Chair’s review

Taking full advantage of the positive market dynamics to drive profitability
I am pleased to report a strong operational performance with improved quality of earnings through our divisions’ continuing successes in capturing new growth opportunities.

Positioning

During the past year, the easing of global supply chain disruptions was counterbalanced by a sticky inflationary environment taking hold for longer. Against this backdrop, Datatec has managed its businesses efficiently and mitigated the effects of high interest rates through effective working capital management and efficiencies.

Our businesses are investing in advanced digital systems and platforms which are accelerating their transformation into the world’s leading, data-driven technology providers and specialist distributors of cyber security and networking solutions. The development of capabilities within cloud, IoT, software, security, data management and intelligent networks to provide full life-cycle solutions around IT infrastructure is also a priority in support of our strategy.

The leadership teams are readying for the growth in hybrid workplaces and the adoption of Artificial Intelligence which will be essential to deliver the digital experience that our customers, partners and employees are expecting.

Performance overview

Westcon International delivered strong revenue and profit growth across all regions as the benefits of the turnaround continue to materialise beyond the exceptional impact of the crystallisation of its share-based remuneration plan in the prior year which impacted all earnings measures for the Group.

Logicalis International also performed well but Logicalis Latin America, which accounted for 10% of Group revenues, did not deliver on our expectations as it faced numerous challenges in Argentina and Brazil impacting its financial performance. Steps have been taken to reshape the business and we expect an improvement in FY25.

The Group’s revenues increased 6.1% to US$5.5 billion compared to US$5.1 billion in the prior year. Adjusted EBITDA rose 6.6% to US$192.1 million compared to US$180.2 million in the prior year. Underlying earnings per share was 20.2 US cents per share compared to 7.9 US cents in FY23 which was impacted by a high one-off accounting charge for Westcon International’s share-based remuneration plan.

Our overall balance sheet remained strong during the year, supported by excellent working capital management as extended supplier credit arrangements unwound.

Strategic review progress

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.

New management incentive schemes for Logicalis International and Westcon International were implemented during the financial year. These management incentive plans are focused on maximising shareholder value and designed to achieve strong alignment. Key individuals in the divisional leadership teams have invested their own funds to become shareholders in their businesses alongside Datatec at fair value. Their investment will only materialise at the same time as Datatec through future value realisation events.

The executive directors of Datatec will not participate in these divisional management incentive plans.

Dividends

On 27 May 2024, the Board declared a final dividend for the financial year of ZAR298.4 million or 130 ZAR cents per share, equivalent to approximately 7 US cents per share, as a cash dividend with a scrip distribution alternative.

This dividend was calculated in line with our dividend policy of maintaining three times cover in relation to underlying earnings per share. The final dividend for the prior year had been calculated using a normalised full year underlying earnings per share excluding all share-based payment charges before applying the Group’s dividend policy of three times cover.

Commitment to sustainable long term performance

The Board recognises that applying sustainable practices is critical to safeguard stakeholder interests, facilitate effective decision-making and promote positive long-term performance. Our shared-value Responsible Business strategy continues to deliver results, details of which can be found in this year’s Integrated Report.

Our Board evolution process continued during FY24 with Sabine Everaet joining Datatec on 2 October 2023. Sabine had a distinguished career as an executive at The Coca‑Cola Company and now has non‑executive roles at ING Bank Belgium and the Charities Aid Foundation in the UK. Her experience as a CIO in the EMEA region is bringing valuable insight to the Board. She also serves on the Social and Ethics Committee where she is already making a very positive contribution and will become its Chair after the AGM.

Post year-end, we welcomed Colin Jones to the Board. Colin was previously at Euromoney Institutional Investor PLC and currently serves in several non-executive roles with UK AIM listed PLCs. His experience in the listed company environment both as a CFO and non-executive director will be of great value to the Board. Colin also joined the Audit, Risk and Compliance Committee.

At the AGM on 31 July 2024, Stephen Davidson will retire from the Board after 18 years of service as a non-executive director of Datatec. Stephen was my predecessor as Chair of the Board from 2008 to 2022 and subsequently chaired the Remuneration Committee and Social and Ethics Committee. Stephen’s many years of service as the independent non-executive Chair have been a huge value-add to the Board and to Datatec. His leadership over the years through the many corporate actions the Group has undertaken, drawing on his experience, guidance and wisdom has been invaluable. My colleagues and I wish him much success for the future.

Rick Medlock will also retire from the Board at the AGM on 31 July 2024. He has served as an independent non-executive director of Datatec for four years and was a member of the Audit, Risk and Compliance Committee during his tenure. Rick brought a wealth of experience to the Board and his contribution over his tenure was much appreciated. We wish him well in his future endeavours.

Our commitment to building relationships with all stakeholders remains at the core of our engagement approach with shareholders. In December 2023, Deepa Sita, Remuneration Committee Chair, and I held a series of face-to-face shareholder meetings on ESG-related matters to ensure an optimal alignment between Datatec and its shareholders.

We encourage our shareholders to attend the AGM on 31 July 2024 which is being held as a virtual meeting to allow broad participation.

Outlook

In closing, I would like to thank all of Datatec’s employees and partners for their hard work and commitment throughout the past financial year. I would also like to express my appreciation to our shareholders and customers for their ongoing support.

We continue to assess opportunities to unlock value through our Strategic Review. Despite the political and economic challenges in many parts of the world, our operations are expected to deliver an improved financial performance in FY25 supported by the leadership in place across the entire Group.

Datatec is well placed to capitalise on the demand for the services and solutions our businesses provide while the Board remains focused on closing the valuation gap though the ongoing Strategic Review.

Maya Makanjee
Chair

28 June 2024