Executive directors' commentary on Group financial results

US$ million	FY25	FY24	% movement	Note reference

Gross invoiced income	7 735.0	7 620.7	1.5%	1
Revenue^	3 639.7	3 992.4	(8.8) %	1
Gross profit	910.3	862.2	5.6%	1
Gross margin^ (%)	25.0%	21.6%		1
Operating costs	(689.0)	(684.6)	0.6%	2
EBITDA	221.3	177.6	24.6%
EBITDA margin^ (%)	6.1%	4.4%
Adjusted EBITDA	246.2	192.1	28.2%	3
Adjusted EBITDA margin^ (%)	6.8%	4.8%		3
Adjusted EBITDA as a % of gross profit	27.0%	22.3%
Depreciation and amortisation	(61.4)	(61.2)	0.3%
Operating profit	159.2	116.4	36.8%
Operating profit margin^ (%)	4.4%	2.9%
Net finance costs	(56.9)	(55.0)	3.5%	4
Profit before tax	104.0	76.5	35.9%
Taxation	(34.7)	(25.5)	36.1%	5
Profit for the year	69.3	50.9	36.1%
Effective tax rate (%)	33.4%	33.4%		5
Basic earnings per share (US cents)	25.7	20.4	26.0%
Headline earnings per share (US cents)	25.5	14.2	79.6%
Underlying earnings per share (US cents)	30.5	17.1⁽¹⁾	78.4%

Revenue^ decreased by 8.8%. The decrease in revenue is mainly attributable to a mix change and more software and services being net revenue accounted. The increase in gross margin^ % is largely due to changes in the revenue mix, contributing to a significant gross profit increase in Westcon International and Logicalis International.

Contributions to Group gross invoiced income (%)

Contributions to Group gross profit (%)

^ FY24 restated.
Refer to Retrospective application of a voluntary change in accounting policy.

Operating costs (including net foreign exchange gains and losses, restructuring costs, share-based payment charges and acquisition and integration costs) increased slightly to US$689.0 million (FY24: US$684.6 million), resulting in strong positive operating leverage for the year.

Operating costs included US$0.6 million of net foreign exchange gains (FY24: net foreign exchange losses of US$21.7 million mainly from sharp currency depreciation in Argentina during the year).

Adjusted EBITDA excludes restructuring costs of US$10.8 million that relate to fundamental reorganisations in Logicalis Latin America, Westcon International and Corporate and Management Consulting (FY24: US$3.0 million from Logicalis Latin America).

It further excludes share-based payment charges of US$15.8 million (FY24: US$8.3 million). Adjusted EBITDA margin has significantly improved, increasing to 6.8% for FY25, up from 4.8% in FY24.

Net finance costs increased 3.5% to US$56.9 million, mainly due to the increased cost of borrowings, higher working capital requirements and average utilisation of financing facilities.

The tax charge of US$34.7 million (FY24: US$25.5 million) on pre-tax profits represents an effective tax rate of 33.4% (FY24: 33.4%). The effective tax rate has benefited from a reduction in losses arising in certain operations for which no tax credit arises. Offsetting this, a fair value gain has arisen on the acquisition of a controlling shareholding in a previously equity-accounted investment, for which no taxation arises. However, this gain is much reduced from the fair value gain arising in the previous year.

As at 28 February 2025, tax losses carried forward are estimated at US$217.8 million with an estimated future tax benefit of US$55.7 million, of which US$43.2 million has been recognised as a deferred tax asset.

Cash and net debt
US$ million	FY25	FY24

Cash resources	584.1	569.0
Bank overdrafts	(193.3)	(178.9)
Short-term interest-bearing liabilities and short-term leases	(350.8)	(428.5)
Long-term interest-bearing liabilities and long-term leases	(92.1)	(84.7)
Net debt	(52.1)	(123.1)

The Group generated US$286.8 million of cash from operations during FY25 (FY24: US$175.6 million) and ended the year with net debt of US$52.1 million
(FY24: US$123.1 million). Excluding lease liabilities, net cash would have been US$30.5 million (FY24: US$51.3 million net debt).

Liquidity and borrowing facilities

The Group continues to closely monitor the outlook for liquidity in its divisions to ensure that sufficient cash is generated to settle liabilities as they fall due.

Westcon International has an invoice assignment facility of EUR391 million for its European subsidiaries, as well as an extended payables facility of US$138.0 million. Westcon International has a securitisation facility of US$130.0 million for its Asia-Pacific facilities. In addition, Westcon International utilises accounts receivable facilities in the Middle East (US$25.0 million) and Indonesia (US$11.0 million) as well as overdraft facilities in Europe (EUR4.0 million) and Africa (US$1.0 million), and a securitisation facility in South Africa (ZAR300.0 million).
Logicalis International is supported by a corporate facility of US$135 million, covering all its operations, comprising a rolling credit facility to fund working capital requirements and an acquisition facility.
Logicalis Latin America is supported separately via a number of uncommitted overdraft facilities and short-term lending arrangements. These are predominantly sourced via Tier 1 banks in Brazil as it is the largest territory in the region.

The Group continues to monitor the funding needs of its individual operations and works closely with various financial institutions to ensure adequate liquidity. The Group has performed covenant projections for the next 12 months to confirm that banking covenants are expected to be met.

Underlying earnings per share

Following a review of peer reporting and to more closely align the definition of underlying earnings per share to the Group's adjusted EBITDA metric, the Group decided not to exclude unrealised foreign exchange gains or losses from underlying earnings from FY25 onward. The comparative figure for underlying* earnings per share (which is a non-IFRS measure) for FY24 has been recalculated in accordance with the revised definition.

The Board will continue to monitor and assess peer reporting and best practices in this regard.

Retrospective application of a voluntary change in accounting policy

IFRS 15 Revenue recognition – Westcon International sales of software for the year ended 28 February 2025

Revenue from sales arrangements where the Group acts as an agent is recognised on a net basis and the commission or gross profit earned on these contracts is recognised as revenue. Where the Group is deemed to be acting as a principal, revenue is recognised on a gross basis. When deciding on the most appropriate basis for presenting revenue or related costs, both the legal form and the substance of the agreement between the Group and the counterparty are reviewed to determine each party's respective role in the transaction.

Westcon International, one of the Group's operating segments, in its capacity as a distributor, sells software licences to customers. Westcon International'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 Westcon International acts as a principal or agent with regard to these arrangements. Westcon International has revisited the revenue recognition assessment for these arrangements.

In its reassessment, Westcon International concluded that the performance obligation has evolved and changed gradually over time as vendors have begun to deliver the solutions and therefore taken on the primary responsibility of fulfilling this promise, and that Westcon International now arranges access to the software from the vendor on behalf of the customer.

Based on the reassessment, and in line with changes in peer reporting, the Group concludes that Westcon International has repositioned to act as an agent in these types of arrangements and has applied a voluntary change in accounting policy in accordance with the requirements of IAS 8 Accounting policies, Changes in Accounting Estimates and Errors ("IAS 8") for the revenue recognised from the sale of software which is now being accounted for on a net basis. The Group believes the change in accounting policy provides more reliable and relevant information to the users of the financial statements, enhancing comparability within the market.

As part of the reassessment, the Group concluded that the revenue recognition applied to the sales of software by Logicalis International as well as Logicalis Latin America remains appropriate, as the primary responsibility can be with the vendor or with the Group depending on the nature of the arrangements (including bundled arrangements). The accounting policy for the Logicalis businesses is therefore unchanged.

As a result, the Group has restated its consolidated statement of comprehensive income to reflect 100% of the commissions or gross profits earned by Westcon International for acting as an agent in sale of software arrangements, as revenue. This has resulted in a decrease in revenue and a corresponding decrease in cost of sales in the previous financial year.

The amount of the restatement for FY24 is shown in the table below:

FY24	As previously presented US$'000	Total restatement US$'000	Restated US$'000

Revenue	5 457 947	(1 465 534)	3 992 413
Cost of sales	(4 595 711)	1 465 534	(3 130 177)
Gross profit	862 236	–	862 236

The restatement has 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. Further, the restatement has no impact on the consolidated statement of financial position or consolidated statement of cash flows. Despite revenue 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 a the period end, the Group continues to present these amounts as gross trade receivables and trade payables in the consolidated statement of financial position.