Executive directors' commentary on Group results

US$ million	FY23 reported	Analysys Mason	FY23 combined^	FY22 reported	FY22 combined^	% movement reported	% movement combined^
Revenue	5 143.1	51.8	5 194.9	4 546.4	4 636.8	13	12
Group combined^ revenue was up by 12.0%. Group continuing revenue was up by 13.1%. In constant currency, Group continuing revenue increased by 20.3%.
Gross profit	744.5	21.7	766.2	729.8	770.4	2	(1)
Gross margin (%)	14.5	41.9	14.7	16.1	16.6
The Group's continuing gross margin in FY23 was 14.5% (FY22: 16.1%). The significant strengthening of the US Dollar compared to the Pound Sterling and Euro during much of FY23 had a significant negative impact on gross margins in Westcon Europe, largely offset by realised and unrealised foreign exchange gains on hedging contracts. This was less pronounced in the second half.
Operating costs	(646.2)	(15.0)	(661.2)	(586.4)	(615.9)	10	7
Restructuring costs of US$15.2 million were included in FY23 relating to fundamental reorganisations in Logicalis International and Logicalis Latin America. There were no restructuring costs in FY22. Continuing operating costs included US$15.3 million of foreign exchange gains (FY22: gains of US$2.1 million). Foreign exchange gains consisted of unrealised foreign exchange losses of US$8.8 million (FY22: gains of US$0.6 million) and realised foreign exchange gains of US$24.1 million (FY22: gains of US$1.5 million). Unrealised foreign exchange differences are excluded from underlying earnings per share. The unrealised foreign exchange losses arose mainly in Westcon Europe on open positions of forward exchange contracts ("FECs"). The FECs hedge the net open working capital position of the business, as well as the open order backlog, which constituted the majority of the unrealised variances. The continuing share-based payment charge under IFRS 2 included in operating expenses was US$52.6 million, more than triple the equivalent charge in FY22 of US$15.5 million which reflects the increasing valuations of the divisions' cash-settled share-based payments plans, particularly Westcon International. The share-based payment charge in FY23 was exceptionally high and will be substantially lower in future years.
EBITDA	98.3	6.7	105.0	143.4	154.5	(31)	(32)
EBITDA margin (%)	1.9	12.9	2.0	3.2	3.3
Adjusted EBITDA	180.2	9.5	189.7	158.9	177.0	13	7
Adjusted EBITDA margin (%)	3.5	18.3	3.7	3.5	3.8
Depreciation and amortisation	(68.2)	(0.9)	(69.1)	(68.4)	(72.4)	–	(5)
PPE, right-of-use assets and intangible assets impairment	(11.6)	–	(11.6)	–	–
Operating profit	18.5	5.8	24.3	75.0	82.1	(75)	(70)
Operating profit includes US$8.0 million of impairment of right-of-use assets, US$2.9 million from Logicalis International and US$3.4 million from Westcon International related to property restructuring initiatives.
Operating profit margin (%)	0.4	11.2	0.5	1.6	1.8
Net finance costs	(38.1)	(0.2)	(38.3)	(31.0)	(31.3)	23	22
The continuing net interest charge increased mainly due to increased interest rates.
(Loss)/profit before taxation	(20.0)	8.5	(11.5)	44.0	50.9	(145)	(123)
Taxation	(13.4)	(1.4)	(14.8)	(9.5)	(10.6)	41	40
A combined^ tax charge of US$14.8 million (FY22: US$10.6 million) has arisen on the combined^ pre-tax profits which include the tax-exempt profit on disposal of the Analysys Mason division. Excluding the discontinued business, the effective tax rate was -66.7%. This is a result of low or nil tax credits arising on the losses of certain operations (including limited tax credits on the IFRS 2 charges in FY23) and the high local tax rates applied to certain profitable operations. As at 28 February 2023, there are estimated tax loss carry forwards relating to the continuing businesses of US$236.5 million with an estimated future tax benefit of US$59.3 million, of which US$38.5 million has been recognised as a deferred tax asset.
Underlying earnings per share	6.1	1.8	7.9	16.0	18.7
Headline (loss)/earnings per share	(10.8)	1.5	(9.3)	13.9	16.2
Earnings per share	(16.1)	53.0	36.9	14.3	16.7

Withholding taxes

As at 28 February 2022, Westcon International had a contingent liability in respect of a possible withholding tax obligation at its subsidiary in the Kingdom of Saudi Arabia, Westcon Saudi Company LLC ("Westcon KSA"). This relates to payments Westcon KSA has made in relation to the purchase of vendor software and maintenance services which have been resold to customers during the six years ended 31 December 2020. Westcon KSA strongly disagrees with the tax authority's assessments issued on 22 June 2021 and has submitted the necessary appeals. Following an unsuccessful attempt to utilise the alternative dispute resolution procedures the matter is now proceeding to court. The ongoing litigation with the KSA tax authorities is likely to continue beyond the next financial year end. A liability has been recognised for a possible liability in this regard.

As at 28 February 2023, withholding tax liabilities for the Group totalled US$20.0 million (FY22: US$7.3 million), which includes the liability for the Westcon KSA matter described above.

Product backlog

Supply chain delays had a marked effect on slowing the sales process from order to delivery, causing a notable increase in the quantum of open, unfulfilled sales orders, termed "backlog" at the recent period end. Open product orders at the end of FY23 were approximately US$1.2 billion (FY22: US$1.2 billion).

US$ million	FY23	FY22
Westcon International	768	818
Logicalis International	271	261
Logicalis Latin America	140	139
Datatec Group	1 179	1 218

Cash and net debt

On a combined^ basis, the Group generated US$173.4 million of cash from operations during FY23 (FY22: US$96.7 million) and ended the period with a continuing net debt of US$106.6 million (FY22: US$133.7 million). Excluding lease liabilities, net debt would have been US$34.2 million on a continuing basis (FY22: net debt of US$45.3 million).

US$ million	FY23	FY22
Cash resources	584.7	453.9
Bank overdrafts	(196.4)	(166.6)
Short-term interest-bearing liabilities and short-term leases	(407.9)	(299.5)
Long-term interest-bearing liabilities and long-term leases	(87.0)	(117.9)
Combined^ net debt	(106.6)	(130.1)
Continuing net debt	(106.6)	(133.7)

^ Including Analysys Mason discontinued operations

Continuing excludes the results of the Analysys Mason discontinued operations. The prior years have been re-presented to show comparative results from discontinued operations in accordance with IFRS 5.