the second quarter of the current financial year. The executive directors of Datatec will not participate in these new divisional management incentive plans.

This year saw substantial returns flowing to shareholders in the form of dividends.

The initial cash consideration received on completion of the sale of Analysys Mason was approximately GBP128 million, with a further GBP7.1 million in deferred loan notes payable three years after completion.

On 11 October 2022, the Board declared a GBP135.1 million special dividend to shareholders. All transaction-related costs were absorbed by the Company in order to maximise this distribution to shareholders.

On 23 May 2023, the Board declared a final dividend for the financial year of ZAR439 million or 195 SA cents per share, equivalent to 10 US cents per share. This dividend was calculated by normalising full year underlying earnings per share by excluding all share-based payment charges and applying the Group's dividend cover policy of three times to underlying earnings.

As is customary, both dividends were offered as a cash dividend with a scrip distribution alternative.

Datatec is committed to the highest standards of corporate governance, which form the foundation for the long-term sustainability of our company and the creation of value for our stakeholders.

Our Board evolution process continued during FY23 with Luis Rapparini, who is also the Chair of the Logicalis Latin America audit committee, joining the Datatec Board on 1 September 2022. Luis has extensive experience as a finance and internal audit executive developed over his career with British American Tobacco, Raízen and Royal Dutch Shell. Luis also joined the Remuneration Committee on 1 December 2022.

At the AGM in July 2023, John McCartney will retire from the Board after many years of service and I would like to thank him for the depth of wisdom and experience he has brought to the Board over this time. Stephen Davidson, our other long serving non-executive director, is standing for re-election for a final one-year term at the AGM. He will also hand over the reins of the Remuneration Committee to a new Chair, Deepa Sita.

I would like to extend my appreciation to all my colleagues for their ongoing dedication and support. Their robust oversight on the implementation of the strategy continues to be critical.

Datatec is committed to conducting business in a responsible and sustainable way.

Our shared-value responsible business strategy continues to deliver on its promises and is fully aligned with our commitment to environmental performance, our responsibility to support society and communities, and to continue to work from an ethical business platform with strong corporate governance.

The implementation of our global network of responsible business champions serves to effectively drive this important work throughout Datatec's divisions. I am very pleased to witness the great progress being made in this area across the Group as a member of the Group's responsible business Committee.

You will see elsewhere in this Integrated Report how Datatec's responsible business targets are set and monitored and I look forward to the successful evolution of this reporting.

As with other stakeholders, and in line with our commitment to build trusting relationships, our proactive engagement programme with shareholders continued during the year.

In late January and February of 2023, Stephen Davidson, Deepa Sita and I held a series of face-to-face and online shareholder consultations covering a range of ESG and remuneration matters. We appreciate the constructive exchanges that these meetings generate and will continue to maintain open lines of communication to stay fully attuned to shareholders' perspectives.

We encourage our shareholders to attend the AGM on 27 July 2023 which is being held as a virtual meeting to allow broad participation.

On behalf of the Board, I would like to express our thanks to the more than 10 000 employees whose commitment has contributed to the Group's success under the leadership of Jens Montanana and Ivan Dittrich.

Demand for our technology solutions and services across the world continues to grow.

With the semiconductor shortage now easing and the ability to actively manage supply chain issues, our operations remain well-positioned to deliver in their respective markets. Financially, the Group has been able to mitigate rising interest rates through its strong working capital management and by reducing debt levels.

I am very confident that the strong leadership in place across the entire Group is ready to capitalise on opportunities in our sector, whilst the Board remains focused on driving shareholder value in the context of its Strategic Review for the benefit of all our stakeholders.

Maya Makanjee

Chair

26 July 2023