Corporate Profile - ShareData · 2002. 8. 16. · Corporate Profile Datatec Annual Report 2002 1...
Transcript of Corporate Profile - ShareData · 2002. 8. 16. · Corporate Profile Datatec Annual Report 2002 1...
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 1
Corporate Profile
1Datatec Annual Repor t 2002
Datatec is an international networking and IT services group with operations in Europe, North America, South
America, Africa and the Asia Pacific region. The Group generates more than 95% of its revenue in foreign currency
outside South Africa.
The Group provides active management support to the strategic direction and operations of its subsidiaries and has
three principal lines of business:
• Westcon, a global distributor of advanced networking, security, data and voice communications and convergence
products, based in New York, United States of America (“US”) and the largest distributor worldwide of equipment
in this sector, with operations in many countries;
• Logical, an international professional services and IT network integration group headquartered in London, United
Kingdom (“UK”) and with operations in more than ten countries; and
• Mason, a strategic telecommunications consultancy headquartered in Manchester in the UK and focusing on
UK and European clients.
The Group also has similarly focused operations in South Africa (“SA”) under Other Holdings. These are Westcon
AME, Affinity Logic and RangeGate.
Value Drivers
to be ethical, honest andsocially responsible
to all stakeholders andacceptable corporate citizens
to provide a best in classportfolio of actively managed
businesses in the internationalIT networking sector
to deliver long-term,sustainable,above average returns throughinvesting, operating and value
realisation within the businesses
to be an employer ofchoice, attracting, developing
and retaining the bestand key talents
enhance and protectDatatec
shareholder value
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 2
Six Year Review
2 Datatec Annual Repor t 2002
%
2002 change 2001 2000 1999 1998 1997
In South African Rand (R million)
Revenue 20 677 3 20 158 11 524 6 641 1 374 464
Continuing operations 20 360 17 500 7 607 2 005 550 96
Acquisitions 202 1 537 2 572 4 179 680 302
Discontinued operations 115 1 121 1 345 457 144 66
Operating profit before
finance costs, depreciation
and amortisation (“EBITDA”) 846 (20) 1 059 708 479 92 26
Operating profit 646 (20) 807 553 406 74 19
Westcon 586 772 406 312 (9) 4
Logical (13) 25 148 78 44 –
Mason 6 34 4 – – –
Other Holdings 99 81 32 (11) 35 16
Discontinued operations (32) (105) (37) 27 4 (1)
Profit before exceptional items
and goodwill amortisation 547 (21) 690 515 399 67 16
(Loss)/profit before taxation (147) (111) 1 316 539 373 93 16
(Loss)/profit after taxation (325) (132) 1 015 388 219 68 10
Attributable (loss)/earnings (336) (135) 958 379 195 72 11
Headline earnings 346 (16) 410 364 225 44 11
Non-current assets 1 295 (1) 1 302 705 514 72 32
Current assets 8 420 (1) 8 466 5 670 4 191 800 252
Ordinary shareholders’ funds 3 726 16 3 205 1 403 897 161 44
Outside shareholders’ interest 199 (23) 260 138 84 6 9
Non-current liabilities 78 (3) 80 607 1 096 199 57
Current liabilities 5 712 (8) 6 223 4 227 2 628 506 175
Net cash inflow/(outflow) from
operating activities 1 687 715 207 (203) 38 92 32
Net cash (outflow)/inflow from
investing activities (520) (2 837) 19 (2 022) (3 569) (625) (180)
Net cash (outflow)/inflow from
financing activities (100) (168) 148 1 353 3 693 710 221
Net cash/(borrowings) 168 164 (262) (485) 405 256 79
In South African centsHeadline earnings per share 265 (18) 325 300 267 87 39
Basic (loss)/earnings per share (257) (134) 761 340 231 141 39
Tangible net asset value
per share 2 414 17 2 058 1 179 898 277 118
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 3
3Datatec Annual Repor t 2002
%
2002 change 2001 2000 1999 1998 1997
In US dollars (US$ million)
Revenue 2 198 (20) 2 763 1 859 1 145 292 105
Continuing operations 2 165 2 399 1 227 346 117 22Acquisitions 21 211 415 720 144 68Discontinued operations 12 153 217 79 31 15
Operating profit before finance costs, depreciationand amortisation (“EBITDA”) 88 (39) 144 114 83 20 6Operating profit 69 (38) 111 89 70 16 4
Westcon 62 106 65 54 (2) 1Logical (1) 3 24 13 10 –Mason 1 5 1 – – –Other Holdings 10 11 5 (2) 7 3Discontinued operations (3) (14) (6) 5 1 –
Profit before exceptional items and goodwill amortisation 58 (38) 95 83 69 14 4(Loss)/profit before taxation (14) (108) 180 87 64 20 4(Loss)/profit after taxation (33) (124) 139 63 38 14 2Attributable (loss)/earnings (35) (127) 131 61 34 15 3Headline earnings 36 (36) 56 59 39 9 3
Non-current assets 113 (30) 163 107 82 14 7Current assets 736 (30) 1 057 859 665 160 56Ordinary shareholders’ funds 326 (19) 400 213 142 32 10Outside shareholders’ interest 17 (46) 32 21 13 1 2Non-current liabilities 7 (32) 10 92 174 39 12Current liabilities 499 (36) 777 640 417 101 39
Net cash inflow/(outflow) from operating activities 175 522 28 (33) 7 20 7Net cash (outflow)/inflow from investing activities (45) (2 015) 2 (307) (567) (125) (40)Net cash (outflow)/inflow from financing activities (9) (147) 18 205 586 142 49Net cash/(borrowings) 15 145 (33) (74) 64 51 18
In US centsHeadline earnings per share 28 (38) 44 48 46 19 9Basic (loss)/earnings per share (27) (126) 104 55 40 30 9Tangible net asset value per share 211 (18) 257 179 143 56 26
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Six Year Review continued
4 Datatec Annual Repor t 2002
2002 2001 2000 1999 1998 1997
Summary of statistics
Stock exchange performance Total number of shares traded ('000) 130 566 127 537 79 297 43 721 20 471 13 559 Total number of shares traded as a percentage of total shares 95.0% 99.1% 66.7% 55.3% 40.0% 33.6%Total value of shares traded (R million) 2 199 6 212 7 405 3 780 772 222
Prices (cents)Closing 1 650 1 650 11 600 9 560 7 500 2 100 High 2 500 11 700 14 500 12 800 7 700 2 400 Low 880 1 450 5 530 4 600 2 000 925 Market capitalisation 2 267 2 124 13 798 9 551 4 364 782
Shares issuedIssued (million) 137 128 119 100 58 37 Weighted average (million) 131 126 112 84 51 31
RatiosReturn on total assets 6.6% 8.3% 8.7% 8.6% 8.4% 6.7%Return on ordinary shareholders' funds 14.7% 21.5% 36.7% 44.5% 41.6% 36.4%Debt/equity ratio 2.1:1 2.5:1 43.3:1 122.2:1 122.4:1 127.3:1Current ratio 1.5:1 1.4:1 1.3:1 1.6:1 1.6:1 1.4:1Interest cover 375.6% 322.8% 384.0% 624.6% 429.4% 316.7%SA Consumer Price Index 8.6% 5.7% 5.3% 5.2% 6.9% 8.6%
EmployeesNumber of employees 3 023 3 830 4 135 2 913 1 200 507 Revenue per employee (R’000) 6 840 5 263 2 787 2 280 1 145 915 Revenue per employee ($’000) 727 721 450 393 244 208
Exchange ratesRand/$ income statement translation rate 9.6 7.3 6.2 5.8 4.7 4.4Rand/$ balance sheet translation rate 11.4 8.0 6.6 6.3 5.0 4.5
Notes:– Westcon is consolidated into the Group’s results based on Westcon’s results for its financial year ended
28 February for the 2002, 2001 and 2000 periods. Westcon’s results are thus translated at a different Rand/$exchange rate, as set out on page 36 of the Finance Report.
– 1997 represents a thirteen month period.– Detailed segmental information is set out in note 26 of the annual financial statements on pages 89 and 90.– The SA Consumer Price Index sourced from Standard Bank of South Africa Limited.– Return on total assets is calculated utilising operating profit and return on ordinary shareholders’ funds is
calculated utilising profit before exceptional items and goodwill amortisation.– Debt includes all long-term liabilities including amounts due to vendors of a long-term nature.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 5
5Datatec Annual Repor t 2002
ebitda — ongoing operations
2276
431
706
1 127
873
1997 1998 1999 2000 2001 20020
200
400
600
800
1 000
1 200
R Million
6 Year CAGR = 102%
0.91.1
2.3
2.8
5.3
6.8
1997 1998 1999 2000 2001 20020
1
2
3
4
5
6
7
R Million
0.41.2
5.8
10.2
19.0
20.6
1997 1998 1999 2000 2001 20020
5
10
15
20
25
revenue — ongoing operationsR Billion
6 Year CAGR = 120%
revenue per employee
39
87
267
300
325
265
1997 1998 1999 2000 2001 20020
50
100
150
200
250
300
350
Cents
6 Year CAGR = 47%
headline earnings per share
6 Year CAGR = 50%
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 6
Directorate
6 Datatec Annual Repor t 2002
Executive Directors
> Jens Montanana
Chief Executive Officer, Age 41 (British)
Date of Appointment 6 October 1994.
Jens is the founder and chief architect behind Datatec
Limited, which he established in 1986. Between 1989
and 1993 Jens ran US Robotics' UK operations. In 1993
he co-founded US start up Xedia Corporation in Boston,
MA, an early pioneer of network switching and one of
the market leaders in IP bandwidth management, which
was subsequently sold to Lucent Corporation. In 1994
Jens returned to SA and listed Datatec on the JSE
Securities Exchange South Africa.
> Stephen Lawrence
Chief Executive Officer: Logical, Age 45 (British)
Date of Appointment 7 November 2000
Prior to joining Logical, Stephen was vice-president of
Arthur D Little, the Boston headquartered, technology
based management consultancy – where he was
responsible for the company's UK activities, which was
the company's largest operation outside the US. He was
also non-executive chairman of Mason, acquired by
Datatec in 1999.
> David Pfaff
Executive Director, Age 37 (South African)
Date of Appointment 1 July 2001
David is responsible for Datatec’s South African
interests, global investor relations and corporate
communications. From 1 June 2002, David succeeded
Robin Rindel as Chief Financial Officer and will remain
responsible for global investor relations and corporate
communications. Prior to joining Datatec, David was a
director of Anglo American Industrial Corporation.
> Robin Rindel
Executive Director, Age 40 (South African)
Date of Appointment 1 September 1995
Robin was the Datatec Finance Director and he heads
up a team responsible for the Group’s corporate finance
and acquisition activities. From 31 May 2002, Robin
relinquished his CFO role and will assume on 1 October
2002 operational responsibility for Westcon’s Asia
Pacific Operation.
> Alan Smith
Chief Executive Officer of Westcon Group, Inc., Age 39
(American) Date of Appointment 17 July 2001
Alan is the CEO and president of Westcon. He is the
former executive vice-president and chief operating
officer. He joined Westcon in 1997 as director of
business development and planning. Prior to joining
Westcon, Alan was manager of the business
management group at Bay Networks (now Nortel
Networks), and its predecessor, Synoptics Corporation,
from 1993 to 1997. From 1989 to 1993, he held the
position of manager of contracts at Oracle.
> Jens Montanana > Stephen Lawrence > Robin Rindel> David Pfaff > Alan Smith
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 7
7Datatec Annual Repor t 2002
Non-executive Directors
> Leslie BoydNon-executive Chairman, Age 65 (South African)Date of Appointment 6 December 2001In addition to his position as Chairman at Datatec,Leslie is chairman of Imperial Holdings and co-chair of the Millenium Labour Council. Leslie isalso a director of a number of other companiesincluding: ABSA Bank, Anglo American Corporation ofSouth Africa, Anglo American Platinum Corporation,Highveld Steel and Vanadium Corporation, and TheTongaat-Hulett Group, to name but a few. In the past,Leslie has also held chairman positions at several ofthese companies. In 1990, Leslie was the foundingpresident of the South African Chamber of Business.
> Colin BrayshawNon-executive Director, Age 66 (South African)Date of Appointment 6 December 2001Colin is currently chairman of Coronation Holdingsand a non-executive director on the boards of a numberof listed companies, including: African Harvest,AngloGold, Anglo Platinum Corporation, AECI,Johnnic Holdings, Highveld Steel and VanadiumCorporation. Previously he was chairman andmanaging partner of Deloitte & Touche and various ofits predecessor firms.
> Mendel KarpulNon-executive Director, Age 49 (South African)Date of Appointment 30 August 1996Mendel has over fifteen years experience in thesolution-driven software development industry andwas strategically involved in forming one of the first
commercial Internet Service Providers in SA, Internet Africa.
> John McCartneyNon-executive Director and Deputy Chairman, Age 49(American) Date of Appointment 11 May 1998John was formerly president and chief operatingofficer for US Robotics, as well as president of 3ComCorporation's Client Access Unit. He joined the executive management team of US Robotics in 1984. John is also a director of A.M. CastleCorporation, Quotesmith.com and Next LevelCommunications.
> Cedric SavageNon-executive Director, Age 63 (South African)Date of Appointment 6 December 2001Cedric has been appointed to the board of DatatecLimited as a non-executive director. In addition, he isnon-executive chairman of The Tongaat-HulettGroup, and a director of a number of companies,including AECI, ARM Gold and Delta MotorCorporation.
> Chris SeabrookeNon-executive Director, Age 49 (South African)Date of Appointment 6 October 1994Chris is executive chairman of Sabvest, which is alisted investment group with interests in SA and theUK. He is a director of seven JSE listed companies,including Primedia and Massmart, and is alsochairman of trade finance and financial servicesgroups in London and Luxembourg.
> Mendel Karpul > John McCartney> Leslie Boyd > Cedric Savage > Chris Seabrooke> Colin Brayshaw
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 8
Chairman’s Report
8 Datatec Annual Repor t 2002
This is my first Chairman's Report since I became
non-executive Chairman of Datatec in December 2001.
The year under review has undoubtedly been the most
difficult in the relatively short history of the worldwide
IT industry. Despite this, progress has been made by
Datatec on a number of fronts and management has
responded well to the challenges.
> Corporate Governance
The Group has made good progress in corporate
governance and is in the process of reviewing the King
II Report in order to move to full compliance.
The Executive Chairman, Jens Montanana, decided to
step down from that role and to assume the role of Chief
Executive under an independent non-executive
Chairman. Jens deserves credit for taking that decision
and inviting someone with no previous contact with
Datatec to become Chairman.
At the same time, Colin Brayshaw and Cedric Savage
were made independent non-executive directors. I chair
the Remuneration and Nomination Committee, Colin
the Audit and Compliance Committee and Cedric the
Business Risk Committee. The Board now has a majority
of non-executive directors, with independent directors
chairing all the board committees.
The Business Risk Committee was set up during the
year and will introduce a set of standards and values to
guide the way business is done throughout Datatec's
operations. The Business Risk Committee will oversee
management and application of these processes.
Leslie Boyd Chairman
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 9
A tough market is the true test of any company and I ampleased to report that the Datatec Group has achievedsignificant advances despite a particularly difficultenvironment.
Leslie BoydChairman
17 July 2002
9Datatec Annual Repor t 2002
> Performance
It is important to note that over 95% of Datatec's
revenue is earned outside SA in foreign currencies,
making it a strong Rand hedge stock.
In the 2002 financial year, turnover from ongoing
operations of R20.6 billion increased by 8% from
R19.0 billion in 2001. Operating profit declined from
R807 million to R646 million as a result of weaker
trading conditions. Headline earnings per share
declined by 18% from 325 cents per share to 265 cents.
Cash flow showed a significant improvement through
the year and, at year end, the company moved from a
net debt position of R262 million to a net cash position
of R168 million.
Jens Montanana, the management team has, with some
resilience, weathered the storm. On behalf of all
shareholders, I would like to thank everyone for their efforts.
I would also like to thank Mark Lamberti and Jon James,
who resigned from the Board during the course of the
year, for their contribution to the affairs of the company.
At the same time I welcome to the Board
Colin Brayshaw, David Pfaff, Cedric Savage and
Alan Smith. I am sure they will contribute significantly
to the business.
> Prospects
The year ahead will remain challenging, but prospects
should improve in calendar 2003.
The past year has been extremely dif ficult and challenging. Led by Jens Montanana,the management team has, with some resilience, weathered the storm.
> Operating Environment
There are early indications of a recovery in the world
economy. The recovery is likely to be slow and will
depend on factors such as the oil price. The US seems to
be recovering from the recession and the terrible effects
of the September 11 attacks. However, this recovery is likely
to be delayed due to the uncertainties around the recent
US corporate governance and accounting failures.
The sectors in which Datatec's subsidiaries operate
are less predictable than most, and we expect margins
to remain under pressure during the ensuing
financial year.
> Appreciation
As I mentioned previously, the past year has been
extremely difficult and challenging. Led by
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Chief Executive Officer’s Report
10 Datatec Annual Repor t 2002
Jens Montanana Chief Executive Officer
> Overview and Market Conditions
The year saw Datatec successfully navigate a particularly
challenging environment in which the IT and
telecommunications sectors experienced significant
contraction, driven by a downturn in service provider
and corporate spending and faced with slowing
spending and lengthening sales and product life cycles.
The networking and telecommunications sectors have
become increasingly intertwined as a consequence of
digitalisation in communications, Internet networking
and voice/data convergence. Deregulation accelerated
this convergence but in the process also created
significant capacity “hangover” as a result of over-
investment during recent years.
Generally, our industry experienced exceptional
growth during 1999 and 2000, fuelled by the
telecommunications explosion. A new business
paradigm of “build before demand” took hold, in
preference to the previous philosophy of “build to meet
demand”. The catalysts to this dynamic were driven by
the Internet revolution, the e-business boom, the build-
up to Y2K, and fueled by deregulation.
These technology investment and planning
excesses became all the more evident as Datatec’s
suppliers, partners and competitors experienced
a sharp contraction in their businesses. The result
was an industry downsizing by, sometimes, as much
as 40%.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 11
11Datatec Annual Repor t 2002
The Internet and e-business boom prompted many to draw
new parallels between “old” and “new” economies and
business, in which the Internet was often presented as the basis
of an alternative economy. The realisation that everything is
part of one economy has sobered the market considerably.
Those least affected by the downturn were the
organisations which did not over-invest in pioneering and
often over-promising technologies, who can now adopt
appropriate e-technologies and use communications
infrastructure at a fraction of the cost that early adopters
and evangelical e-businesses had to bear.
At an early stage, Datatec responded to the anticipated
downturn. It began restructuring and reshaping its
Consolidation in the sector occurred during the
market downturn. Datatec has been an active
consolidator during this period, taking advantage of
opportunities where appropriate, illustrated most
recently by the Group’s acquisition of the activities of
Landis Business Partners, giving Westcon a major boost
to its European presence.
We remain passionately committed to growth and
the enhancement of shareholder value. Throughout
our sixteen-year history we have continued to deliver
top-line growth and uninterrupted profitability, a
performance we would like to continue in the
long term.
Our early approach to rationalisation has enhanced the Group’s competitiveness andour businesses are positioned to exploit any market improvements.
operations and subsidiaries to assure itself a stronger
competitive position to adapt to changes in the
business environment.
This pro-active response helped us through a difficult
period and despite experiencing a decline in business
in all of our major operations, we were able to
out-perform many in our industry by falling less than
many others. This applies especially to the key
statistics and the ratios of our financial performance,
particularly in the areas of debt reduction and
significant improvements in working capital, resulting
in a positive cash inflow.
One consequence of the year’s disappointing market
conditions was to delay the possibility of a NASDAQ
stock exchange listing (IPO) of Westcon.
Datatec has come through this turbulent period with a
balance sheet in better condition than at any time
during its life as a public company. That is a tribute to
the quality of our people, our assets and our ability to
readily adapt in order to remain competitive and
profitable, while holding our position at the cutting
edge of our market.
> Operations and Strategy
Datatec operates as an integrated management services
group, providing active management of the Group’s
subsidiaries via strategic direction, business planning,
investment, financial control and risk management.
The Datatec Group was built on solid and fundamental
businesses in significant markets with proven growth
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 12
Chief Executive Officer’s Report continued
12 Datatec Annual Repor t 2002
characteristics, not on high-risk exponential growth
opportunities. Our differentiation is the ability to
identify, select and exploit the “out-perform” sectors and
cyclical trends that drive our industry.
Today, these trends include the convergence of voice
and data, widespread adoption of the Internet, mobile
computing, broadband and high capacity
communications and considerably increased spending
on security as use of the Internet is “industrialised”.
Datatec’s operations comprise significant, focused
businesses providing IT networking products and
services to channels and enterprises all over the
to our market sector at various levels that are all
complementary.
Our individually distinguished and separately branded
subsidiaries are aligned with their own routes to market
and are all customer focused. This structural flexibility
improves our nimbleness and customer reach without
creating overlap or conflict. It delivers quality in service
through best practice.
Datatec has adopted successful, decentralised
management of its subsidiary divisions while creating
the right control and reporting mechanisms which instil
greater responsibility and accountability throughout the
Throughout our 16-year history we have continued to deliver top-line growth anduninterrupted profitability, a performance we would like to continue in the long term.
world. The Group’s international subsidiary
companies, Westcon, Logical and Mason, provide
value-added distribution, integration services and
strategic consulting respectively, to organisations
locally and globally.
We have established solid foundations for each of the
major operating divisions by focusing our businesses into
“pure play” operations at various levels of our industry
supply chain. We are able to operate and respond more
effectively to rapid changes in our industry vertical sector
– IT networking – and adapt accordingly.
Operating in these three principal areas of indirect
distribution, direct integration services and consulting,
we provide our shareholders with an aggregate exposure
Group. The Group’s reward system motivates and
encourages management individuals to retain their
entrepreneurial spirit.
Importantly, Datatec is not afraid of change. We cannot
be. We cannot afford to be complacent in ensuring we
remain in control of the growth drivers that make us
passionate about our business.
Our early approach to rationalisation has enhanced the
Group’s competitiveness and our businesses are well
positioned to exploit any market improvements.
> Financial Results
Difficult international market conditions and the
downturn in technology resulted in lower US Dollar
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 13
13Datatec Annual Repor t 2002
revenues and earnings, an adverse impact that was
mitigated somewhat by the weaker South African Rand
and significant reductions in operating costs and better
working capital management.
We experienced modest revenue growth from ongoing
operations of 8% in Rand terms but a decline, in US Dollar
terms, of 16%. Our operating profit in Rands fell 20%
and in US Dollars, approximately 38%. EBITDA profits
from ongoing operations fell to R873 million from
R1.127 billion.
The most notable feature of the year’s financial
performance resulted from improvements to the
balance sheet. Cash generated from operations was a
significant R2.1 billion, largely as a result of
improvements to working capital of R1.3 billion, driven
largely through a reduction in inventories.
The Group’s net debt at the year end was eliminated,
moving to a net cash position of R168 million from a
negative R262 million in the 2001 financial year – a year-
on-year improvement of R430 million.
> Prospects for the Group
The networking and telecommunications sector
remains subdued as a result of the over investment that
has occurred during recent years. The acquisition of the
Landis distribution activities, while providing a boost to
Westcon’s European revenues and geographical
footprint, will create a drag on profits in the year ahead
as increased investment and expenses in integrating
systems and infrastructure occur.
We anticipate that margin pressure on product sales will
continue to erode the operating profit performance of
the Group, especially in the Westcon division. We
further expect that this contraction in margin, which
has been exacerbated by the downturn in corporate
technology spending, will only start to improve once
the fundamental supply and demand characteristics
which drive our overall industry return to an
expansionary trend.
Steps have been taken to stabilise profitability over the
next year through lower operating costs and reductions
in personnel. However, although revenues appear to
have stabilised and confidence may be returning, the
Group believes that there will be no recovery in this
sector until at least calendar 2003.
Jens Montanana
Chief Executive Officer
17 July 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 14
Westcon Divisional Report
14 Datatec Annual Repor t 2002
>
Goods move. People move.Ideas move and cultures change. The difference now isthe speed of these changes.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 15
15Datatec Annual Repor t 2002
Westcon Group, Inc. (“Westcon”) is the leading globaldistributor of networking and telecommunicationsequipment with multi-country operations spanningNorth and South America, Europe, Asia Pacific withservices in Africa and the Middle East. Its primary vendors are Cisco Systems, Nortel Networksand Avaya Communications. Westcon is a sales andmarketing channel for other leading vendors ofnetworking technology in the security, wireless andvoice-over-IP (VOIP) markets. Westcon adds value to itsdistribution activities by providing technical expertise,sales support and services.
Westcon targets sales opportunities that are solutions
based, thereby requiring a high degree of specialisation
and customisation. Its customers are value-added
resellers, systems integrators and service providers that
resell networking products and solutions to large
organisations and governments around the world. These
solutions include the design and configuration of data,
voice converged and wireless networks, as well as
extensions of a network such as video conferencing,
network storage and unified messaging.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 16
Westcon Divisional Report continued
16 Datatec Annual Repor t 2002
Our global services and training enable customers to
expand their technology offerings and geographic
presence, enter new markets and offer a more
comprehensive set of networking services.
> Structure
Westcon operates its global distribution business
throughout the Americas, Asia, Australia and Europe
and has separate operations under the Comstor, Voda
One and Westcon brands. The group delivers value to
its customers through its highly trained sales staff of
400 people, supported by over 100 certified technical
personnel.
The Comstor division provides a wide range of Cisco
products in the US, UK, Germany, Belgium, Australia,
Ireland and Singapore.
The US-based Voda One division provides Avaya
products for the rapidly-growing market for
convergence solutions, as well as unified messaging, call
centre applications, PABX and data networking
solutions. Voda One was created by combining the
operations of two distributors of Avaya voice products,
Inacom Communications and CCA Technologies, both
acquired in 2000.
The Westcon division of the group leads with Nortel
Networks solutions and also provides a wide range of
complementary voice and data networking equipment
and security products in the US, Canada, UK, Australia
and Brazil.
Westcon has developed significant technical competencies
and a wide array of support services, allowing it to
complement, or act as an extension of, its vendors’ sales
forces. In this way we provide Cisco, Nortel and Avaya with
a focused sales force that markets products and services
through our own three branded divisions.
> Alan SmithChief Executive OfficerWestcon
> John O’MalleyChief Financial OfficerWestcon
westcon revenue by vendorciscoavayanortelother
westcon revenue by regionnorth americauk and europesouth americaasia pacific
19%
57%12%
12%
29%
63%
7%1%
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 17
17Datatec Annual Repor t 2002
Our sales and technical personnel also assist customers
with network design and configuration consulting, pre-
and post-sales support, training, security monitoring,
technical consulting, professional services staff
augmentation, as well as the staging and configuration
of products.
The role of the distribution channel has continued to
remain a critical part of major networking vendors’
business models. Companies such as Cisco, Nortel,
Avaya, Checkpoint, Nokia and Alcatel rely on the
channel for contributing sales coverage, geographical
coverage, design and configuration skills, pre- and post-
sales product support, as well as professional services
and training.
During the year under review, networking vendors
increased their reliance on the channel for mission critical
functions as they looked to enhance their efficiencies in a
contracting market while also introducing new products
that are technologically complex.
Westcon serves nearly 9 500 customers who are primarily
value-added resellers and system integrators, with less
than 5% of the group’s revenues coming from service
providers or telco’s.
> MarketsThe economic and trading environment in the Americas
has improved slightly with indications of rising demand,
particularly in the retail and consumer sectors. However,
the technology sector deteriorated during the year. The
exceptions were modest growth in security, storage,
wireless and voice in IP segments of the market where
customers are stabilising, securitising and enhancing
their existing network infrastructures rather than
expanding them.
In Europe, the IT market was adversely affected by
shrinking consumer spending and significant corporate
debt, specifically in the service provider/telco markets.
This resulted in a more competitive market,
demonstrated by lower margins and volatile market share.
The global IT market contracted overall, punctuated by
increasing merger and acquisition activity in both
Europe and the US, as well as the bankruptcies and
reorganisations common in a contracting market.
> Financial Performance
During the year, Westcon’s revenue declined 19% from
$2.056 billion in fiscal 2001 to $1.670 billion due to
softening demand for voice and data networking
products, particularly among telecommunications
companies and service providers.
Gross margins decreased from 11.2% in 2001 to 10.4%
in this financial year, primarily due to a reduction in
global channel margins associated with sales of Cisco
products, as well as the highly competitive nature of a
contracting market and the reduction or elimination of
margin-enhancing programmes previously offered by
many significant vendors.
We responded with several cost-cutting and control
measures such as reductions in staffing and certain
employee benefit programmes, modifications to
compensation plans and freezes on the hiring of new
staff and capital spending. These initiatives successfully
contained selling and general administration expenses,
bringing them into line with our current levels of
operation.
For the year ended 28 February 2002, Westcon’s
EBITDA decreased by 36% from $115.2 million (2001)
to $73.3 million, after making provision during the year
in respect of the Lucent litigation, as detailed in note 23
of the annual financial statements.
Substantial operating cash flows generated during
the year allowed Westcon to reduce debt
substantially, specifically when combined with
steadily declining interest rates, which resulted in
lower financing costs.
During the year, we maintained our focus on managing
key elements of working capital. These disciplines
reduced the outstanding aggregate accounts receivables
by 14% from $311 million (2001) to $267 million.
Inventories declined by 51% from $363 million (2001)
to $178 million at the year end.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 18
Westcon Divisional Report continued
18 Datatec Annual Repor t 2002
This positive cash flow was utilised to improve the
Westcon balance sheet. During the year, lines of credit
and acquisition debt were reduced by 43% from
$246 million (2001) to $139 million, while cash on hand
increased by 30% from $76 million (2001) to
$99 million.
During the year ended 28 February 2002, the Comstor
division sold Cisco products worth $947 million and was
responsible for generating 57% of Westcon’s revenue.
The Americas accounted for 50% of the Comstor
division’s net sales, while Europe and the Asia-Pacific
region accounted for 40% and 10% respectively.
Most of the Westcon division’s net sales occurred in the
US (82%) while Europe accounted for 17% and the
Asia-Pacific region accounted for the remaining 1%.
Sales of Nortel products represented 46% of this
division’s total sales in fiscal 2002.
> Ongoing Strategy
In its exceptionally competitive environment, Westcon
maintained its differentiation among customers by
continuing to evolve its value proposition. During the
year under review, we took the following actions:
• began the process of changing our organisational
structure to reflect our divisional approach
globally;
• continued our growth strategy in Europe through
planned acquisitions and green-fielding (new locations
include Comstor Belgium and Comstor Ireland);
• diversified our overall product portfolio to include
more IP Telephony and Convergence products from
vendors such as 3Com, Siemens and Polycom; and
• enhanced our security and networking product
range through strategic vendor agreements with ISS,
WatchGuard, Aladdin, Netscreen and Secure
Computing Corporation.
> People
A primary asset of Westcon is its staff worldwide.
Westcon’s recruitment philosophy is to hire the most
experienced and capable management team in each of
the markets in which it operates. We recruit the best
local talent from every part of the globe, including
certified engineers, product specialists and sales
representatives. These local employees are best suited to
understanding their individual markets and uncovering
new sales opportunities.
Westcon offers training and career development
programmes to its employees throughout the world.
Many are given Datatec and Westcon stock options and
other incentives designed to increase productivity and
enhance business performance.
> Landis
On May 15, 2002, Westcon completed a transaction to
absorb the employees and the fixed assets of the former
Landis Business Partner organisation operating in nine
European countries: Austria, Belgium, Denmark, France,
Germany, Norway, Spain, Sweden and The Netherlands.
Westcon’s executive management team, combined with
the Business Partner management teams, have
commenced an aggressive integration schedule to re-
start the operations of the former Business Partner
organisations in these countries. The integration process
includes merging the “best practices” of both
westcon ebitdaR million
westcon revenueR million
20020
2 0004 0006 0008 000
10 00012 00014 00016 000
2001 2002 2001
900800700600500400300200100
0
15 595($1 670) 14 871
685($73)
830
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 19
19Datatec Annual Repor t 2002
organisations, while bringing to the new Westcon
subsidiaries an enhanced value-added business model
that has been the cornerstone of Westcon’s success. It is
expected the first phase of the integration will be
completed within three to four months and the full
integration completed within six to eight months. As part
of the integration process, the company will be actively
“right-sizing” the former Business Partner operations,
inclusive of staff reductions, to appropriate levels based
on the Westcon operating model and current economic
trends for our industry in the respective geographies.
The current integration plans call for the new business
operations to turn profitable late in the last quarter of
our current fiscal year.
Cisco, Nortel, Avaya, Extreme Networks, Siemens, as well
as other major networking and communications vendors,
have agreed to continue their relationship with the new
Westcon and Comstor subsidiaries in Europe. While the
integration process is progressing, it should be noted that
due to the rapid support of Westcon’s vendors and the
timely re-branding of the new business entities, within two
weeks of the close of the transaction the new Westcon
subsidiaries re-entered the market and are currently
working with customers, taking orders and shipping
product.
> The Coming Year
In the year ahead, we intend extending Westcon’s
leadership as a networking and telecommunications
distributor by expanding into Europe through the
acquisition of the Landis businesses and by enhancing
the group’s value offering through providing the most
innovative products available, all supported by our
expertise, product training and networking insight.
The route will include:
• continuing sales of complete network solutions in
preference to simply shipping products;
• offering value-added solutions in the developing
convergence and telecommunications market place,
supported by sales support and training;
• increasing market penetration by streamlining
global operations, expanding our geographic
presence and enhancing our technology offerings;
• pursuing strategic acquisitions by creating greater
demand for Westcon’s style of value-added sales and
support services; and
• realising the benefits of the significant cost
and operational efficiencies of Compass,
Westcon’s recently-implemented processing and
information system.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 20
Logical Divisional Report
20 Datatec Annual Repor t 2002
>
Unless you do somethingbeyond what you’ve masteredyou will never grow
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 21
21Datatec Annual Repor t 2002
Logical Group Limited (“Logical”) is an international
professional services and IT network integration group
with specific skills in next generation technologies such
as convergence and mobility.
We take a consulting-led approach to help our clients
leverage these technologies to gain competitive
advantages for their businesses, using our core
competencies in four key areas:
• shaping business strategies within the context of the
impact of new technology;
• developing and integrating custom applications
and web-enabled solutions to drive process
efficiency;
• designing and deploying the networks and
advanced IT infrastructures that underpin the
enterprise; and
• monitoring and maintaining enterprise networks,
systems and applications to enable our clients to
outsource routine operational management of
mission critical technologies.
> Structure
Logical’s business is structured geographically with a
small head office function in London that provides
strategic direction, financial control and standards-
setting. We aim to make our country operations part of an
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 22
Logical Divisional Report continued
22 Datatec Annual Repor t 2002
integrated network of businesses, creating synergies that
enhance the overall value of Logical to our shareholders.
As part of the restructuring of the business during the
year under review, we narrowed the focus of the
organisation around networking solutions and we exited
the loss-making operations in Switzerland (e-business)
and France (systems) and acquired 100% ownership of
the French networking operation and Secure24, our
managed services’ security product.
Overall, the emphasis has shifted from business
transition to business integration and activity has been
focused on managing earn-outs, integrating the
remaining business units, developing consistent
marketing collateral to support our value proposition
and exploiting proprietary technologies.
Difficult market conditions in all our key markets
meant that we focused heavily on operational cost
containment with the aim of ensuring ongoing monthly
profitability in all regions. To this end we reduced our
headcount by 25% over the year, as well as substantially
improving working capital management to improve our
cash position.
> Markets
Trading conditions affected Logical’s financial
performance during the year. Our business suffered
most in the US and Europe, where the general
slowdown in IT expenditure affected both revenue
and gross margins.
Our business in Australasia held up well, largely driven
by strong domestic demand. Economic growth
forecasts for this region remain strong for 2002/03. In
Argentina, the economic crisis and the devaluation of
the Peso made growth particularly difficult and our
focus here has been on minimising risk in a highly
volatile market. We do not expect to see a significant
improvement in the US and European markets until
calendar 2003.
> Financial Performance
The net effect of Logical’s cost cutting and
reorganisation during the year was an improvement in
overall levels of profitability, reflected in a positive
EBITDA of $1.9 million for the second half, compared
with $1.1 million in the first half.
Revenue fell markedly from the previous year’s levels,
largely due to exiting operations in Switzerland and
France, the Peso devaluation in Argentina and declining
market conditions in our key US and European markets.
Logical ended the year with an overall positive EBITDA
of $3.1 million ($5.3 million in continuing operations).
The cash position improved by 381% to $16.0 million
from a net debt position of $5.7 million (2001).
> Stephen LawrenceChief Executive OfficerLogical
> Nigel Drakeford-LewisChief Financial OfficerLogical
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 23
23Datatec Annual Repor t 2002
> StrategyThere are growth forecasts for network-related professional
services, driven by the increased availability of low-cost
bandwidth (and subsequent new business applications),
the convergence of voice, video and data and increasing
demand for mobile access to the enterprise.
We expect growth in four key areas over the next three
years: storage solutions, wireless LANs, converged
networks and security. Logical will invest in technical
skills and vendor accreditations accordingly.
We are also continuing to develop relationships with
providers of higher margin niche products that
complement our core product business. We will
maintain our focus on Cisco for networking products
and on HP for servers, but we will also take on new
vendors in related value-adding areas such as security,
storage, mobility and service assurance.
We will also concentrate on exploiting our own
proprietary technologies across all our operations,
since these proprietary products have a high services
component and carry higher margins than third
party products.
> People
The integration process and the successful development
of Logical is dependent on the commitment of our
people and we acknowledged this by issuing Datatec
share options to all our employees so that they can have
a stake in the future performance of the Group.
We recognise that major organisational restructuring
and downsizing can create instability and uncertainty
among employees and we have taken steps to address
this with a series of regular communication meetings
and newsletters to explain the business strategy and the
actions required of our staff.
In addition, we instituted a comprehensive employee
opinion survey to obtain feedback from all levels of
the organisation. The survey showed significant
improvements from a similar project twelve months ago.
The survey also highlighted a number of areas to
address, specifically in the area of knowledge sharing
across business units. We will take steps to address this in
the coming months.
> The Coming Year
Logical has achieved stability and focus and having
completed its transition and integration, it is set to show
profitable, ongoing growth. It will continue to develop
as a focused value-player around leading-edge
technology solutions that help our clients identify and
exploit the many business opportunities offered by
advancing technology.
We have deep technical skills and vendor recognition
in high growth areas such as converged technologies
and we have defined a “battleground” that allows us to
add value to our clients and differentiate ourselves
from our competition.
We have already achieved some significant international
successes in the convergence area, particularly in IP
Telephony, that highlight our expertise and positioning
as a leading solutions provider.
Our focus in the year ahead will be on building on
this foundation.
logical revenueR million
2002
0500
1 0001 5002 0002 5003 0003 5004 000
logical ebitdaR million
160140120100806040200
2001 2002 2001
3 799($395m)
3 381
52($5m)
151
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 24
Mason Divisional Report
24 Datatec Annual Repor t 2002
>
… don’t predict the future,create it
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 25
25Datatec Annual Repor t 2002
Mason Group Limited (“Mason”) is a pure-play
telecommunications and IT convergence consultancy. As
such it provides fee-based expertise rather than hardware
or software. Mason’s activities occur primarily in the UK
and Ireland, although approximately 6% of its revenue
comes from Continental Europe. Mason’s UK-based
consultants have also served clients in more than
thirty countries around the world.
Mason’s services, operating under an ISO9001
accredited quality system, include solutions strategies,
business planning, engineering and design,
procurement on behalf of clients, programme and
project management and network optimisation.
The majority of Mason’s clients are large organisations
in telecommunications, enterprise and government and
include 30 of the FTSE 100 companies.
> Markets
The collapse of technology stock prices and turmoil in
the telecommunications industry had a major effect on
Mason. Many of our clients suffered financially and
consequently reduced their spending on external
consultancy.
The roll-out of third generation (3G) mobile telephony
was also delayed due to financial constraints and delays
in handset development.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 26
Mason Divisional Report continued
26 Datatec Annual Repor t 2002
The downturn in the enterprise market was less severe
and government work continued apace. Difficult market
conditions continued past the year end and although
there are large numbers of enquiries for new work, it was
difficult to close new contracts.
Catalyst, the contact centre consultancy acquired by
Mason in March 2001, was successfully integrated into
our finance, IT/IS and human resources systems,
achieving a high degree of cross-selling.
The gloomy mood in the marketplace was lifted in part
by some accolades. Mason was ranked as the UK’s
leading “Telecoms and IT Convergence Consultancy” by
an Industry Research Group survey conducted for
Management Consultancy magazine.
Mason was also ranked 36 in the UK Sunday Times “100
Best Companies to Work For”, based on staff surveys, as
well as being listed as one of the UK’s most visionary
companies in the BT/Guardian “Vision 100” awards.
> Financial PerformanceAs a consequence of the stalling market, our revenue
from fixed and mobile telecommunications operators
dropped by 27%, a fall softened by the fact that less
than half of Mason’s revenue comes from the
telecommunications operators. During the year,
government work grew by 15%.
Catalyst performed very well in a strong market andincreased its revenue by 46%.Geographically, revenue came from the UK (88%),Ireland (5%), the rest of Europe (6%) and other partsof the world (1%).Mason has achieved an average annual revenue growthrate over the last five years of 27%. The level of repeatbusiness from existing clients represented 76% of totalrevenue.
Revenue for the year under review was level at
£20.4 million. Having been prompted by market
conditions to reduce our staff complement from 260 to
200 and abandon the planning of an IPO for Mason,
both developments generated substantial exceptional
costs that negatively affected profits.
Before exceptional costs, EBITDA was down 74% to
£1.0 million and earnings before tax was down 116% to
a loss of £0.5 million after exceptional costs.
> Strategy
Mason has altered its strategies to reflect important
issues being faced in each of the group’s principal
markets. In the telecommunications sector, debt
reduction, customer retention, mergers and
acquisitions, network optimisation and infrastructure
sharing are key issues.
> Dave MasonChief Executive Officer Mason
> Alex SmithFounding DirectorMason
> Terry FlaniganFounding DirectorMason
> Bill MooreFinance Director Mason
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 27
27Datatec Annual Repor t 2002
In the enterprise sector the issues are cost-savings,
exploitation of broadband infrastructure for business
advantage, information security, IP telephony, wireless
LANs and mobile data.
Key issues in the government sector are implementation
of e-government and e-policing initiatives, regional
promotion of broadband infrastructure, the
introduction of secure digital mobile communications
for emergency services and information security.Our strategy is to enhance our differentiation and sellmarket-focused services that help clients in thoseenvironments resolve these issues. Mason’s keydifferentiators are that:• it comprises specialist consultancies that are able to
compete with larger, more generalised consultancies;• it is independent of vendors and can act impartially
in the best interests of customers;• it provides a “concept to reality” service that takes
clients from initial strategic thinking to a workingsolution;
• the group has expertise across all of the convergingtechnologies; and
• it adopts a collaborative approach to working withits clients.
In the longer term, we see many opportunities forMason to expand geographically through establishmentof new offices and through acquisitions.
> People
As a result of the market downturn during the year, we
reduced our staff complement, for the first time, from
260 to 200. Redundancies were mainly among support
staff, consultants and managers. Although the
redundancies were traumatic for all concerned, all those
involved felt they were treated fairly and with sensitivity
and no industrial tribunal claims arose.
Mason retains its strong people-based culture
centred on customer service, teamwork, personal
development, professionalism and fun. Each member
of our team is appraised annually and a career
development and training plan is in place for
each individual.
We also operate a profit-related bonus scheme based on
agreed objectives. Most of the people hold Datatec
share options.
> The Coming Year
Prospects for Mason are looking positive. Its reputation
is growing in Continental Europe and demand for its
services is being driven by deregulation, the
convergence of IT and telecommunications, new
technology, mergers and acquisitions, e-business,
m-commerce and changes in business practices.
The competition in Mason’s market is fragmented and
we expect to see some consolidation among Mason’s
competitors and, as the UK’s market leader, Mason
expects to play a leading role in this consolidation.
mason ebitda
R million
4035302520151050
mason revenue
R million
20020
50
100
150
200
250
300
2001 2002 2001
282($29m)
222
13($1m)
40
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 28
Other Holdings’ Divisional Report
28 Datatec Annual Repor t 2002
Datatec’s operations in SA focus in three core areas:
• RangeGate, a mobile technology systems integrator;
• Affinity Logic, an IT outsource services company;
and
• Westcon AME (Africa Middle East), a value added
networking distributor whose operations mirror
those of the Westcon Group.
For all three, the year was one of consolidation and cost
cutting through staff reductions and rationalisation of
back-end office functions.
> RangeGate
RangeGate represents the Group’s mobile technology
systems integration business located in SA and the UK.
It sells mobile solutions into specific market sectors
such as retail, industrial, manufacturing, transport
and logistics.
RangeGate grew revenues to R83 million during the
year, but experienced an operating loss of R24 million.
During the year the business cut substantial costs and
readied itself for an increasing demand for mobile
technology as organisations sought enhanced
efficiencies through “anytime, anywhere” access for
managers, customers and suppliers.
The proposed merger of RangeGate with Versatile
Mobile Systems did not proceed, as not all
regulatory approvals had been received. RangeGate
will, however, continue to work together with
Versatile on opportunities where both companies
can add value.
In the year ahead, revenues are expected to increase and
the operating performance should improve to a near
break-even situation.
> Affinity Logic
Affinity Logic’s core business is the provision of
outsource services for the delivery of computing
infrastructure and application solutions to the retail and
consumer goods sector. It has been developing an
integrated computing platform that will be outsourced
on a capacity on demand basis.
At the start of the year the company made a
significant investment to develop its core outsourcing
services platform. As part of this refocusing, it was
decided to exit all the non-core investments and
service offerings.
The increased expenditure associated with the
change in the company’s strategy contributed to
Affinity’s significant loss during the year of R29
million for the Group. Turnover from continuing
operations was flat, however, the company generated
positive cash flows from operations.
The balance sheet ended the year well capitalised and
expenditure on the development of the core platform is
now substantially complete. More than 70% of turnover
is annuity based.
During the year it was proposed that Wooltru’s stake be
bought out by management and Datatec, increasing
Datatec’s shareholding from 47.5% to 55.2%. This
transaction was finalised in June 2002 subject to
Competition Commission approval for the increase in
the Datatec shareholding.
After investing substantially in upgrading its service
offering and developing a comprehensive growth and
marketing strategy, Affinity Logic looks forward to a year
of increased revenues and close to break-even
profitability.
> Westcon AME
Westcon AME, created by merging the South African
operations of Westcon, Scantec and Datanet, maintained
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 29
its focus on territorial expansion and successfully
concluded the acquisition of Dubai-based OnLine on
30 June 2001.
The back offices of the SA businesses (Westcon, Datanet
and Scantec) were consolidated, resulting in significant
cost reductions. The company has now realigned all the
businesses to match the strategy of leveraging Westcon’s
global competitive advantage.
Revenue for the year increased by 56% to R713 million
and operating profits rose by 325% to R17 million.
We expect the year ahead to show both increased
revenues and operating profit.
29Datatec Annual Repor t 2002
other holdings revenue
R million
other holdings ebitda
R million
140
120
100
80
60
40
20
02002
0100200300400500600700800900
2001 2002 2001
886
563
123106
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 30
Finance Report
30 Datatec Annual Repor t 2002
GROUP ACCOUNTING POLICIES
The annual financial statements have been prepared in accordance with the Group's published and materially
consistently applied accounting policies that comply with South African Statements of Generally Accepted
Accounting Practice, and with International Accounting Standards (other than goodwill which has previously been
written off against share premium).
Westcon is consolidated into the Group’s annual financial statements based on Westcon’s results for its financial year
ended 28 February. This is consistent with the previous years’ annual financial statements.
REVENUE
The Group's financial results for the year ended 31 March 2002 reflected revenue from ongoing operations of
R20.6 billion compared with revenue in the previous year of R19.0 billion, an increase of 8%. However, in US Dollars
revenue decreased from $2.6 billion in 2001 to $2.2 billion in 2002, a decrease of 16%. Revenue from ongoing
operations per division is as follows:
2002 2001 2002 2001
Revenue (million) Rand Rand $ $
Westcon 15 595 14 871 1 670 2 043
Logical 3 799 3 381 395 460
Mason 282 222 29 30
Other Holdings 886 563 92 77
Total 20 562 19 037 2 186 2 610
Westcon achieved revenue from ongoing operations of R15.6 billion ($1.67 billion) in 2002 compared to revenue of
R14.9 billion ($2.04 billion) in 2001, a decline of 18% in US Dollars reflecting the weak economic trading conditions
and the effects of the September 11, 2001 events. Gross margins decreased from 11.2% in 2001 to 10.4% for 2002, a
decline of 7.1%. This decline is due mainly to the reduction and elimination in the second half of the year of margin
enhancing programmes associated with the sales of Cisco products and the provision made during the year in respect
of the Lucent litigation.
Logical achieved revenue from ongoing operations of R3.8 billion ($395 million) in 2002 compared to revenue of
R3.4 billion ($460 million) in 2001, a decline of 14% in US Dollars. This decline is primarily a result of the weak
economic conditions together with customers in the US and Europe postponing IT projects in a climate of reduced
confidence in the economy. Gross margins decreased from 27.8% in 2001 to 24.4% in 2002 as product margins
declined under increasing competition and the declining use of professional services.
Mason achieved revenue of R282 million (£20 million) in 2002 compared to R222 million (£21 million) in 2001
despite the inclusion for the first time in 2002 of revenue of £5 million from Catalyst, which was acquired by Mason
in March 2001. The collapse of technology stock prices and the turmoil in the telecommunications industry had a
major effect on Mason, with many of Mason's telecommunication customers suffering financially and consequently
reducing their spending on external consultancy. This resulted in revenue reducing from £11.7 million in the first six
months to £8.7 million in the second six months, a reduction of 26%.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 31
31Datatec Annual Repor t 2002
Other Holdings’ revenue increased mainly through the inclusion for the first time of revenue of R202 million from
OnLine, acquired by Westcon AME on 30 June 2001.
OPERATING PROFIT BEFORE FINANCE COSTS, DEPRECIATION AND AMORTISATION (“EBITDA”)
EBITDA from ongoing operations amounted to R873 million compared with the prior year of R1.127 billion. This
decline is largely the result of the difficult economic trading conditions, disappointing results achieved by Logical and
an increase in provisions in Westcon. EBITDA from ongoing operations per division is as follows:
2002 2001 2002 2001
EBITDA (million) Rand Rand $ $
Westcon 685 830 73 114
Logical 52 151 5 21
Mason 13 40 1 5
Other Holdings 123 106 13 14
873 1 127 92 154
EBITDA margin on ongoing operations 4.2% 5.9% 4.2% 5.9%
Included in EBITDA are foreign exchange gains of R136 million (2001: R49 million) attributable to the substantial
decline in the value of the Rand against the Group's trading currencies in the latter part of the year and an amount
of R39 million relating to the refund of customs duty paid, to be received by Westcon from the taxation authorities in
the UK.
As noted in the Group's 2001 annual report, Westcon held $24 million of inventory purchased from Lucent
Technologies, Inc. (“Lucent”) and in July 2001 commenced litigation to require Lucent to abide by the distribution
agreement between the parties and accept return of this inventory. Westcon management believes that Westcon has a
meritorious case against Lucent and is continuing with the litigation. Management has, however, decided to adopt a
prudent approach and, accordingly, Westcon during the year has provided an amount of $13 million (R123 million)
against its remaining Lucent inventory of $16 million.
Logical charged an amount of R86 million against the restructuring provisions created during the financial
year ended 31 March 2001. At the end of the year, R24 million of the restructuring provisions remained, which
provisions are considered adequate to meet restructuring costs mainly relating to future rentals on premises
vacated.
FINANCING COSTS
Financing costs decreased during the year due to the reduction in interest rates in the US and the operating cash flows
generated in Westcon and Logical that lowered the levels of working capital.
GOODWILL AMORTISATION
Goodwill is amortised in the Group's financial statements over a period of seven years and amounted to R133 million
in 2002 compared to R80 million in 2001. This increase is due to goodwill being recorded during the year of
R421 million in respect of payments made for amounts still outstanding to vendors that were subject to earnouts.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 32
Finance Report continued
32 Datatec Annual Repor t 2002
EXCEPTIONAL ITEMS
The following exceptional items were recorded during the year under review:
(R million) 2002 2001
Impairments of property, plant and equipment (1) (109)Net (loss)/surplus on disposal of operations and investments (1) 1 068Write-down of carrying value of investments (58) (161)Loss on disposal and closure of discontinued operations (64) (92)Proposed subsidiary listing costs (40) –
(164) 706Goodwill impairment (397) –
Exceptional items per the Income Statement (561) 706Tax effect 11 (65)Attributable to outside shareholders 2 (5)
Net effect of exceptional items (548) 636
Exceptional items, excluding impairment of goodwill, of R164 million were incurred during the year, which relatedpredominantly to the net loss realised on disposal of certain operations, the write down in the carrying value ofinvestments and the write off of costs relating to Westcon's proposed listing previously included in the balance sheet.
The Group reviewed the value of goodwill carried on its balance sheet at the end of the year. Given the historicaltrading losses of Logical and certain of its Other Holdings, the Group has written off the remaining amounts ofgoodwill totalling R397 million relating to those loss-making operations. The remaining goodwill carried on theGroup's balance sheet of R419 million relates to Westcon, Mason and Westcon AME and management believe thatthere has been no impairment to this goodwill.
TAXATION
The effective rate of ordinary taxation on profit before exceptional items and goodwill decreased from 34.2% in 2001to 30.6% in 2002. This decrease is a result of a shift in Westcon's profit to non-US territories that are subject to lowerrates of tax, compared to the previous year, together with the increased impact on the rate of tax deductions foracquired goodwill of $10 million in the US arising from this spread of profits, a reduction in US state taxes in Westcon,prior year tax credits in Logical, and the recognition of certain deferred tax assets on a prudent basis wheremanagement believes that their recovery is probable.
No provision has been made in Westcon for US Federal deferred income taxes on approximately $108 million ofaccumulated and undistributed earnings of Westcon’s foreign subsidiaries at 28 February 2002 (Westcon’s year end)as it is the present intention of the Group to continue reinvesting such earnings in the foreign subsidiaries indefinitely.The Group has not calculated the amount of the potential US Federal deferred income taxes, which amount will beless than the US statutory rate of taxation after taking into account credit for foreign taxes paid.
MINORITY INTERESTS
Minority interests relate to the 7.5% in Westcon, 25% in Logical Softnet (in Argentina), 25% in Mason and 20.9% inRangeGate not owned by the Group. The decline in profit attributable to the outside shareholders of R57 million in2001 to R11 million in 2002 is due to the general decline in the overall Group profitability, the increase in the Group’sinvestment in Westcon from 85.3% to 92.5% during the year and the allocation to the outside shareholders of theirshare of the losses in RangeGate and Logical Softnet.
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33Datatec Annual Repor t 2002
HEADLINE EARNINGS PER SHARE
Headline earnings per share decreased by 18% from 325 cents in 2001 to 265 cents in 2002. Basic earnings per sharedeclined from 761 cents in 2001 to a loss per share of 257 cents in 2002 due primarily to the charge for impairment ofgoodwill amounting to R397 million (2001: Nil) and the losses from other exceptional items of R164 million (2001: profitof R706 million). Diluted earnings per share was slightly lower than basic earnings per share at a loss per share of 253cents reflecting the notional additional shares in issue necessary to fund the difference between the number of sharesissued and the number of shares that would have been issued at fair value in respect of the share options granted but notexercised. Diluted headline earnings per share of 260 cents in 2002 was 20% lower than the 325 cents in 2001.
The weighted average number of shares in issue for the year was 131 million which increased from last year's126 million due to the additional shares in issue arising predominantly from the issue of shares for cash concluded inthe latter part of the year.
DIVIDEND POLICY
The Group continues to pursue attractive investment opportunities that are synergistic to existing operations.Accordingly, the Group's policy of retaining attributable income for future growth without a dividend distribution toshareholders remains in place.
BALANCE SHEET
Ordinary shareholders' funds increased from R3.2 billion in 2001 to R3.7 billion in 2002, an increase of R0.5 billion.This increase is after the charge for impairment of goodwill of R397 million and partly reflects the fall of the Rand onthe historic cost asset base.
BORROWINGS
Long-term liabilities relate primarily to the Group's proportional share of debt raised in Affinity Logic to fund thedevelopment of operations in that business, as well as capitalised finance leases in respect of property, plant andequipment in other subsidiary companies.
During the year under review the Group reduced its net borrowings mainly through the cash generated fromoperations. As at 31 March 2001, Westcon had a senior acquisition loan facility of $75 million of which $50 million wasrepaid in April 2001. The balance of $25 million was repaid by an instalment of $10 million on 31 December 2001,with the balance of $15 million repayable in six monthly instalments of $2.5 million through June 2002. In addition,as at 31 March 2002, Westcon had a $225 million senior revolving credit facility, expiring on 31 December 2002.Westcon is in the process of interviewing prospective finance companies, which include its current lender, with a viewto selecting a syndicate of financiers to replace this current senior revolving credit facility in January 2003.
The Group is dependent on its bank overdrafts, working capital line of credit and trade finance facilities to operate.These facilities generally consist of either a fixed term or a fixed period but repayable on demand, are secured againstthe assets of the company to which the facility is made available and contain certain covenants which include financialcovenants such as minimum liquidity, maximum leverage and pre-tax earnings coverage. If these covenants areviolated and a waiver is not obtained for such violation, this may, amongst other things, mean that the facility may berepayable on demand.
Datatec has no restrictions on its borrowing powers in terms of its Memorandum and Articles of Association.
CAPITALISED DEVELOPMENT EXPENDITURE
Westcon
Westcon has developed internally an enterprise resource planning system known as Compass which is based on aJ D Edwards application running on an Oracle platform. Compass has been installed in Westcon UK, Westcon, Inc.,Westcon Canada, Comstor US, Comstor Germany and Voda One, which operations amount to 77% of Westcon’s totalrevenue. Westcon will, over the next eighteen months, implement this system over its remaining material operations.The capitalised costs associated with the development of Compass to date amount to R87 million (2001: R24 million)and further costs of approximately $2 million will be capitalised over the next eighteen months.
Development costs are amortised over a maximum of seven years with R13.2 million amortised in the year under review.
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34 Datatec Annual Repor t 2002
Logical
Capitalised development costs consist mainly of R26 million (2001: R19 million) for the EBOC (e-business operationscentre) and R11 million (2001: R6 million) for Secure24. The EBOC costs relate to the costs incurred in developingthe network management centres in the US and UK, which provide outsourced network infrastructuremanagement for customers. Secure24 costs relate to a service, developed in New Zealand, which providesmonitoring, management and reporting of security related events within a customer environment with a unique setof software tools.
Development costs are amortised over a maximum of three years commencing when the development project isbrought to market. During the year under review an amount of R7.0 million was amortised.
Affinity Logic
Capitalised development costs comprise systems development in progress amounting to R2.5 million(2001: R7.9 million), which consists of a wide variety of projects that are under development, including extendedenterprise application integration projects, web based development and planning systems. The majority of theseprojects are SAP based.
When development of a project is completed the development costs are transferred from systems development inprogress to either software or computer equipment and depreciated over the useful life of the project. During the2002 financial year amounts of R20.4 million and R0.6 million were transferred from systems development in progressto software and computer equipment respectively (2001: R9.3 million and R14.1 million respectively).
All amounts above reflect Datatec’s proportional share of such amounts.
AMOUNTS OWING TO VENDORS
Amounts owing to vendors represent purchase considerations owing in respect of acquisitions. Amounts owingare recognised once there is sufficient assurance that the suspensive conditions will be met and the amounts canbe measured reliably. Amounts owing where the suspensive conditions have not been met are disclosed ascontingent liabilities.
Amounts owing to vendors decreased during the year from R413 million included in the balance sheet andR395 million reflected as the maximum contingent liability in 2001 to R90 million included in the balance sheet andR65 million reflected as the maximum contingent liability in 2002.
During the year the following amounts were paid to vendors out of the Group's internal cash resources:
Million R $
Westcon 105 11Logical 461 55Other Holdings 66 8
632 74
The Westcon payments to vendors relate mainly to the acquisitions of Loginet in Germany, Technocraft in Singaporeand CCA Technologies in the US. The Logical payments to vendors relate mainly to the acquisitions of PSSG and BCSin the US, and Satelcom in the UK. The Other Holdings payments relate mainly to the payment to Wooltru Limitedin respect of Affinity Logic.
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35Datatec Annual Repor t 2002
The amounts owing to vendors at 31 March 2002 are made up as follows:
Softnet SA
An amount of R36 million ($3 million) is still owing to the vendors of Softnet. During June 2002 it was agreed thata maximum further amount of $1.7 million would be paid to the vendors, with an amount of $1.5 million to beadvanced to Softnet on loan account by Logical. The minority shareholder of 25% has agreed to advance $0.5 million, his pro rata share of the loan.
Catalyst IT Partners
An amount of R98 million ($9 million) is still owing to the vendors of Catalyst IT Partners (a company previouslyacquired by Mason). Of this amount R33 million ($3 million) is expected to be paid during the 2003 financial year inrespect of the 2002 financial year and is dependent on the level of profitability achieved for such year. The remainingR65 million ($6 million) has been included in contingent liabilities and is payable in respect of the 2003 financial yearand is dependent on the level of profitability achieved for such year.
Online Distribution
An amount of R21 million ($2 million) was provided to be paid during the 2003 financial year to the vendors ofOnline Distribution (a company acquired by Westcon AME) and was dependent on the level of profitability achievedfor the 2002 financial year. This amount was finalised during May 2002 and an amount of R15 million ($1.3 million)was paid to the vendors.
CASH FLOW
Cash generated from operations of R2.1 billion was driven by improvements in working capital of R1.3 billion mainlyas a result of a reduction in inventories. This is particularly reflected in Westcon where inventories reduced by$185 million, a decline of 51% from the previous year. At year end the Group's balance sheet had improved to a netcash positive position of R168 million compared with net debt of R262 million in the prior year, an improvement ofR430 million. These cash flows allowed Westcon to reduce its net debt by $131 million including a repayment of$65 million of its original $75 million acquisition facility.
OPERATING LEASE COMMITMENTS
Operating lease commitments increased from R788 million to R1.046 billion, due to the deterioration of theR/$ exchange rate during the 2002 financial year. In US Dollars operating lease commitments have reduced from$99 million in 2001 to $92 million in 2002.
Operating lease commitments are made up per division as follows:
2002 2001 2002 2001Million R R $ $
Westcon 378 318 33 41Logical 569 380 50 47Mason 57 58 5 7Other Holdings 42 32 4 4
Total 1 046 788 92 99
More detail on operating lease commitments can be found in note 22 of the annual financial statements.
The operating lease commitments in Westcon relate mainly to future property rentals of warehouses and officeproperties. The balance relates to future rentals in respect of office equipment and computer equipment.
The vast majority of the operating lease commitments in Logical relate to property rentals. Included in these rentalsis an amount of $36 million which relates to the Logical Group and Logical UK premises in Slough, where a twentyfive year lease was entered into in April 2000. Approximately 30% of the building has been sublet for a period of five
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36 Datatec Annual Repor t 2002
years (with two break clauses after eighteen months and thirty six months) from January 2002, although this futurerental has not been applied to reducing the operating lease commitments. The balance of the operating leasecommitments relate to future rentals on vehicles and computer equipment.
The operating lease commitments for Mason and Other Holdings relate predominantly to future property rentals ofwarehouses and office properties.
FOREIGN CURRENCY
The Group publishes its financial statements in South African Rands. The Group, however, earns over 58% of itsrevenues in US Dollars although over 94% of its revenues are denominated in US Dollars as Westcon and Logicalreport their consolidated results in US Dollars. As a result a similar proportion of the Group's balance sheetincluding net debt and cash deposits are denominated in US Dollars.
However, the Group conducts business in many foreign currencies and, as a result, is subject to currency risks owingto exchange rate movements which will affect its costs and translation of the profits of subsidiaries whose functionalcurrency is not the South African Rand. The most significant other currencies in which the Group trades are Sterling,the Euro and the Australian Dollar.
During the year the Group was exposed to significant currency risk with the devaluation of the Argentinian Peso. Since1991, the conversion rate of the Argentinian Peso has been 1:1 with the US Dollar. On 20 December 2001, theArgentinian government announced that exchange transactions would be temporarily suspended. On 2 January 2002,the government then announced that the 1:1 ratio would no longer be maintained and instead a dual system with afree market foreign currency exchange was established for most transactions. In February 2002, the dual system wasreplaced by the current single floating rate for all transactions.
The exchange rate at the year end was 2.85 Pesos to the US Dollar. Significant exchange movements have arisen wherebalances have been translated from the previous 1:1 rate to the current market rate.
The majority of Logical Argentina's revenues are with local customers, invoiced in US Dollars and expected to becollected in US Dollars at the floating rate prevailing at the time of collection. Revenues that were made before31 December 2001 and not yet collected were therefore caught by the change in legislation which requires thesebalances to be translated at the old 1:1 rate and not the market rate. This resulted in Logical Argentina incurringsignificant exchange losses in respect of its receivables.
In addition, suppliers, which were mainly outside Argentina, still had to be paid in US Dollars, at the market rates.However, Logical management successfully negotiated payment relief with the major supplier, who also agreed to anextended repayment plan in respect of its debt. The net effect of the payment relief and exchange losses in respect ofreceivables was not material to the Group accounts.
The following table reflects the average and year end exchange rates against the South African Rand of US Dollarsand Sterling:
Year ended Year ended31 March 2002 31 March 2001
Average Closing Average Closing
US Dollar (Westcon – February) 9.3405 11.4450 7.2759 7.7100US Dollar (Group) 9.6251 11.4452 7.3492 8.0300Sterling 13.8069 16.3276 10.8192 11.4588
POST-RETIREMENT BENEFITS
The Group's retirement benefit funds comprise a number of defined contribution funds throughout the world. TheGroup has no liability to these funds other than the monthly payment of staff contributions. The Group has no liabilityin terms of post retirement medical aid contributions for staff.
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37Datatec Annual Repor t 2002
Corporate Governance
The Group and its directors are fully committed to good corporate governance and to the principles of openness,
integrity and accountability in dealing with shareholders and all other stakeholders. All directors endorse the Code of
Corporate Practices and Conduct recommended in the King Report on Corporate Governance in South Africa 2002
(“King II report”).
BOARD OF DIRECTORS (“THE BOARD”)
The Board consists of eleven directors, six of whom are non-executive and five of whom are independent, as defined
by the King II report. This is the first time in the history of the Group that the number of non-executive directors
exceeds the number of executive directors. The Remuneration and Nomination Committee is seeking to appoint an
additional independent non-executive director. The non-executive directors, drawing on their skills and business
acumen, ensure impartial and objective viewpoints in decision making processes and standards of conduct.
The roles of the Chairman and the Chief Executive Officer do not vest in the same person. Leslie Boyd was appointed
as non-executive Chairman of the Group during the year. Jens Montanana continues in the separate role of Chief
Executive Officer.
The directors consider the mix of technical, entrepreneurial, financial and business skills of the directors to be
balanced, thus enhancing the effectiveness of the Board.
The Board retains full and effective control over the Group and monitors the executive management and decisions
in the subsidiary companies. While the Group's executive directors are on the boards of the Group’s subsidiaries,
effective day-to-day executive management of these subsidiaries resides at the divisional level. Logical and Westcon
have executive representation on the main Datatec Board through their Chief Executive Officers.
The Board is responsible for the adoption of strategic plans, monitoring of operational performance and
management, determination of policy and processes to ensure the integrity of the company’s risk management and
internal controls, communications policy, and director selection, orientation and evaluation. These responsibilities
will be set out in the board charter that will be formalised during the 2003 financial year. To adequately fulfil their
responsibilities, directors have unrestricted access to timely financial information, all company information, records,
documents and property. Directors are provided with guidelines regarding their duties and responsibilities as directors
and a formal orientation programme has been established to familiarise incoming directors with information about
the company’s business, competitive position and strategic plans and objectives.
The Board meets at least four times a year and additional meetings are held when non-scheduled matters arise. At all
Board meetings directors declare their interests in contracts where applicable. Full details of the directorate are set
out on pages 6 to 7 and page 101.
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38 Datatec Annual Repor t 2002
DIRECTORS’ ATTENDANCE AT BOARD MEETINGS — 2002 FINANCIAL YEAR
17 May 23 August 10 October 14 November 15 March
2001 2001 2001 2001 2002
L Boyd NAD NAD NAD NAD P
C B Brayshaw NAD NAD NAD NAD P
J S James P P A P NAD
M Karpul P P P P P
M J Lamberti A P P NAD NAD
S F Lawrence P P A P P
J F McCartney P P P P P
J P Montanana P P P P P
D B Pfaff NAD P P P P
R S Rindel P P P P P
C M L Savage NAD NAD NAD NAD P
C S Seabrooke P P P P P
A M Smith NAD P A P P
A = Absent P = Present NAD = Not a director at that time
The Board has the following committees to assist it with its duties:
• Audit and Compliance Committee
• Remuneration and Nomination Committee
• Business Risk Committee
Audit and Compliance Committee
For the period from 1 April 2001 to 6 December 2001, the Audit Committee consisted of the following members:
C S Seabrooke (Chairman)
M J Lamberti*
J S James
R S Rindel
* M J Lamberti was a member of the Audit Committee until 22 October 2001, the date of his resignation from the
Board.
With the appointment of additional non-executive directors on 6 December 2001, the composition of the Audit
Committee was amended as follows to include only independent, non-executive directors:
C B Brayshaw (Chairman)
C M L Savage
C S Seabrooke
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39Datatec Annual Repor t 2002
The name of the Committee was changed to the Audit and Compliance Committee.
The Committee operates within defined terms of reference and authority granted to it by the Board and meets at least
three times a year, when the external auditors and Group Financial Director are invited to attend. The external
auditors have unrestricted access to the Audit and Compliance Committee.
The principal functions of the Committee are to review the interim and annual financial statements and accounting
policies, monitor the effectiveness of internal controls, assess the risks facing the business and to discuss the findings
and recommendations of the auditors.
In line with the increasing independence of Datatec's subsidiaries, separate Audit Committees have been established
for all the subsidiary companies. Full reports from these sub-committees are submitted to, and form part of, the
documentation made available to the Datatec Audit and Compliance Committee.
The Audit and Compliance Committee ensures that there is appropriate independence relating to non-audit services
provided by the external auditors.
Remuneration and Nomination Committee
From 6 December 2001, the Remuneration and Nomination Committee consists of the following members, all being
independent non-executive directors:
L Boyd (Chairman)
J F McCartney
C S Seabrooke
Details of the composition of the Committee prior to 6 December 2001 are set out in the Remuneration Report on
pages 45 to 53.
The Committee operates within defined terms of reference and authority granted to it by the Board and meets at least
twice a year. The Chief Executive Officer and Group Financial Director may be invited to attend these meetings, but
neither may take any part in decisions regarding their own remuneration.
The Committee is responsible for making recommendations to the Board on the company’s framework of executive
remuneration and to determine specific remuneration packages for each of the executive directors and certain senior
managers of the Group. The Committee is also responsible for the Group's remuneration policies and the allocation
of share options in terms of the Group’s share option scheme. The Committee makes recommendations to the Board
regarding the appointment of new executive and non-executive directors and makes recommendations on the
composition of the Board generally.
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40 Datatec Annual Repor t 2002
Business Risk Committee
The Business Risk Committee consists of the following members:
C M L Savage (Chairman)
S F Lawrence
J F McCartney
J P Montanana
D B Pfaff (Chief Risk Officer)
R S Rindel
A M Smith
The Committee was formed during December 2001 and operates within defined terms of reference and authority
granted to it by the Board. At least three meetings are held annually.
The Board appointed the Business Risk Committee to assist it in reviewing the risk management process and review
significant risks facing the Group. The Committee sets the Group’s risk strategy in liaison with the executive directors
and senior management, making use of generally recognised risk management and internal control models and
frameworks in order to maintain a sound system of risk management and internal control.
Management is accountable to the Board for designing, implementing, monitoring and integrating the process of risk
management into the day-to-day activities, but the Board retains overall accountability for risk management. The
Board views risk management in a positive light, as it may identify business opportunities.
The Committee has commissioned the services of Ernst & Young to design and facilitate a formal strategic risk
assessment for Datatec at the Group level. This will result in dynamic risk identification, commitment by management
to the risk management process, risk mitigation activities, documented risk communications, alignment of assurance
to the risk profile and a register of key risks. The Board will set the risk strategy policies with senior management and
decide the Group’s tolerance for risk.
The committee will identify and monitor, at least annually, key performance indicators and key risks, including
operational, physical, human resources, technology, continuity, credit, market and compliance risks.
The Business Risk Committee maintains a close relationship with the Audit and Compliance Committee. The chairman
of the Business Risk Committee is a member of the Audit and Compliance Committee.
COMPANY SECRETARY
All directors have access to the advice and services of the Company Secretary and are entitled and authorised to seek
independent and professional advice about affairs of the Group at the Group’s expense. The Company Secretary is
responsible for the duties set out in Section 268G of the Companies Act. The certificate required to be signed in terms
of subsection (d) of the Companies Act (Act 61 of 1973), as amended, appears on page 55.
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41Datatec Annual Repor t 2002
FINANCIAL AND INTERNAL CONTROL
The Group’s internal control and accounting systems are designed to provide reasonable, but not absolute, assurance
as to the integrity and reliability of the financial information and to safeguard, verify and maintain accountability of
its revenue and assets. These controls are implemented by skilled company personnel.
The Group has implemented a system of control self-assessment across all Group companies. Local management is
required to complete and submit control self-assessment programmes bi-annually. Local management is monitored
against internal control norms in other Group companies and action is taken where ratings are considered to be
inadequate.
The external auditors review the self-assessment programmes to ensure objectivity and consistency of rating across the
Group. Ratings are also reviewed by the Audit and Compliance Committee.
Nothing came to the attention of the Board or arose out of the internal control self-assessment process or year end
external audits to indicate that any material breakdown in the functioning of the Group’s internal controls,
procedures and systems had occurred during the course of the year.
The Board is considering implementing an internal audit function during the year ahead to provide ongoing
assurance on effectiveness of internal controls.
MANAGEMENT REPORTING
The Group has established management reporting disciplines which include the preparation of annual budgets by
operating entities. Monthly results and the financial status of operating entities are reported against approved
budgets. Profit projections and cash flow forecasts are reviewed regularly, while working capital and borrowing levels
are monitored on an ongoing basis.
EMPOWERMENT AND EMPLOYMENT EQUITY
Datatec places particularly high value on the abilities and contributions made by employees in the development and
achievements of its businesses.
The Group is open to new partnerships that will increase shareholder value as well as plough back skills and resources
into the South African community.
Around the globe, the Group is an equal opportunities employer. In terms of the South African Employment Equity
Act, the Group strives to afford all staff members opportunities to realise their full potential and advance their careers.
The Group is committed to a working environment that is free from any discrimination and seeks to develop skills and
talent inherent in its work force.
The Group's social responsibility activities are detailed on pages 43 to 44.
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42 Datatec Annual Repor t 2002
ORGANISATIONAL INTEGRITY
The Group operates on a basis of decentralised management across numerous countries. All employees are
required to maintain the highest level of ethical standards in ensuring that the Group’s business practices are
conducted in a manner that, in all circumstances, is above reproach. A formal code of ethics will be implemented
during the 2003 financial year.
Datatec is actively enhancing its performance-driven culture of full disclosure and transparency in which individual
employees assume responsibility for the actions of the business. The integrity of new appointees in the selection and
promotion process is continuously assessed.
ENVIRONMENT
Datatec operates in an office based environment and is committed to conduct its operations in an environmentally
responsible manner in all the countries in which it operates.
The Group encourages recycling of paper and other materials and is mindful to save electricity, water and other
resources.
In light of the King II report, a formal environmental policy will be implemented during the 2003 financial year.
SHARE DEALINGS
No Group director or employee may deal, directly or indirectly, in Datatec shares or warrants on the basis of previously
unpublished, price-sensitive information.
Restrictions are imposed upon directors and senior management in the trading of Datatec shares and warrants and
upon all employees regarding the exercising of Datatec share options during certain “closed periods”. These closed
periods include those between the interim and financial year end dates (30 September and 31 March) and the interim
and financial year end reporting dates, when the financial results are published in the press.
SHAREHOLDER RELATIONS
Datatec’s investor relations programme includes communications with shareholders through interim and annual
reports, meetings and presentations.
GOING CONCERN
The directors’ assessment on the Group as a going concern is set out on page 55.
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43Datatec Annual Repor t 2002
Corporate Social Investment
WESTCON
Westcon’s policy is to make charitable donations in support of various causes for others in need. During fiscal 2002,
Westcon contributed to the American Red Cross, as well as making contributions to support the advancement of
treatments for conditions such as breast cancer and autism.
Each year, Westcon contributes to the Community Fund, a US local non-profit corporation that provides funding
and support for the health, education and welfare needs of its residents. The Community Fund provides support
to over twenty agencies concerned with health care, substance abuse, community services, mature adults,
counselling and youth.
Westcon also makes regular contributions to local police and firefighters. In Westchester County, New York, Westcon
employees are currently participating in projects of Habitat for Humanity, an American volunteer organisation that
provides housing assistance for under-privileged families.
LOGICAL
As a member of the Information Systems Research Centre at Cranfield School of Management, Logical is
working with leading IT companies and academics to co-sponsor research on success factors in technology-led
business change.
In addition, Logical's CEO makes presentations to assist numerous MBA students, while the company plays an active
part in a number of professional institutions in the Thames Valley area, participating in meetings and speaking at
conferences.
MASON
Mason participated in numerous events such as the Manchester to Blackpool Bike Ride and various marathons,
managing to raise several thousand pounds for charities. Mason also awarded a scholarship to an MSc graduate at
Salford University.
OTHER HOLDINGS
All the South African operations have committed themselves to a transformation process designed to minimise
barriers to employment equity. Plans were submitted to the Department of Labour during 2001. Significant progress
has been made towards achieving the plans' goals. Since most of our business interests exist outside SA, employment
equity plans are established on an individual entity basis.
The Datatec Education and Technology Trust was established in March 2000 with an initial grant allocation from the
Group of R10 million. The principal ideal of the Trust is to grow SA’s mathematics, science and technology talent,
with a primary focus on providing sustainable infrastructure dedicated to developing these skills. The Group believes
that this development, at grassroots level, provides a platform from which SA can build its expertise in fields such as
medicine, science and technology.
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44 Datatec Annual Repor t 2002
The Trust invested in three community-based projects:
• The Centre for Innovation, established at Hilton College in the Kwa Zulu-Natal Midlands, provides the
surrounding community with computer skills training and is utilised by Protec, a national organisation involved in
technology skills training within disadvantaged communities.
• The Maths Centre, a national initiative to improve mathematics education in state schools. It serves as a resource
base for the empowerment of teachers of mathematics and equips them with the necessary skills to improve their
profession.
• The Siyakhula Bridging School, situated in an economically depressed area between Ivory Park and Ebony Park,
aims at teaching basic computer literacy skills to local area residents, many of whom are unemployed.
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45Datatec Annual Repor t 2002
Remuneration Report
REMUNERATION AND NOMINATION COMMITTEE (“REMUNERATION COMMITTEE”)
The Board has delegated responsibility for the remuneration policy to the Remuneration Committee. The role of theRemuneration Committee is to establish the overall principles that determine the remuneration of the Group'smanagement and to determine the remuneration of the Group's executive directors. In compiling this report, theCommittee has taken into account the provisions and recommendations outlined in the King II Report.
The composition of the Remuneration Committee was amended during the year under review as follows:
For the period from 1 April 2001 to 6 December 2001, the Remuneration Committee comprised the followingmembers:
J F McCartney (Chairman)M J Lamberti*C S SeabrookeJ P Montanana
* M J Lamberti was chairman of the Remuneration Committee until 22 October 2001, the date of his resignation fromthe Board.
With the appointment of additional non-executive directors on 6 December 2001, the composition of theRemuneration Committee was amended as follows:
L Boyd (Chairman)J F McCartneyC S Seabrooke
The Chief Executive Officer and Group Financial Director may be invited to attend meetings of the RemunerationCommittee but neither may take any part in discussions regarding their own remuneration. External advisers are usedto provide information and advice as required.
REMUNERATION POLICIES
The Remuneration Committee operates a framework of policies, within which it has set the remuneration package foreach executive director.
The overall strategy of the Remuneration Committee is to ensure that executive directors and senior managers arerewarded for their contribution to the Group's operating and financial performance at levels which take account ofthe international IT industry, market and country benchmarks. In order to promote an identity of interest withshareholders, share incentives are considered to be critical elements of executive incentive policy.
The basic objective of the policies is that the executive directors should receive remuneration which is appropriate totheir scale of responsibility and performance and which will attract, motivate and retain individuals of the necessarycalibre. The underlying philosophy of the Remuneration Committee is to provide base pay at median levels bycomparison with relevant comparator companies internationally and to provide the potential for upper quartileearnings when corporate and individual performance justify it. In the application of its policy, the RemunerationCommittee has regard to the necessity of being competitive in the different parts of the world in which the Groupoperates, particularly the US and the UK.
SUMMARY OF REMUNERATION
The remuneration of the executive directors is made up of three main elements designed to balance long- and short-term objectives: a base salary, annual bonus plan with performance targets and a long-term incentive in the form ofan executive share option scheme. The last two elements are designed to encourage and reward superior performance
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Remuneration Report continued
46 Datatec Annual Repor t 2002
and to align the interests of the executive directors as closely as possible with the interests of the shareholders. Inaddition to these main elements, the executive directors also receive retirement and other benefits as outlined below.
Base salary
The base salary of the executive directors is subject to annual review and is set with reference to external market datarelating to comparable international companies based in the US and the UK, and individual performance is also takeninto consideration.
Annual bonus plan
All executive directors are eligible to participate in an annual bonus plan based on the achievement of short-termperformance targets set for each executive director. These targets include measures of corporate performance anddivisional performance (where applicable) and the achievement of individual objectives. These targets are reviewedannually by the Chief Executive with the Remuneration Committee. The bonus will not normally exceed 100% ofannual base salary.
Other benefits
Executive directors are entitled to pensions, the provision of car allowances or a fully-maintained car, medicalinsurance, death and disability insurance and reimbursement of reasonable business expenses. The total value ofbenefits received by each director is shown on page 50.
The Group contributes an amount of 10% of the executive directors' salary package for J P Montanana, R S Rindeland D B Pfaff in respect of retirement funding contributions. Westcon contributed an amount of $2 000 for A M Smithto the US Statutory 401K Retirement Savings Programme. Logical contributes an amount of 25% of S F Lawrence'sbase salary in lieu of all benefits.
SHARE OPTION SCHEMES
The Group operates a number of share option schemes as follows:
• The Datatec Share Option Scheme
• The Westcon Group, Inc. Share Option Plan
• The Logical Group Senior Management Share Option Scheme
• The Mason Employee Benefit Trust
The Datatec Share Option Scheme (“the Datatec Scheme”)
The Datatec Scheme is available to all employees and directors of the Group. The Remuneration Committee, with theapproval of the Board, grants options to employees and directors of Group companies at a price equal to the 30 dayclosing market price prior to the date of such grant less a 15% discount (always subject to a minimum price of 200 cents).
The number of options available in terms of the Datatec Scheme amounts to 18 000 000 (approximately 13.1% of theissued share capital), with the maximum number of share options available to any one participant being limited to1 000 000 (approximately 0.7% of the issued share capital). Options vest over a period of four years from the date onwhich the option is granted, at the rate of 25% per annum at each anniversary of the date of grant. Options are eligibleto be exercised within five years of being granted, unless such option lapses through the death or termination ofemployment of the option holder.
Various amendments to the Datatec Scheme are to be proposed at the Annual General Meeting, the details of whichappear in the Notice to Members on pages 96 to 100.
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47Datatec Annual Repor t 2002
As at 31 March 2002, 5 013 433 (2001: 4 437 487) share options had been exercised since the original grants and11 626 398 (2001: 10 963 876) share options had been granted but not yet exercised as follows:
Number of Option priceNumber of holders options per share
1 494 7 564 448 R10 – R20114 616 543 R20 – R30370 1 325 082 R30 – R40452 1 799 350 R40 – R5054 123 425 R50 – R6026 46 400 R60 – R7027 43 800 R70 – R8030 102 350 R80 – R901 5 000 R90 – R100
2 568 11 626 398
As set out in the 2001 annual report (after consultation with major shareholders) the Board agreed, in terms of theauthority granted to them in the Datatec Scheme, to allow employees to elect to either have their existing optionslapse and receive new options at a new grant price based on the formula in the Datatec Scheme rules for the samenumber of options, or to remain with their existing options. This process was completed during January 2002, and718 employees elected to allow their existing options to lapse and received 3 296 673 new options at a grant price ofR10.96 per option. 263 employees elected to retain their existing 1 206 089 options at various grant prices. Thecancellation and re-issue did not apply to Westcon employees, certain of the SA subsidiaries disposed of and to Datatecdirectors other than S F Lawrence.
Westcon Group, Inc. Stock Option Plan (“the Plan”)
As noted in the 2000 and 2001 annual report, Westcon was in the process of implementing an executive shareincentive scheme.
The Plan provides for grants of incentive stock options and non-qualified stock options and is available to all directors, officers, employees, consultants, contractors and advisors of Westcon and its subsidiaries. The Plan isadministered by Westcon’s Compensation Committee, which is appointed by the board of directors of Westcon andconsists of three members of the board of directors. The current Compensation Committee members areJ P Montanana, D B Pfaff and C S Seabrooke, all non-executives of Westcon. Pursuant to the Plan, the CompensationCommittee is empowered to determine: the option recipients, the option price (provided it is at least fair market valueon the grant date), the number of shares subject to the option and the option term.
The number of shares that may be issued under the Plan is 4 660 000 shares of common stock of Westcon(approximately 10% of the issued share capital). Options are eligible to be exercised within ten years of the grant dateunless such option lapses through the death or termination of employment of the option holder.
454 350 non-qualified options (approximately 1% of the issued share capital) were granted on 1 July 2001 to A M Smith pursuant to the following terms: option price – $6.40 (a valuation of Westcon of approximately $300 million);option term – maximum of ten years; option vests – (i) on the date of issuance with respect to 33% of the shares subjectto the Option; and (ii) at the expiration of each three month period thereafter with respect to 9% of the shares subjectto the Option until the Option may be exercised in full; provided however, that in the event of a change in control ofWestcon, on the date immediately preceding such change in control 100% of the shares subject to the Option may beexercised. For purposes of the Plan, “change in control” is defined as the sale of substantially all the assets of Westcon
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48 Datatec Annual Repor t 2002
or its parent to a bona fide unaffiliated third party or a change of 35% of the shareholders of Westcon or 40% of theboard of directors of Westcon. In the event that the Optionee’s employment or service is terminated earlier by death,the Option will be exercisable immediately in accordance with the Plan.
The Compensation Committee has approved the granting of 2 211 400 share options to 310 employees(approximately one third of Westcon’s current workforce) pursuant to the following terms: option price – $6.40 (a valuation of Westcon of approximately $300 million); option term – maximum of ten years; option vests over a threeyear period as to 33% one year after the date of grant and at the expiration of each three month period thereafter withrespect to 9% of the shares subject to the option. Options are only exercisable in the event of an IPO and terminatewithin three years of grant in the event that an IPO does not occur. These options have a grant date of October 1, 2001.A M Smith was granted a further 250 000 options in respect of this grant and J F McCartney is to receive 200 000 options.
The Logical Group Senior Management Share Option Scheme (“the Logical Scheme”)
As noted in the 2000 and 2001 annual report, an executive share incentive scheme was in the process of beingimplemented in Logical. This scheme amounted to 10% of the capital of the Logical group of companies of whichabout 7.5% was to be issued. With the introduction of new management in Logical and the creation of a holdingcompany, Logical Group Limited (“LGL”), the Logical Scheme has been amended through the introduction of anEmployee Benefit Trust which is administered by independent Trustees in Jersey.
In terms of the Logical Scheme, LGL is to issue to the Trust 7 200 000 Logical shares (equal to 10% of the issued sharecapital of Logical) at a valuation of Logical of $100 million. The Trust will grant options over these shares to thevarious participants.
The Logical Scheme is available to the top forty or so of the senior managers (on a worldwide basis) within Logical.The Datatec Remuneration Committee recommends to the Trustees the identities of the grantees and the prices atwhich options are exercisable. Options amounting to 5% of the issued capital are to be granted at an exercise priceof $1.39 (equivalent to a valuation of Logical of $100 million). 1 080 000 options (approximately 1.5% of the issuedshare capital) are to be issued to S F Lawrence at a price of $1.39 per ordinary share.
Options vest over a period of two years from the date of grant, with 33.33% vesting on the date of grant and a further33.33% vesting on each of the two subsequent anniversaries of such date of grant. Any further grants of options willbe done at market value at the time, subject to a minimum valuation of $100 million, such market value to bedetermined by the auditors.
Options are exercisable in the event of a trade sale of the Logical business, the flotation of Logical, the sale by Datatecof the majority of its shares in Logical (only a similar proportion as sold by Datatec), the occurrence of certainstatutory events in relation to Logical and a long-stop date being reached (30 June 2005). In the event that the long-stop date is reached, the options are to be exercised and subsequently converted into Datatec shares according to apre-determined formula (subject to the approval of, inter alia, the JSE Securities Exchange South Africa andshareholders in general meeting, to the extent required). This pre-determined formula is based on an independentvaluation of Logical, which valuation is limited to the P:E multiple of Datatec at the time. In the event that the P:Emultiple is zero or less than zero, an independent valuation of Datatec will be performed.
Options lapse through the termination of the employment of the relevant option holder. Vested options may beexercised by a personal representative in the case of the death of the option holder.
The Mason Employee Benefit Trust (“the Mason EBT”)
The Mason EBT is available to all employees of the Group and was established on 13 March 1998, prior to theacquisition of Mason by the Group.
Options are granted at the discretion of the board of Mason as a means of retaining key members of staff andrewarding good performance.
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49Datatec Annual Repor t 2002
The options are held in an Employee Benefit Trust which is administered by the Royal Bank of Canada, anoffshore trust.
The number of options available in terms of the Mason scheme amounts to 1 103 000 (approximately 10% of theissued share capital).
Options are eligible to be exercised within ten years of being granted, or on either the 100% sale of Mason or as aresult of a public listing of the company, unless such option lapses through the death or termination of employmentof the option holder.
At present, 835 515 share options have been granted but not yet exercised as follows:
Number of holders Number of options Option price per share
25 59 436 £0 – £0.5038 372 100 £0.51 – £1.0086 403 979 £2.00 – £2.50
149 835 515
The collapse of technology stock prices, specifically in the telecommunications sector and Mason’s peer companies,has resulted in the value of Mason falling dramatically. Based on an independent valuation performed, the Masonboard and the Datatec Remuneration Committee approved the repricing of the 403 979 options, originally granted ata price of £2.30, to a new grant price of £1.32. In addition, Datatec is in discussions with the Trustees of the EBTregarding a realisation mechanism for the EBT. Details of these discussions are set out in the commitments note (note22 of the annual financial statements on page 85).
NON-EXECUTIVE DIRECTORS
L Boyd was appointed non-executive chairman on 6 December 2001 and receives a fee of $75 000 per annum.
J F McCartney is the non-executive deputy chairman and will be appointed the non-executive chairman of Westconduring the 2003 financial year, and receives a fee of $62 000 per annum.
With effect from 6 December 2001, each other non-executive director is paid a fee of $40 000 per annum. Non-executive directors, who are members of a committee of the Board, are paid an additional sum of $5 000 per annumin respect of each committee of which they are members.
The remuneration of the non-executive directors is determined by the board of directors as a whole, and is subject tothe approval of shareholders at the Annual General Meeting.
EXTERNAL APPOINTMENTS
Subject to the approval of the Board, executive directors are permitted to hold a directorship in one non-group listedcompany and to retain the fees payable from this appointment.
DIRECTORS’ SERVICE CONTRACTS
In order to properly reflect their spread of responsibilities, J P Montanana, R S Rindel and D B Pfaff have contractswith Datatec International Holdings Limited and Datatec Management Services (Pty) Limited. Other than is set outhereunder, the employment contracts of all executive directors are terminable at three months notice by either party. A M Smith has a contract with Westcon Group, Inc. with a fixed term expiring on 31 December 2004 exclusive of a sixmonth notice provision. S F Lawrence has a contract with Logical Group Services Limited that is terminable at sixmonths notice by either party.
All the non-executive directors have letters of appointment with Datatec and/or Datatec International Holdings fora period of three years from their date of appointment.
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50 Datatec Annual Repor t 2002
DIRECTORS’ EMOLUMENTS
The following tables set out an analysis of the pre-tax remuneration, including bonuses for individual directors whoheld office during the years ended 31 March 2001 and 2002 in the Group. The Remuneration and NominationCommittee has approved the directors’ emoluments.
Basic salary Bonus Fees Benefits Total Total#2002 $ $ $ $ $ Rand
Executive directorsJ P Montanana 623 081 311 296 – 127 311 1 061 688 10 218 853R S Rindel 284 522 142 260 – 44 887 471 669 4 539 861J S James* 113 410 51 948 – 17 138 182 496 1 756 542S F Lawrence 358 617 80 689 – 89 654 528 960 5 091 293D B Pfaff~ 111 149 29 732 – 12 790 153 671 1 479 099A M Smith~ 308 712 125 000 – 4 951 438 663 4 097 332†
Total executive directors 1 799 491 740 925 – 296 731 2 837 147 27 182 980
Non-executive directorsL Boyd ~ – – 24 000 – 24 000 231 002C B Brayshaw ~ – – 13 500 – 13 500 129 939C M L Savage ~ – – 15 000 – 15 000 144 377M J Lamberti* – – 13 091 – 13 091 126 002M Karpul – – 49 870 – 49 870 480 004C S Seabrooke – – 49 870 – 49 870 480 004J F McCartney – – 72 000 – 72 000 693 007
Total non-executive directors – – 237 331 – 237 331 2 284 335
Total directors’ emoluments 1 799 491 740 925 237 331 296 731 3 074 478 29 467 315
# converted at a weighted average rand/dollar exchange rate of R9.6251 for the year ended 31 March 2002* resigned during the 2002 financial year~ appointed during the 2002 financial year† converted at a weighted average rand/dollar exchange rate of R9.3405, being the Westcon conversion rate
Westcon entered into a restraint of trade agreement with A M Smith on 1 July 2001. In terms of this agreement the restraint is for aperiod of eighteen months after the last day of A M Smith’s employment with Westcon and an amount of $2 million is to be paid tohim over a period of time, as follows: the first payment of $500 000 was made during July 2001, and the second payment of$214 286 was made to him during September 2001. Thereafter payments of $214 286 will be made to him in March and Septembereach year, with the last payment due on 1 September 2004. The amount of $714 286 paid to him during the 2002 financial year isnot included in the table of emoluments above.
Where a director was a director for part of the financial year, only the portion of his salary or fees for the time that he has been adirector has been included in the table above. A M Smith was appointed on 17 July 2001 and D B Pfaff was appointed on 1 July2001. L Boyd, C B Brayshaw and C M L Savage were appointed on 6 December 2001. J S James resigned on 6 December 2001 andM J Lamberti resigned on 22 October 2001.
All directors’ emoluments have been paid by subsidiaries of Datatec Limited.
J P Montanana received a relocation allowance of $70 000 during the year to assist in his relocation from the US to the UK. Thisallowance is not included in the table of emoluments above.
Fees paid to M J Lamberti, C S Seabrooke and M Karpul were paid to Ratelimb (Pty) Limited, Sabvest Financial Services (Pty)Limited and Korbitec (Pty) Limited (50% of the fees) respectively.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 51
51Datatec Annual Repor t 2002
Basic salary Bonus Fees Benefits Total Total#
2001 $ $ $ $ $ Rand
Executive directors
J P Montanana 624 798 616 877˜ – 64 527 1 306 202 9 599 540
R S Rindel 265 740 548 360˜ – 28 948 843 048 6 195 728
J S James * 244 472 33 418 – 14 930 292 820 2 151 993
M Karpul 32 657 1 234 638˜ – – 1 267 295 9 313 604
S F Lawrence 153 350 168 685 – 38 338 360 373 2 648 453
D B Pfaff = – – – – – –
A M Smith= – – – – – –
Total executive directors 1 321 017 2 601 978 – 146 743 4 069 738 29 909 318
Non-executive directors
L Boyd = – – – – – –
C B Brayshaw = – – – – – –
C M L Savage = – – – – – –
M J Lamberti * – – – – – –
C S Seabrooke – – 21 771 – 21 771 160 000
J F McCartney – – 100 000 – 100 000 734 920
Total non-executive
directors – – 121 771 – 121 771 894 920
Total directors ‘
emoluments 1 321 017 2 601 978 121 771 146 743 4 191 509 30 804 238
# converted at a weighted average rand/dollar exchange rate of R7.3492 for the year ended 31 March 2001
˜Special incentive bonuses relating to the sale of UUNET SA are included in these amounts as follows:
J P Montanana $544 277
R S Rindel $517 063
M Karpul $1 224 623
* resigned during the 2002 financial year
= appointed during the 2002 financial year
The 2001 emoluments only reflect the emoluments of directors that were directors of the company during the 2002 financial year.
For this reason the total remuneration above does not agree to the directors’ emoluments for 2001 on page 72.
Where a director was a director for part of the financial year, only the portion of his salary or fees for the time that he has been a
director has been included in the table above. S F Lawrence was appointed on 7 November 2000.
All directors’ emoluments have been paid by subsidiaries of Datatec Limited.
Fees paid to C S Seabrooke were paid to Sabvest Financial Services (Pty) Limited.
Remuneration Report continued
52 Datatec Annual Repor t 2002
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DIRECTORS’ SHARE INTERESTS
The interests of directors who held office at 31 March 2002 in ordinary shares of the company were as follows:
Direct Indirect 2002 Beneficial Beneficial Non-beneficial Total
Executive directors
J P Montanana 5 249 955 345 000 – 5 594 955R S Rindel 44 500 – 62 057 106 557J S James* – – – –
S F Lawrence 45 000 – – 45 000D B Pfaff – – – –
A M Smith – – – –
Non-executive directors
L Boyd – – – –
C B Brayshaw – – – –
C M L Savage – – – –
M J Lamberti* – – – –
M Karpul 355 200 – – 355 200C S Seabrooke – 300 000† – 300 000J F McCartney 233 000 – – 233 000
5 927 655 645 000 62 057 6 634 712
2001Executive directors
J P Montanana 1 149 955 4 370 000 – 5 519 955R S Rindel 44 500 – 62 057 106 557J S James* 5 200 – – 5 200M Karpul 355 200 – – 355 200S F Lawrence 45 000 – – 45 000D B Pfaff – – – –
A M Smith – – – –
Non-executive directors
L Boyd – – – –
C B Brayshaw – – – –
C M L Savage – – – –
M J Lamberti* – – – –
C S Seabrooke – 300 000 – 300 000J F McCartney 233 000 – – 233 000
1 832 855 4 670 000 62 057 6 564 912
* resigned during the 2002 financial year
†The only movement in the interests of directors since the year end was the disposal of these shares on 23 and 24 May 2002.
53Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 53
DIRECTORS’ DATATEC SHARE OPTIONS
Optionsheld at Granted Exercised Options
Issue beginning during and held atDirectors at year end date of year the year Price paid year end
J P Montanana 1997-04-15 100 000 – 15.56 – 100 000 2000-11-12 200 000 – 35.46 – 200 000 2001-12-10 – ~ 700 000 10.96 – 700 000
300 000 700 000 – 1 000 000
R S Rindel 1997-04-15 17 500 – 15.56 – 17 500 1997-10-29 35 000 – 14.25 – 35 000 2000-11-12 70 000 – 35.46 – 70 000 2001-12-10 – ~ 410 000 10.96 – 410 000
122 500 410 000 – 532 500
S F Lawrence ^ 2001-12-10 228 000 – 10.96 – 228 000
228 000 – – 228 000
D B Pfaff 2001-12-10 – 200 000 10.96 – 200 000
– 200 000 – 200 000
A M Smith 1998-12-01 30 000 – 31.40 – 30 000 1999-07-08 30 000 – 42.85 – 30 000
60 000 – – 60 000
M Karpul 1997-04-15 37 500 – 15.56 – 37 500 1999-09-28 50 000 – 28.75 – 50 000 2000-11-12 40 000 – 35.46 – 40 000
127 500 – – 127 500
C S Seabrooke 1997-10-29 40 000 – 14.25 – 40 000 2002-03-14 – √80 000 18.06 – 80 000
40 000 80 000 – 120 000
J F McCartney 2002-03-14 – √125 000 18.06 – 125 000
– 125 000 – 125 000
Total 878 000 1 515 000 – 2 393 000
^ These options were cancelled and re-issued during the 2002 financial year as set out on page 47.~ These options were granted to such directors during the year as a result of the conversion of their interests in the Westcon, Logical
and Mason share schemes into Datatec options as set out in the press announcement dated 18 October 2001.√ The granting of these options is subject to ratification by shareholders at the Annual General Meeting.
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Index to the Annual Financial Statements
54 Datatec Annual Repor t 2002
Board Approval 55
Certificate by Secretary 55
Report of the Independent Auditors 56
Directors’ Report 57
Group Accounting Policies 62
Income Statements 66
Balance Sheets 67
Statements of Changes in Equity 68
Cash Flow Statements 69
Notes to the Cash Flow Statements 70
Notes to the Annual Financial Statements 72
Annexure 1 – Subsidiary Companies and Joint Venture 91
Annexure 2 – Associated Companies 93
Annexure 3 – Investments 94
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Board Approval
55Datatec Annual Repor t 2002
The annual financial statements for the year ended 31 March 2002 are prepared in accordance with GenerallyAccepted Accounting Practice as applied in the Republic of South Africa and incorporate appropriate and responsibledisclosure together with appropriate accounting policies.
The directors are responsible for the maintenance of adequate accounting records, the preparation and integrity ofthe annual financial statements and all related information. The directors are also responsible for the systems ofinternal control which are designed to provide reasonable, but not absolute, assurance as to the reliability of thefinancial statements and to adequately safeguard, verify and maintain accountability of assets and to prevent anddetect material misstatement and loss.
The directors believe that the Group has adequate resources to continue in operation for the foreseeable future andaccordingly the financial statements have been prepared on a going concern basis.
The annual financial statements which appear on pages 57 to 94 were approved by the board of directors on 17 July2002 and are signed on its behalf by:
J P Montanana R S Rindel D B PfaffChief Executive Officer Executive Director Executive Director
(Group Finance Director (Group Finance Directorfrom 1 April 2001 to 31 May 2002) from 1 June 2002)
Certificate by Secretary
In terms of section 268G(d) of the Companies Act (Act 61 of 1973), as amended (“Act”), I certify that for the year
ended 31 March 2002, Datatec Limited has lodged with the Registrar of Companies all such returns as are required
of a public company in terms of the Act.
Further, that such returns are true, correct and up to date.
I P DittrichSecretary
> for the year ended 31 March 2002
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Report of the Independent Auditors
56 Datatec Annual Repor t 2002
To the members of Datatec Limited
We have audited the annual financial statements and Group annual financial statements of Datatec Limited, set out
on pages 57 to 94, for the year ended 31 March 2002. These financial statements are the responsibility of the
company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.
SCOPE
We conducted our audit in accordance with statements of South African Auditing Standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material
misstatement. An audit includes:
• examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements;
• assessing the accounting principles used and significant estimates made by management; and
• evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
AUDIT OPINION
In our opinion, the financial statements fairly present, in all material respects, the financial position of the company
and the Group at 31 March 2002 and the results of their operations and cash flows for the year then ended in
accordance with Statements of Generally Accepted Accounting Practice as applied in the Republic of South Africa,
and in the manner required by the Companies Act of South Africa.
Deloitte & ToucheChartered Accountants (SA)
Registered Accountants and Auditors
Sandton
17 July 2002
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Directors’ report
57Datatec Annual Repor t 2002
PROFILE AND GROUP STRUCTURE
Datatec and its subsidiaries (“the Group”) is an international IT networking and services group with operations in
many of the world's leading economies. The Group's main lines of business comprise the global distribution of
advanced networking and communication products (“Westcon”), professional services and IT network integration
(“Logical”) and strategic telecommunications consulting (“Mason”). The Group also has a number of other interests
in SA, which are included with the Group Head Office under Other Holdings. These interests include Westcon AME
(operating in Africa and the Middle East), a 47.5% interest in Affinity Logic and a 79.1% interest in RangeGate
(operating in SA and the UK).
GROUP FINANCIAL RESULTS
Commentary on the Group financial results is given in the Finance Report on pages 30 to 36. Full details of the
financial position and financial results of the Group are set out in the annual financial statements on pages 57 to 94.
SHARE CAPITAL
Authorised share capital
The authorised share capital of the company is made up of R2 000 000, divided into 200 000 000 ordinary shares of
one cent each.
Issued share capital
As at 31 March 2002, the issued share capital is made up of R1 373 819,23 divided into 137 381 923 ordinary shares
of one cent each.
Share capital issued during the year ended 31 March 2002
During the year, 8 680 251 shares were issued, primarily to finance acquisitions, to fund the Group's working capital and
capital expenditure requirements and to settle shares issued in terms of The Datatec Group Share Option Scheme.
During the year the following shares were issued for cash:
– 3 000 000 shares at R18.60 per share; and
– 5 000 000 shares at R20.00 per share.
The authorised and issued share capital of the company, and full details of the movement in share capital, have been
reflected in the statements of changes in equity on page 68 in the annual financial statements.
DIRECTORS
Details of the current board of directors appear on pages 6 and 7 and page 101. M J Lamberti and J S James resigned
from the Board on 22 October 2001 and 6 December 2001 respectively. D B Pfaff and A M Smith were appointed to
the Board on 1 July 2001 and 17 July 2001 respectively. L Boyd, C B Brayshaw and C M L Savage were appointed to
the Board on 6 December 2001. There were no other changes in the composition of the Board.
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58 Datatec Annual Repor t 2002
All directors, including non-executive directors, are required, in terms of the company’s Articles of Association, to
retire and offer themselves for re-election at least every three years. All directors are subject to re-election by
shareholders at the first opportunity after their appointment in addition to re-election at least every three years.
Messrs Boyd, Brayshaw, Seabrooke and Savage retire at the forthcoming Annual General Meeting and, being eligible,
offer themselves for re-election.
More details on the directors and their interests are provided in the Remuneration Report set out on pages 45 to 53.
INVESTMENTS, ASSOCIATES, SUBSIDIARIES AND JOINT VENTURES
Financial information relating to the Group's investments and interests in subsidiaries, associates, investments and
joint ventures is contained in notes 10, 12 and 13 as well as Annexures 1 to 3 to the annual financial statements.
ACQUISITIONS
The following significant acquisitions were concluded during the year under review:
Pursuant to an agreement dated 8 June 2001 (“the Agreement”) RangeGate Mobile Solutions Limited (“RangeGate”)
acquired the Task Management System computer software programme (“the Programme”) and certain assets from
Symbol Technologies Limited and Symbol Technologies Inc. (collectively “Symbol”) for an initial consideration of
£57 034 together with further payments of 33% of all licence fees received by RangeGate for licences sold and
collected by it in respect of the Programme. These payments in respect of the licence fees continue for a period of
four years or until a total aggregate amount of $2 million has been paid. In addition, Datatec has provided a guarantee
limited to $1 million to Symbol in respect of RangeGate’s other obligations under the Agreement.
Westcon AME acquired, with effect from 30 June 2001, the entire issued share capital of, and shareholders’ claims
against, On Line Distribution Limited, a Dubai-based networking distribution company, for an initial consideration of
$2.43 million, plus a further amount of up to $1.92 million to be paid in the event of the achievement of certain profit
milestones over the twelve-month period ending 30 April 2002. This amount was finalised during May 2002 and an
amount of R15 million ($1.3 million) was paid to the vendors.
Datatec acquired, on 17 July 2001, an additional 5% of Westcon Group, Inc. from the original founders of Westcon
and certain other shareholders, for an amount of $22 million. In addition, during the period Datatec exercised its
rights under the original sale agreements entered into between Datatec and certain members of Westcon's senior
management and repurchased the 2.25% of equity capital of Westcon sold to such members during the 2000 financial
year. The consideration for such repurchase was (in each case) cancellation of the loan amount (together with any
accrued interest) owed by the relevant member to Datatec which was created at the time of the original purchase of
such equity capital by such member. As a result of these acquisitions Datatec increased its investment in Westcon from
85.3% to 92.5%.
Datatec, together with Primedia Limited, entered into a scheme of arrangement during November 2001 in
terms of which the minority shareholders’ shareholdings in Metropolis* were acquired by Datatec and
Primedia at a price of 40 cents per Metropolis* share. Metropolis* has since been delisted and Datatec’s
interest amounts to 28.6% of Metropolis*.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 59
59Datatec Annual Repor t 2002
DISPOSALS
Datatec, with effect from 1 April 2001, disposed of 20.9% of RangeGate to certain members of RangeGate’s
management for an amount of R1.58 million.
With effect from 11 June 2001, the Group disposed of, for an amount of R1.6 million, the business of Datasoft Logical
(Pty) Limited that, since the disposal of the South African Logical business, was no longer core to the South African
based Datatec subsidiaries. The disposal agreement was drawn up under SA law and contains warranties that are
considered normal for disposals of this nature.
With effect from 28 June 2001, the Group disposed of its interest in Network I Limited, based in the UK. The sale,
made to a consortium of incumbent management and external investors, was for an amount of £0.75 million,
including a dividend payment of £0.1 million. In the event that Network I is sold to a third party at a later date, a
further £0.25 million will accrue to the Group. The disposal agreement was drawn up under UK law and contains a
warranty in respect of ownership of the shares.
As set out in the 2001 annual report, the Group has disposed of its investment holding in Korbitec Holdings (Pty)
Limited for an amount of R4 million to existing Korbitec shareholders. The disposal agreement was drawn up under
SA law and contains a warranty in respect of ownership of the shares. Certain of these shareholders (Messrs
Montanana, Karpul and Seabrooke, directors of Datatec), constitute related parties and duly declared their interest.
The approval of the JSE Securities Exchange South Africa was obtained prior to the disposal.
On 28 September 2001, Logical Group Limited disposed of its Swiss subsidiary Logical Solutions AG, for an amount
of CHF 1 plus 10% of the proceeds realised in the event of a future sale of the company. Logical Solutions AG was loss
making and focused on packaged applications, such as Broadvision, and desktop services. The company was disposed
of as its focus was not consistent with the Group's strategic direction. The disposal agreement was drawn up under
Swiss law and contains a warranty in respect of ownership of the shares.
On 20 December 2001, Logical Group Limited disposed of its loss making French subsidiary Logical France SA and
its 100% subsidiary Logical Systems SA for an amount of EUR1 000. Logical Systems SA was focused on desktop
product supply and support. Logical France SA was disposed of as the business was not consistent with Logical’s
strategic direction. The disposal agreements were drawn up under French law and contain limited warranties that
expire on 19 December 2002 and warranty claims cannot exceed EUR152 450 in the aggregate.
SPECIAL RESOLUTIONS OF THE GROUP
During the year, RangeGate (Pty) Limited increased its authorised share capital from R1 000 to R10 000 and
Logical Group Limited increased its authorised share capital from £32 million to £80 million.
CORPORATE GOVERANCE COMPLIANCE STATEMENTS
A statement on the Group's corporate governance policies and procedures is set out on pages 37 to 42.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 60
Directors’ report continued
60 Datatec Annual Repor t 2002
EXTERNAL AUDITORS
Deloitte & Touche have expressed their willingness to continue in office as external auditors of the Group and a
resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting in accordance with
section 270 of the Companies Act.
STRATE (Share Transactions Totally Electronic)
As set out in the 2001 annual report, the company's shares were dematerialised on 25 September 2001 by the JSE
Securities Exchange South Africa. Electronic trading of the company's shares commenced on 15 October 2001, details
of which were sent to shareholders in August 2001.
SHARE OPTION AND MANAGEMENT INCENTIVE SCHEMES
Details of the Group's share option and other management incentive schemes are set out in the Remuneration Report
on pages 45 to 53.
EVENTS OCCURRING SUBSEQUENT TO THE YEAR-END
Landis
Pursuant to a sale and purchase agreement dated 25 April 2002, as varied by a supplemental agreement dated 14 May
2002 (“the Agreement”), Westcon Group European Operations Limited (“Westcon Europe”), a subsidiary of Westcon
Group, Inc., purchased the European computer networks equipment distribution business of Landis Group NV (“the
Business”) for a total consideration of EUR6 617 883. Completion of this transaction took place on 15 May 2002. The
Business is carried on in The Netherlands, Belgium, Germany, France, Norway, Sweden, Denmark, Spain and Austria.
Westcon Europe obtained an abbreviated set of warranties in relation to this transaction from Landis Group NV but
a substantial amount of the purchase price is to remain in escrow as security for the proper discharge by Landis Group
NV of its obligations under the Agreement.
Westcon has assumed no liabilities in respect of the Business other than in respect of the employees of the Business.
Westcon has estimated an amount in respect of the costs of any restructuring of the workforce of the Business which
may need to be carried out and has set aside such amount in terms of the Agreement.
Westcon has received restrictive covenants in the usual form from Landis Group NV and its affiliates to the effect that,
inter alia, such persons will not carry on any business in competition with the Business during a period of three years
after the date of the Agreement.
Affinity Logic Holdings (Pty) Limited (“Affinity Logic”)
Subject to the approval of the Competition Commission, Datatec is to increase, without cost, its investment in Affinity
Logic from its current holding of 47.5% to 55.2%, through the disposal by Wooltru Limited (“Wooltru”) of its 33.2%
interest in Affinity Logic as a result of the unbundling of Wooltru. The management of Affinity Logic have acquired
the balance of Wooltru's interest (25.5%) for an amount of R6.69 million. Datatec has advanced such amount to the
management of Affinity Logic to enable them to acquire these shares, which amount bears interest and is repayable
at the end of a period of three years.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 61
61Datatec Annual Repor t 2002
ANNUAL GENERAL MEETING (“AGM”)
The AGM will be held at 14h00 on 30 September 2002 in the auditorium at Building 8, Harrowdene Office Park,
Western Service Road, Woodmead, Sandton, Republic of South Africa. In addition to the ordinary business of the
meeting, as special business, shareholder consent will be sought to:
(a) authorise directors to repurchase the company shares from time to time according to certain guidelines;
(b) ratify the grant of options on 14 March 2002 to Messrs J F McCartney and C S Seabrooke, non-executive directors
of the company; and
(c) amend the Articles of Association of the company to allow for the electronic communication of proxies and notices.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 62
Group Accounting Policies
62 Datatec Annual Repor t 2002
BASIS OF ACCOUNTING
The company’s annual financial statements and Group annual financial statements set out on pages 57 to 94 havebeen prepared on the historical cost basis and incorporate the following principal accounting policies, prepared inaccordance with Statements of Generally Accepted Accounting Practice as applied in the Republic of South Africa,which have been consistently applied in all material respects, with the exceptions of those noted in the accountingpolicies that follow. The principal accounting policies adopted are set out below.
CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the company and enterprises controlledby the company up to 31 March each year, with the exception of Westcon Group, Inc. which is consolidated for thetwelve month period to 28 February each year. Control is achieved where the company has the power to govern thefinancial and operating policies of an investee enterprise so as to obtain benefits from its activities.
The Group annual financial statements incorporate the annual financial statements of the company and itssubsidiaries, associates and joint venture. The operating results of these entities have been included from theeffective dates of acquisition to the effective dates of disposal. All significant inter-company transactions andbalances have been eliminated.
ASSOCIATES
Associates are those enterprises in which the Group holds a long-term equity interest, and over which it has the abilityto exercise significant influence and which are neither subsidiaries nor joint ventures.
Associates are accounted for on the equity method in the Group financial statements as from the date on which theybecome investees.
Provision is made when, in the opinion of the directors, there has been an impairment in the carrying value of aninterest in an associate.
Unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.
JOINT VENTURES
Joint ventures are those companies where there is a contractual agreement in terms of which the Group and one ormore venturers undertake an economic activity subject to joint control.
Such joint ventures are accounted for using the proportionate consolidation method. The proportionate share ofassets, liabilities, income and expenses of the joint venture are brought into account in the Group annual financialstatements on a line-by-line basis. Inter-company transactions are eliminated.
INVESTMENTS
Investments are stated at cost to the Group, unless an impairment in the value of the investment has occurred. In thesecircumstances, the investment is stated at its written down value. Income from investments is brought to account onlyto the extent of dividends received or declared.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment have been stated at historical cost, less accumulated depreciation. In accordance withrevised accounting standards, owner occupied properties are stated at historical cost and are depreciated. This is notconsistent with prior financial periods. The prior year amounts have not been restated as the effect of this revisedaccounting policy is immaterial.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 63
63Datatec Annual Repor t 2002
Depreciation is calculated based on historical cost using the straight-line method over the estimated useful lives ofthe assets.
The basis of depreciation to be provided on property, plant and equipment is as follows:
Number of years over which to be written off
Computer equipment and software 2 – 6Leasehold improvements period of the leaseOffice furniture and equipment 2 – 6Motor vehicles 2 – 4Owner occupied properties 20
INTANGIBLES
Goodwill, comprising the excess of the cost of shares in subsidiaries, associates and joint ventures over their net assetvalue at the date of acquisition, is written off over its useful life, not exceeding seven years.
Other intangible assets, comprising trademarks, tradenames, patents and other intellectual property purchased by theGroup, are treated in the same manner as goodwill.
IMPAIRMENT
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determinewhether there is any indication that those assets have suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where itis not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amountof the cash-generating unit to which the asset belongs.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, itscarrying amount is reduced to its recoverable amount. Impairment losses are recognised as an expense immediatelyand are treated as exceptional items.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit isincreased to the revised estimate of its recoverable amount. This is done so that the increased carrying amountdoes not exceed the carrying amount that would have been determined had no impairment loss beenrecognised in prior years. A reversal of an impairment loss is recognised as income immediately and treated asan exceptional item.
AMOUNTS OWING TO VENDORS
Amounts owing to vendors represent purchase considerations owing in respect of acquisitions. Amounts owing arerecognised once there is sufficient assurance that the suspensive conditions will be met and the amounts can bemeasured reliably. Amounts potentially owing where the suspensive conditions have not been met are disclosed ascontingent liabilities.
LEASED ASSETS
Assets leased in terms of agreements, which are considered to be finance leases, are capitalised. Capitalised leasedassets are depreciated at the same rate and on the same basis as equivalent owned assets. Lease finance charges areamortised over the duration of the leases, using the effective interest rate method.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 64
Group Accounting Policies continued
64 Datatec Annual Repor t 2002
INVENTORIES
Inventories, comprising merchandise for resale and raw materials, are stated at the lower of cost and net
realisable value and are primarily valued on the average cost basis.
Provision is made for obsolete and slow-moving inventory.
Contract work in progress is recognised on the percentage of completion method by reference to the milestones set
out in each contract.
DEFERRED TAXATION
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will
be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill (or negative goodwill).
Deferred tax liabilities are recognised for temporary taxable differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the
liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited
or charged directly to equity, in which case the deferred tax is also dealt with in equity.
FOREIGN CURRENCY TRANSACTIONS
Transactions in currencies other than the South African Rand are initially recorded at the rates of exchange ruling
on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the
rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.
Where appropriate, in order to hedge its exposure to foreign exchange risks, the Group enters into forward contracts.
On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates ruling
on the balance sheet date. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such
translation differences are recognised as income or expenses in the period in which the operations are disposed of.
PROVISIONS
Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable
estimate can be made for the amount of the obligation. Where the effect of the discounting to present value is
material, provisions are adjusted to reflect the time value of money.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 65
65Datatec Annual Repor t 2002
REVENUE
The invoiced value of sales and services rendered, excluding value added and sales taxes, in respect of trading
operations is recognised at the date on which goods are delivered to customers or services are provided.
Revenue and profits from long-term and fixed-price contracts are recognised on the percentage of completion
method, after providing for contingencies and once the outcome of the contract can be assessed with reasonable
assurance. The percentage of completion is measured by reference to milestones set out in each contract. As soon as
losses on individual contracts become evident, they are provided for in full.
Revenue from cost plus contracts is recognised by reference to the recoverable costs incurred during the period plus
the fee earned, measured by the proportion that costs incurred to date bear to the estimated total costs of the contract.
Inter-company and inter-divisional sales are eliminated on consolidation.
PENSION SCHEME ARRANGEMENTS
Certain subsidiaries of the Group make contributions to various defined contribution retirement plans, on behalf of
employees, in accordance with the local practice in the country of operation. These contributions are charged against
income as incurred.
The Group has no liability to these defined contribution retirement plans other than the payment of its share of
the contribution in terms of the agreement with the funds and employees concerned, which differs from country
to country.
EXCEPTIONAL ITEMS
Exceptional items are those items of income and expenditure from ordinary activities that are of such size and nature
of incidence that their separate disclosure is relevant to explain the performance of the Group.
DISCONTINUING OPERATIONS
Discontinuing operations are significant, distinguishable components of an enterprise that have been sold,
abandoned or are the subject of formal plans for disposal or discontinuance.
Once an operation has been identified as discontinuing, comparative information is restated.
CAPITALISED DEVELOPMENT EXPENDITURE
Development expenditure is capitalised where costs are incurred for a clearly defined project that are separately
identifiable, and where the outcome of the project has been assessed with reasonable certainty with adequate
resources to complete the project.
Capitalised development costs are amortised over a maximum period of between three to seven years.
Income Statements
> for the year ended 31 March
66 Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 66
Group Company
2002 2001 2002 2001Notes R million R million R million R million
Revenue 20 677 20 158 – –
Continuing operations 20 360 17 500 – –Acquisitions 202 1 537 – –
������� ������� ������� �������
Ongoing operations 20 562 19 037 –Discontinued operations 115 1 121 – –
Cost of sales (17 759) (16 853) – –
Gross margin 2 918 3 305 – –Operating (costs)/income (2 072) (2 246) 141 40
Operating profit before finance costs, depreciation and amortisation (“EBITDA”) 846 1 059 141 40
Ongoing operations 873 1 127 141 40Discontinued operations (27) (68) – –
Depreciation 1 (200) (170) – –Restructuring costs of continuing operations – (82) – –
Operating profit 1 646 807 141 40 Income from investments 2 76 146 34 79 Financing costs 3 (172) (250) (3) –Share of associate company losses (3) (13) – –
Profit before exceptional items and goodwill amortisation 547 690 172 119 Goodwill amortisation 11 (133) (80) (1) –Exceptional items 4 (561) 706 (524) 374
Goodwill impairment (397) – (9) –Other exceptional items (164) 706 (515) 374
(Loss)/profit before taxation (147) 1 316 (353) 493 Taxation 5 (178) (301) (53) (24)
(Loss)/profit after taxation (325) 1 015 (406) 469 Profit attributable to outside shareholders (11) (57) – –
Attributable (loss)/earnings 6 (336) 958 (406) 469
Headline earnings 6 346 410
Number of shares issued (millions)– Issued 137 128– Weighted average 131 126– Diluted weighted average 133 126
Earnings per share (cents) 6– Headline 265 325– Basic (257) 761– Diluted (253) 761– Diluted headline 260 325
Balance Sheets
> as at 31 March
67Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 67
Group Company
2002 2001 2002 2001
Notes R million R million R million R million
ASSETS
Non-current assets 1 295 1 302 1 490 1 196
Property, plant and equipment 8 513 448 – 3 Capitalised development expenditure 9 131 75 – –Subsidiary companies and joint venture 10 – – 1 485 1 177 Intangible assets 11 419 571 – 10 Associated companies 12 1 9 – –Investments 13 29 34 5 6 Deferred tax asset 14 202 165 – –
Current assets 8 420 8 466 779 1 348
Inventories 15 2 397 3 044 – –Accounts receivable 16 3 781 3 268 – –Other receivables 366 308 2 95 Subsidiary companies 10 – – 700 401 Cash resources 1 876 1 846 77 852
Total assets 9 715 9 768 2 269 2 544
EQUITY AND LIABILITIES
Ordinary shareholders’ funds 3 726 3 205 2 145 2 071
Share capital and premium 1 193 1 029 1 193 1 029 Non-distributable reserves 1 228 535 629 471 Distributable reserves 1 305 1 641 323 571
Outside shareholders’ interest 199 260 – –
Total shareholders’ funds 3 925 3 465 2 145 2 071
Non-current liabilities 78 80 23 –
Long-term liabilities 17 58 74 – –Deferred tax liability 14 20 6 23 –
Current liabilities 5 712 6 223 101 473
Accounts payable and provisions 18 3 771 3 584 40 53 Amounts owing to vendors 19 90 413 12 401 Taxation 143 118 49 19 Bank overdrafts and trade finance advances 20 1 708 2 108 – –
Total equity and liabilities 9 715 9 768 2 269 2 544
Statements of Changes in Equity
> for the year ended 31 March
68 Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 68
Group Company
Non- Non-
distri- Distribu- distri- Distribu-
Share Share butable table Share Share butable table
capital premium reserves reserves Total capital premium reserves reserves Total
Balance at 1 April 2000 1 546 173 717 1 437 1 546 95 102 744
New share issues – 484 – – 484 – 484 – – 484
Share issue expenses – (2) – – (2) – (2) – – (2)
Exchange difference
arising on translation of
offshore operations – – 95 – 95 – – 109 – 109
Recoupment of goodwill
and trademarks – – 267 – 267 – – 267 – 267
Attributable earnings for
the year – – – 958 958 – – – 469 469
Change of accounting
period for Westcon – – – (34) (34) – – – – –
Balance at 31 March 2001 1 1 028 535 1 641 3 205 1 1 028 471 571 2 071
New share issues – 165 – – 165 – 165 – – 165
Share issue expenses – (1) – – (1) – (1) – – (1)
Exchange difference
arising on translation of
offshore operations – – 622 – 622 – – 87 – 87
Recoupment of goodwill
and trademarks – – 71 – 71 – – 71 158 229
Attributable loss for
the year – – – (336) (336) – – – (406) (406)
Balance at 31 March 2002 1 1 192 1 228 1 305 3 726 1 1 192 629 323 2 145
Authorised share capital200 000 000 (2001: 200 000 000) ordinary shares of R0.01 each
Issued share capital137 381 923 (2001: 128 701 672) ordinary shares of R0.01 each
18 000 000 (2001: 18 000 000) of the unissued shares equivalent to 13.1% (2001: 13.9%) of the issued share capital,have been set aside for the purpose of granting options to any officer or employee of the company, including anydirector, in terms of the Group employee share option scheme. At the balance sheet date 5 013 433 of the18 000 000 shares set aside for the share option scheme had been exercised.
The remaining unissued ordinary shares of 62 618 077 (2001: 71 298 328) are under the control of the directorsuntil the next general meeting, subject to the provisions of section 221 and 222 of the Companies Act and therequirements of the JSE Securities Exchange South Africa.
Cash Flow Statements
> for the year ended 31 March
69Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 69
Group Company
2002 2001 2002 2001
Notes R million R million R million R million
Cash flow from operating activities
Cash generated from operations A 2 051 623 105 52
Income from investments 76 146 34 79
Financing costs (172) (250) (3) –
Taxation paid B (268) (230) (27) (14)
1 687 289 109 117
Net cash flow relating to exceptional items – (82) (2) (1)
Net cash inflow from operating
activities 1 687 207 107 116
Cash flow from investing activities
Acquisition of subsidiary companies and
joint ventures C (371) (725) (662) (960)
Investment in associated companies 10 (10) (18) –
Loans to subsidiaries – – (35) 14
Proceeds on disposal of businesses and
investments D 6 1 118 22 1 314
Additions to property, plant and equipment E (149) (375) – (3)
Additions to capitalised development expenditure (76) (53) – –
Proceeds on disposal of property, plant
and equipment 60 64 – –
Net cash (outflow)/inflow from investing activities (520) 19 (693) 365
Cash flow from financing activities
Net proceeds from issue of shares F 164 482 164 482
Decrease in amounts owing to vendors (323) (190) (353) (126)
Increase/(decrease) in long-term liabilities 59 (146) – –
Increase in short-term loans – 2 – –
Net cash (outflow)/inflow from financing activities (100) 148 (189) 356
Net increase/(decrease) in cash and cash equivalents 1 067 374 (775) 837
Cash and cash equivalents at the beginning of year (262) (298) 852 15
Translation difference on opening cash position G (637) (151) – –
Change in Westcon cash for one month – (187) – –
Cash and cash equivalents at end of year H 168 (262) 77 852
Notes to the Cash Flow Statements
> for the year ended 31 March
70 Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 70
Group Company
2002 2001 2002 2001R million R million R million R million
A. Cash generated from operations
(Loss)/profit before taxation (147) 1 316 (353) 493 Adjustments for:Unrealised foreign exchange gains (95) – (95) –Share of associated companies losses 3 13 – –Depreciation 200 170 – –Net loss on disposal of property, plant and equipment 1 11 3 –Income from investments (76) (146) (34) (79)Financing costs 172 250 3 –Goodwill amortisation 133 80 1 –Restructuring costs – 82 – –Exceptional items 561 (706) 524 (374)
Operating profit before working capital changes 752 1 070 49 40
Working capital changes:Decrease/(increase) in inventories 1 611 (683) – –Decrease/(increase) in accounts receivable 754 (214) 62 (16)(Decrease)/increase in accounts payable (1 066) 450 (6) 28
2 051 623 105 52
B. Taxation paid
Amounts unpaid at beginning of year 118 86 19 9 Amounts charged to the income statement excluding deferred tax 224 395 53 24 Other movements 69 (133) 4 –Amounts unpaid at end of year (143) (118) (49) (19)
268 230 27 14
C. Acquisition of subsidiary companies and joint ventures
Cost of investment acquired in subsidiary companies and joint venture 662 960
The fair value of assets acquired and the liabilities assumed on the acquisition of subsidiary companies and on the purchase of joint ventures, net of cash acquired, is as follows: 371 725 – –
Property, plant and equipment 1 11 Goodwill arising on acquisitions 421 698 Accounts receivable 37 397 Inventories 30 181 Taxes acquired 8 –Accounts payable (53) (562)Long-term liabilities (73) –
371 725
Notes to the Cash Flow Statements continued
> for the year ended 31 March
71Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 71
Group Company
2002 2001 2002 2001R million R million R million R million
D. Proceeds on disposal of businesses and investments
Property, plant and equipment 13 71 – –Capitalised development expenditure 5 4 – –Investments 4 7 4 579 Accounts receivable 21 141 – –Inventories 8 1 – –Accounts payable (20) (102) – –Long-term liabilities (81) (395) – –Outside shareholders – (9) – –Deferred tax 3 (1) – –Surplus on disposal 10 1 354 18 735 Intangibles 43 47 – –
6 1 118 22 1 314
E. Additions to property, plant and equipment
Office furniture, equipment and motor vehicles (52) (91) – –Computer equipment and software (85) (246) – (3)Leasehold improvements (12) (38) – –
(149) (375) – (3)
F. Net proceeds from issue of shares
Ordinary shares issued, including share premium 165 484 165 484 Share issue expenses (1) (2) (1) (2)
164 482 164 482
G. The translation difference on the opening cashposition is calculated on opening cash balancesof companies based outside SA, and not on thenet cash and cash equivalents included on thebalance sheet at the beginning of the year, whichis inclusive of cash held by the company, Datatec Limited.
H. Cash and cash equivalents at end of year
Cash resources 1 876 1 846 77 852 Bank overdrafts and trade finance advances (1 708) (2 108) – –
168 (262) 77 852
Notes to the Annual Financial Statements
> for the year ended 31 March
72 Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 72
Group Company
2002 2001 2002 2001R million R million R million R million
1. Operating profit
Operating profit is arrived at after taking into account the following items: Auditors’ remuneration Audit fees – current year 15 12 – –
– prior year 3 2 – –Other services and expenses 4 2 – –
22 16 – –
Depreciation –Office furniture, equipment and motor vehicles 33 31 – –Computer equipment and software 133 126 – –Leasehold improvements 12 11 – –Owner occupied property 2 – – –
180 168 – –Capitalised development expenditure 20 2 – –
200 170 – –
Foreign exchange gains 136 49 149 51
Fees for services Administrative 18 8 – –Managerial 7 4 1 –Technical 9 20 – –
34 32 1 –
Operating lease rentals Premises 112 92 – –Computer equipment 19 17 – –Office furniture, equipment and motor vehicles 32 19 – –
163 128 – –
Net loss on disposal of property, plant and equipment Computer equipment – 2 3 –Office furniture, equipment and motor vehicles 1 9 – –
1 11 3 –
Retirement benefit contributions 39 36
Staff costs 1 721 1 620 – –
Directors’ emolumentsExecutive directorsSalaries 17 15Incentive bonuses 7 4Special incentive bonuses arising from the sale of UUNET – 17Benefits 3 1
27 37Non-executive directors’ fees 2 1
29 38
Full details are provided on directors’ emoluments in the Remuneration Report on pages 45 to 53.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
2. Income from investments
Dividends received 2 4 – 2
Listed – 2 – 2Unlisted 2 2 – –
Interest received From subsidiary companies – – 21 25 Other investments 74 142 13 52
76 146 34 79
3. Financing costs
Interest paid Finance charges on finance leases 1 3 – –Bank overdraft and trade finance interest 171 247 3 –
172 250 3 –
4. Exceptional items
Impairments of property, plant and equipment (1) (109) (3) –Net (loss)/surplus on disposal of operations and investments (1) 1 068 4 579 Write-down of carrying value of investments (58) (161) (485) (105)Loss on disposal and closure of discontinued operations (64) (92) (26) (105)Proposed subsidiary listing costs (40) – (5) 5 Goodwill impairment (397) – (9) –
Exceptional items (561) 706 (524) 374 Taxation 11 (65) – –
(550) 641 (524) 374 Attributable to outside shareholders 2 (5) – –
Net effect of exceptional items (548) 636 (524) 374
The taxation credit and outside shareholders’portion of the exceptional items relates primarilyto the proposed subsidiary listing costs. In 2001,a tax charge of R104 million was incurred on thesurplus on disposal of operations, a credit ofR32 million on the loss on disposal and closureof discontinued operations and a further creditof R7 million on the impairment of property,plant and equipment.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
5. Taxation
5.1 Taxation charge
South African normal taxation:
Current taxation – current year 101 30 53 24
Current taxation – prior year – 1 – –
Deferred taxation – current year 1 (3) – –
Deferred taxation – prior year (1) (2) – –
101 26 53 24
Foreign taxation:
Current taxation – current year 143 355 – –
Current taxation – prior year (20) 9 – –
Deferred taxation – current year (25) (87) – –
Deferred taxation – prior year (21) (2) – –
77 275 – –
Total taxation charge 178 301 53 24
5.2 Reconciliation of taxation rate to profit
before taxation
South African normal tax rate 30.0% 30.0% 30.0% 30.0%
Tax losses utilised – (1.0%) – –
Permanent differences (60.7%) 4.1% (45.0%) –
Goodwill impairment (84.3%) – – –
Foreign taxation rate differential 2.4% 4.4% – –
Non-taxable capital gain – (21.3%) – (25.1%)
Tax losses not recognised (8.5%) 6.7% – –
Effective taxation rate (121.1%) 22.9% (15.0%) 4.9%
Certain subsidiaries had tax losses at the end
of the financial year, that are available to
reduce the future taxable income of the
Group, estimated to amount to: 364 300
Estimated future tax relief at an estimated
tax rate of 34.6% (2001: 31.7%) 126 95
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001
R million R million R million R million
6. Earnings per share
Basic earnings per share was a loss of 257 cents
(2001: earnings of 761 cents) and is calculated
on the weighted average number of shares in
issue during the year of 130 673 730
(2001: 125 963 705), based on earnings
attributable to ordinary shareholders.
Reconciliation of basic earnings to headline earnings:
Attributable (loss)/earnings per the income
statement (336) 958
Headline earnings adjustments: 682 (548)
Goodwill amortisation 133 80
Net loss on disposal of property, plant and
equipment 1 11
Net loss/(surplus) on disposal of operations and
investments 1 (1 068)
Impairments of property, plant and equipment 1 109
Write-down of carrying value of investments 58 161
Loss on disposal and closure of discontinued
operations 64 92
Proposed subsidiary listing costs 40 –
Goodwill impairment 397 –������� �������
695 (615)
Tax effect (11) 62
Outside shareholders’ interest (2) 5
Headline earnings 346 410
Headline earnings per share of 265 cents (2001: 325 cents) is calculated on the weighted average number ofshares in issue during the year of 130 673 730 (2001: 125 963 705), based on the headline earnings attributableto ordinary shareholders.
Diluted loss per share of 253 cents (2001: earnings of 761 cents) is calculated on the diluted weighted averagenumber of shares in issue during the year of 133 046 599 (2001: 126 032 880), after taking into account thedifference between the number of shares issued and the number of shares that would have been issued at fair valuein respect of the 11 626 398 (2001: 10 963 876) options granted, but not exercised. These are calculated on the basisthat the shares required for the options are issued by the company and not bought through the open market.
Diluted headline earnings per share of 260 cents (2001: 325 cents) is based on headline earnings attributable toordinary shareholders and the diluted weighted average number of shares in issue.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
7. Interest in profits and losses of subsidiaries and joint venture
Interest in the aggregate amount of profits and losses of subsidiaries and joint venture after taxation
Profits 380 999Losses – continuing operations (296) (380)
– discontinued operations (14) (130)
8. Property, plant and equipment
2002 2002 2002 2001 2001 2001R million R million R million R million R million R million
Accumulated Net book Accumulated Net bookCost depreciation value Cost depreciation value
GroupOffice furniture, equipment and motor vehicles 181 84 97 163 78 85Computer equipment and software 634 305 329 517 223 294 Leasehold improvements 109 43 66 80 26 54Owner occupied properties 23 2 21 15 – 15
947 434 513 775 327 448
CompanyComputer equipment and software – – – 3 – 3
Included in property, plant and equipment are assets held under finance lease agreements with a book value ofR16 million (2001: R9 million) which are encumbered as security for liabilities under finance lease agreementsas stated in note 17. A register giving particulars of land and buildings is maintained at the company's registeredoffice and may be inspected by members of the public or their duly authorised agents. Property, plant andequipment have been impaired by an amount of R1 million. Refer to note 4.
Notes to the Annual Financial Statements continued
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8. Property, plant and equipment (continued)
Officefurniture,
equipment Computer Leasehold OwnerMovement of property, plant and and motor equipment improve- occupiedequipment vehicles and software ments properties Total
GroupNet book value at beginning of year 85 294 54 15 448Subsidiaries acquired 1 – – – 1 Other additions 52 85 12 – 149Translation differences (net) 22 106 20 8 156
160 485 86 23 754Subsidiaries disposed of (13) – – – (13)Disposals and impairments (17) (23) (8) – (48)Depreciation (33) (133) (12) (2) (180)
Net book value at end of year 97 329 66 21 513
CompanyNet book value at beginning of year – 3 – – 3Additions – – – – –
– 3 – – 3 Disposals and impairments – (3) – – (3)
Net book value at end of year – – – – –
Group Company
2002 2001 2002 2001R million R million R million R million
9. Capitalised development expenditure
Balance at beginning of year 75 24 – –Amounts capitalised 102 80 – –Disposals (5) (4) – –Transfers (21) (23) – –Amounts amortised (20) (2) – –
Balance at end of year 131 75 – –
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
10. Subsidiary companies and joint venture
Unlisted shares at cost 1 765 741Impairment of unlisted shares (449) (6)
Unlisted shares at written down value 1 316 735Amounts owing by subsidiaries and joint venture 869 843
Total investment per Annexure 1 2 185 1 578
Disclosed as follows:Shares at cost and long-term portion of loans 1 485 1 177 Current portion of loans 700 401
2 185 1 578
Certain of the unlisted shares in the underlying subsidiaries have been pledged as stated in note 20.
The Group's proportional interest in the joint venture has been incorporated in the Group's assets and liabilities and results as follows:
Property, plant and equipment, investment and cash 148 144Long-term borrowings 33 49Working capital (26) 21Revenue 91 166(Loss)/profit before tax (29) 29
Further details of the company's subsidiaries and joint venture are disclosed in Annexure 1.
11. Intangible assets
Goodwill at cost 949 651 10 10
At beginning of year 571 – 10 –Arising on acquisition of subsidiaries 421 698 – –Disposal of a subsidiary (43) (47) – –Arising on restructuring of joint venture – – – 10
Impairment (397) – (9) –Goodwill amortised (133) (80) (1) –
Balance at end of year 419 571 – 10
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
12. Associated companies
Shares at cost 5 82 – 78
Attributable share of post-acquisition losses,net of dividends received (4) (1) – –
Beginning of year (1) 12 – –Current year (3) (13) – –
Write-down of investment to fair value – (73) – (78)Loans – 1 – –
1 9 – –
The aggregate share of associated companies' net assets and revenue is as follows:
Property, plant and equipment, investments and cash 3 152 Total borrowings – 349 Working capital (1) 308Revenue 14 2 680
Further details of the Group’s associated companies are disclosed in Annexure 2
For 2001 the results of Siltek Limited are included.
13. Investments
Investments at beginning of year 34 98 6 41 Additions 11 12 5 –Disposals (4) – (4) –Write-down of investments to fair value (12) (76) (2) (35)
Investments at end of year 29 34 5 6
Further details of the Group's investments are disclosed in Annexure 3.
14. Deferred tax asset/(liability)
Movement of deferred tax assets Balance at beginning of year 165 65 – –Arising on acquisition and disposal of subsidiaries 5 36 – –Other movements 32 64 – –
202 165 – –
Analysis of deferred tax assets Capital allowances 10 6 – –Provisions 135 90 – –Effect of tax losses 35 44 – –Other temporary differences 22 25 – –
202 165 – –
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
14. Deferred tax asset/(liability) (continued)
Movement of deferred tax liabilities
Balance at beginning of year (6) (11) – –
Other movements (14) 5 (23) –
(20) (6) (23) –
Analysis of deferred tax liabilities
Capital allowances – (1) – –
Provisions – (1) – –
Other temporary differences (20) (4) (23) –
(20) (6) (23) –
15. Inventories
At cost:
Merchandise for resale 2 790 3 236 – –
Contract work in progress 3 7 – –
2 793 3 243 – –
Inventory provisions (273) (199)
Lucent inventory provision (123) – – –
2 397 3 044 – –
The Group has established return policies with
its major vendors to reduce the risk of
technological obsolescence of inventories.
R2 149 million inventories are encumbered as
set out in note 20.
16. Accounts receivable
Trade receivables 3 952 3 407 – –
Receivables provisions (171) (139) – –
3 781 3 268 – –
R3 728 million (2001: R2 920 million) of trade
receivables are encumbered as per note 20 at
the end of the financial year.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
17. Long-term liabilities
Liabilities under capitalised finance leases 38 33 – –
Unsecured loans 58 56 – –
96 89 – –
Less: Current portion included in accounts
payable and provisions (note 18) (38) (15) – –
Long-term portion 58 74 – –
Repayable within 2–5 years 51 73 – –
Repayable after 5 years 7 1 – –
58 74 – –
Liabilities under capitalised finance lease
agreements are repayable in monthly
instalments of R3 million (2001: R0.8 million),
at rates linked to the prime interest rates.
The liabilities relate to assets included under
property, plant and equipment in note 8,
with a net book value of R16 million (2001:
R9 million). The final repayment date is
April 2005. The long-term liabilities are
reflected at their book values, which
approximate fair values. Unsecured loans
comprise borrowings raised to fund capital
expenditure in certain subsidiary and joint
venture companies. These loans bear interest
at rates linked to prime borrowing rates, are
repayable in 2005 and are unsecured.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
18. Accounts payable and provisions
Trade accounts payable 3 116 2 842 – –Other payables 509 553 12 15Provisions 108 174 28 38Current portion of long-term liabilities 38 15 – –
3 771 3 584 40 53
Onerous Onerouscontract contract
Analysis of provisions provisions Other provisions Other
Balance at 1 April 2000 12 7 – 25 Amounts added 149 75 27 –Amounts utilised (56) (13) – (14)
Balance at 1 April 2001 105 69 27 11 Amounts added 14 4 5 –Amounts utilised (99) (40) (7) (8)Foreign exchange effects 33 22 – –
Balance at 31 March 2002 53 55 25 3
Group Company
2002 2001 2002 2001R million R million R million R million
19. Amounts owing to vendors
Purchase considerations owing 90 413 12 401
Amounts owing to vendors in the balance sheetrepresent purchase considerations due in respectof acquisitions and may, at the election of the Group, be funded out of the issue of newshares or by cash, pending the achievement ofthe relevant profit warranty milestones by thevendors of the businesses. Amounts owing arerecognised once there is sufficient assurance thatthe suspensive conditions will be met and theamounts can be measured reliably. At the end ofthe financial year the Group had an estimatedcontingent liability of R65 million (2001:R395 million) relating to possible future earnoutobligations.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
20. Bank overdrafts and trade finance advances
Total borrowings at year end:Bank overdraft and trade finance advances 1 708 2 108 – –Other borrowings (note 17) 96 89 – –
1 804 2 197 – –
South Africa – Other HoldingsThe Group has general short-term banking facilities amounting to R30 million (2001: R30 million) with the StandardBank of South Africa Limited. In terms of the cash management system operated in SA, various cross guarantees havebeen put in place to restrict the overall exposure to the amount of the banking facility.
Westcon AME (through OnLine Distribution) has a facility of $2.5 million with HSBC Bank in the Middle East,backed by a guarantee of $2 million by Datatec Limited. The facility bears interest at 6.5% and inventory andaccounts receivable balances have been pledged as collateral.
South Africa – Affinity LogicAffinity Logic Holdings (Pty) Limited has a long-term loan of R220 million (2001: R220 million) with RandMerchant Bank (“RMB”). The loan bears interest at 20.35% and is repayable in 2004. Promissory notesamounting to R94 million (2001: R142 million) have been furnished to the loan creditor in respect of all interestpayments due in terms of the loan agreement. An investment in an investment trust of R143 million (2001:R114 million) has been set off against this loan, with the net loan outstanding amount being R77 million(2001: R106 million). 47.5% of the net loan has been proportionally consolidated in the Group balance sheet.Datatec previously provided a letter of comfort to RMB in respect of the loan obligations of Affinity Logic toRMB, which letter of comfort was cancelled by RMB after the year end.
WestconWestcon has entered into a $225 million senior revolving credit facility, expiring on 31 December 2002 (2001:$285 million facility, expiring 30 September 2003). In addition, during the 2002 financial year, Westcon had asenior acquisition loan facility of $75 million, of which $50 million was repaid during April 2001. In December2001, $10 million of the acquisition facility was repaid with the balance to be repaid in six monthly instalmentsof $2.5 million each through June 2002.
Advances under the revolving facility are available up to 85% of the company’s eligible accounts receivable andup to 50% of the company’s eligible inventory, with sub-limits on borrowings for certain of the company’ssubsidiaries. The revolving credit component of these facilities bears interest at a base rate per annum equal tothe US prime rate, as defined in the agreement, minus 0.5% or the London Interbank Offered Rate (“LIBOR”)plus 2.5%, at the company’s option. Amounts outstanding under the acquisition facility bear interest at primeplus 5.0% after December 31, 2001. Borrowings under these facilities were collaterised by (1) a pledge ofcommon stock and (2) liens on inventory and accounts receivable of Westcon and its subsidiaries which utilisethe facility. The loan facilities contain covenants including, but not limited to, financial covenants limitingbalance sheet leverage, establishing minimum liquidity and pre-tax earnings coverage, restricting asset sales andpurchases, restricting the payment of dividends during continuing events of default, limiting additional debt andgranting liens. In addition, certain of the companies within Westcon had $203 million of inventory purchasefinancing. The amounts are collaterised by inventory and accounts receivable and are generally guaranteed byWestcon. These arrangements generally contain financial covenants limiting leverage and establishing minimumliquidity and pre-tax earnings coverage for subsidiaries that are parties to such arrangements. General short-termbanking facilities amounting to $14 million are also available to the Australian and UK businesses.
Notes to the Annual Financial Statements continued
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20. Bank overdrafts and trade finance advances (continued)
Westcon’s UK subsidiary has a revolving credit line of $10 million, which expires 30 September 2003. Advancesunder the revolving credit arrangement are generally available up to 85% of the subsidiary’s eligible accountsreceivable and bears interest at the UK base rate plus 1.5%.
LogicalLogical operates a cash management system with Natwest/Royal Bank of Scotland in the UK. In terms of the cashmanagement arrangement various cross guarantees have been put in place between the UK companies. Datatecpreviously issued a letter of comfort to Natwest which has now been cancelled. Logical UK had an IBM GlobalFinance facility of £2.5 million (2001: £15 million) at the year end where Logical UK had pledged its accountsreceivable book as security for the facility. The facility was terminated after the year end. The facility wasrepayable on demand and bore interest at the UK base rate plus 2.5%. Logical US has short-term bankingfacilities amounting to $22 million (2001: $12.5 million) with Comerica Bank, with its accounts receivable bookas security for the facility. The facility bears interest at the US prime rate less 0.5%. In addition short-termbanking facilities of approximately $4 million (2001: $20.5 million) are also available from various financialinstitutions to other Logical companies across the world. These facilities are generally secured over specifiedassets of the local company.
MasonMason has access to general short-term banking facilities amounting to £2 million (2001: £2 million), bearinginterest at the UK base rate plus 1%, as well as outstanding term loans of £1.1 million (2001: £1.7 million). These facilities are secured over the company’s debtors’ book.
Group Company
2002 2001 2002 2001R million R million R million R million
21. Foreign liabilities
Uncovered foreign liabilities at the balance sheet date: Trade accounts payable US Dollars 9 9 – – Pounds sterling 2 – – –
The Group's operations manage their exposure to exchange rate fluctuations, where appropriate,through entering into forward exchange contractsand hedges with major commercial banks.
22. Commitments
Capital commitments Capital expenditure authorised and contracted for 10 30 – –Capital expenditure authorised but not yet contracted for 54 113 – –
Total capital commitments 64 143 – –
This expenditure will be incurred in the ensuing year and will be financed from existing cash resources and available facilities.
Notes to the Annual Financial Statements continued
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Group Company
2002 2001 2002 2001R million R million R million R million
22. Commitments (continued)
Operating lease commitmentsDue within one year: Property 150 98 – – Office furniture, equipment and motor vehicles 28 20 – – Computer equipment 18 16 – –
Total operating lease commitments due within one year 196 134 – –
Due within two to five years: Property 387 319 – –Office furniture, equipment and motor vehicles 31 20 – –Computer equipment 15 17 – –
Total operating lease commitments due within two to five years 433 356 – –
Due after five years: Property 417 298 – –Office furniture, equipment and motor vehicles – – – –Computer equipment – – – –
Total operating lease commitments due after five years 417 298 – –
Total operating lease commitments 1 046 788 – –
Other commitments
At the time of the acquisition of Mason, Datatec entered into a series of put and call arrangements (exercisablein two equal tranches) with the founder management shareholders of Mason, that commenced in May 2002 andterminates in May 2004. The founder management shareholders own 15% of Mason. Neither Datatec nor thefounder management shareholders exercised their rights to put or call in 2002. However the foundermanagement shareholders have agreed to exercise their rights to put to Datatec the 15% shareholding owned bythem in two equal tranches in May 2003 and May 2004. The consideration payable for such put will amount to amultiple of 8.28 times the audited pre-tax profits of Mason achieved in the previous financial year (ie financialyear ended 31 March 2003 and 2004). In the event that Datatec had exercised a call, the multiple increases to10.35 times. The Employee Benefit Trust ("EBT") owns 10% of Mason. At the time of the acquisition, it wasintended that Datatec would consider offering similar arrangements to the EBT that it had agreed with thefounder management shareholders. Datatec is currently in discussions with the Trustees of the EBT in respect ofthese arrangements which may result in the EBT agreeing to allow its option holders to elect to either put theirshares to Datatec in May 2003 (as to 33% of the shares subject to the put), May 2004 (as to a further 33% of theshares subject to the put) and May 2005 (as to the balance of 33% of the shares subject to the put) or to put theirshares in the same percentages, but in May 2004, May 2005 and May 2006. The consideration payable for such putwill amount to a multiple of 8.28 times the audited pre-tax profits of Mason achieved in the previous financial year.These arrangements are also subject to the approval of the Exchange Control Department of the South AfricanReserve Bank and the JSE Securities Exchange South Africa.
Notes to the Annual Financial Statements continued
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22. Commitments (continued)
In the event of a change of control of Westcon, should Datatec directly own less than 51% of the issued and
outstanding capital shares of Westcon, Datatec has committed to pay an amount of $4.5 million to Mirado Corp,
whose shareholders include Philip Raffiani, Tom Dolan and Roman Michalowski. A M Smith (CEO of
Westcon) has the right to require Westcon to purchase his 1.02% shareholding in Westcon at any time after
1 July 2004 for a period of thirty six months at fair market value. This right expires upon the commencement
of trading of Westcon on the NASDAQ, New York or London stock exchanges.
23. Contingent liabilities, guarantees and litigation
There are contingent liabilities relating to purchase considerations owing to vendors of businesses. These are
conditional upon future earnout targets being met. Refer note 19 for details.
As noted in the Group’s 2001 annual report, Westcon held $24 million of inventory purchased from Lucent
and in July 2001 commenced litigation to require Lucent to abide by the distribution agreement between the
parties and accept return of this inventory. Westcon management believe that Westcon has a meritorious case
against Lucent and is continuing with the litigation. Management has, however, decided to adopt a prudent
approach, and accordingly, Westcon has, during the year, provided an amount of $13 million (R123 million)
against its remaining Lucent inventory of $16 million.
In terms of the arrangement between RangeGate and Symbol, Datatec has provided a guarantee to Symbol in
respect of licence fees sold and collected by RangeGate, limited to an amount of $2 million. In addition,
Datatec has also issued a guarantee to Symbol for $1 million, expiring in June 2003.
As set out in the 2001 annual report, the Group disposed of UUNET SA (Pty) Limited to WorldCom, Inc. The
disposal agreement was drawn up under SA law and contains warranties and conditions required by the purchaser
for its protection that were considered normal for disposals of this nature. The warranties expire after eighteen
months from February 2001 with tax warranties expiring after thirty six months from the date of assessment by
the South African Revenue Service of UUNET’s income tax returns for the period ended 31 December 2000.
Such assessment has as yet not been made. In addition, in the normal course of business, Datatec had provided
guarantees to certain suppliers and customers of UUNET SA. UUNET International Limited (a subsidiary of
WorldCom, Inc.) indemnified Datatec in respect of these guarantees and agreed to procure Datatec is released
from these guarantees. At the date of this report, Datatec had been released from the majority of its guarantees
and has called on UUNET SA to procure its release from the remaining guarantees.
Datatec has issued, in the ordinary course of business, guarantees and letters of comfort to third parties in
SA in respect of trading facilities and lease commitments. RangeGate (Pty) Limited (SA) has provided a letter
of support to RangeGate Mobile Solutions Limited (UK) confirming its intention to provide financial support
for a period of at least twelve months from the date of signing their statutory financial statements.
Westcon has issued, in the ordinary course of business, guarantees and letters of comfort to suppliers and
financial institutions on behalf of its subsidiaries. The inventory purchase financing of $203 million referred to
in note 20 is generally guaranteed by Westcon.
Notes to the Annual Financial Statements continued
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23. Contingent liabilities, guarantees and litigation (continued)
Logical has issued, in the ordinary course of business, guarantees to third parties in respect of trading facilities
and lease commitments. Logical Group Limited has provided letters of support to Logical Networks Limited
(incorporated in Australia), Logical Group Services Limited, Logical e-Business Solutions Limited and Logical
Strategy Limited (all incorporated in the UK) confirming its intention to continue to provide financial support
to these subsidiaries for a period of at least twelve months from the date of signing their statutory financial
statements. In addition, Logical Group Limited also issued a letter of comfort confirming its intention to
continue to provide financial support to Logical Networks France.
The Group has certain other contingent liabilities resulting from litigation and claims including breach of
warranties where operations have been disposed of, generally involving commercial and employment matters,
which are incidental to the ordinary conduct of its business. Management believes, after taking legal advice
where appropriate on the probable resolution of these contingencies, that none of these contingencies will
materially affect the consolidated financial position or the results of operations of the Group.
24. Related party transactions
Related party transactions exist within the Group. Sales and purchases between Group companies are
concluded at arm's length in the ordinary course of business. Details of material transactions with related
parties are disclosed elsewhere in the financial statements, specifically in the Directors’ Report.
For the year ended 31 March 2002, the intergroup sales of goods and provision of services amounted to R179 million.
Logical Other Holdings
2002 2002
R million R million
25. Disposal and discontinuance of subsidiaries
A description of subsidiaries disposed of can be found in the
Directors’ Report on page 59.
Revenue 112 3
Cost of sales (98) –
Gross margin 14 3
Operating costs (40) (9)
Operating loss before finance costs (26) (6)
Financing costs – –
Loss before exceptional items and goodwill (26) (6)
Exceptional items (36) (8)
Loss before taxation (62) (14)
Taxation – –
Loss after taxation (62) (14)
Notes to the Annual Financial Statements continued
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Logical Other Holdings
2002 2002
R million R million
25. Disposal and discontinuance of subsidiaries (continued)
Net operating cash outflow 68 6
Investing activities outflow 5 6
Financing activities outflow 80 5
The net assets at date of disposal were as follows:
Property, plant and equipment 13 –
Goodwill 43 –
Capitalised development expenditure 5 –
Inventories 8 –
Accounts receivable 21 –
Accounts payable (20) –
Holding company and fellow subsidiary companies (3) (43)
Bank overdraft (2) –
Deferred taxation 3 –
Long-term liabilities – (81)
68 124
Net selling price – 2
Loss (36) (20)
26. Segmental report
For management purposes the Group is currently organised into four operating divisions – Westcon, Logical,
Mason and Other Holdings. These divisions are the basis on which the Group reports its primary segmental
information.
Principal activities are as follows:
Westcon – Global distribution of advanced networking and communication products
Logical – Provision of professional services and IT network integration
Mason – Strategic telecommunications consultancy
Other Holdings – Other distribution and service orientated interests in SA
Notes to the Annual Financial Statements continued
> for the year ended 31 March
89Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 89
26. Segmental report (continued)
Westcon Logical Mason Other Holdings Eliminations Total
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001R million R million R million R million R million R million R million R million R million R million R million R million
Abridged Income StatementRevenue 15 595 14 963 3 911 4 040 282 222 889 933 – – 20 677 20 158
– North America 9 887 9 115 2 060 1 826 – – – – (8) (68) 11 939 10 873 – South America 223 170 235 232 – – – – – 458 402 – UK and Europe 4 572 4 784 956 1 321 282 222 37 3 (23) – 5 824 6 330 – Asia Pacific 1 080 962 672 661 – – – – (133) – 1 619 1 623 – Africa – – – – – – 852 938 (15) (8) 837 930 – Intersegmental (167) (68) (12) – – – – (8) 179 76 – –
Operating profit/(loss) 586 781 (39) (20) 6 34 93 10 – 2 646 807 Financing costs (118) (201) (26) (43) (2) (2) (26) (33) – 29 (172) (250)Income from investments 29 34 11 14 1 – 35 129 – (31) 76 146 Share of associate company losses – – – – – – (3) (13) – – (3) (13)
Profit/(loss) before exceptional items and goodwill amortisation 497 614 (54) (49) 5 32 99 93 – – 547 690 Goodwill amortisation (61) (42) (64) (35) (4) (7) (4) 4 – – (133) (80)Goodwill impairment – – (382) – – – (15) – – – (397) –Other exceptional items (29) 200 (36) (179) (5) – (94) 685 – – (164) 706
Profit/(loss) before taxation 407 772 (536) (263) (4) 25 (14) 782 – – (147) 1 316 Taxation (122) (304) 48 37 (4) (10) (100) (24) – – (178) (301)
Profit/(loss) after taxation 285 468 (488) (226) (8) 15 (114) 758 – – (325) 1 015
EBITDA 685 838 30 117 13 40 118 64 – – 846 1 059
– North America 220 421 50 69 – – – – 15 – 285 490 – South America 25 29 8 34 – – – – – – 33 63 – UK and Europe 346 334 (60) (11) 13 40 22 1 – 2 321 366 – Asia Pacific 79 69 32 5 – – – – – – 111 74 – Africa – – – – – – 95 54 1 12 96 66 – Intersegmental 15 (15) – 20 – – 1 9 (16) (14) – –
Gross assets 7 823 7 151 2 169 1 915 285 220 938 3 292 (1 500) (2 810) 9 715 9 768
– North America 4 683 4 805 1 224 1 004 – – – – (34) (96) 5 873 5 713 – South America 168 122 112 190 – – – – – – 280 312 – UK and Europe 2 526 1 740 517 453 285 220 72 36 (477) (59) 2 923 2 390 – Asia Pacific 446 484 316 268 – – – – (20) – 742 752 – Africa – – – – – – 866 3 256 (969) (2 655) (103) 601
Property, plant, equipment andcapitalised development costs 354 238 196 197 11 15 83 73 – – 644 523
– North America 271 220 70 39 – – – – – – 341 259 – South America 28 4 6 17 – – – – – – 34 21 – UK and Europe 45 13 73 100 11 15 1 – – – 130 128 – Asia Pacific 10 1 47 41 – – – – – – 57 42– Africa – – – – – – 82 73 – – 82 73
Notes to the Annual Financial Statements continued
> for the year ended 31 March
90 Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 90
26. Segmental report (continued)
Westcon Logical Mason Other Holdings Eliminations Total
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001R million R million R million R million R million R million R million R million R million R million R million R million
Investments and associated companies 6 99 – 3 15 9 1 941 1 374 (1 932) (1 442) 30 43
– North America – 95 – – – – – – – (92) – 3 – South America – – – 17 – – – – – – – 17 – UK and Europe 6 4 – (19) 15 9 – 1 – (1) 21 (6)– Asia Pacific – – – 5 – – – – – – – 5 – Africa – – – – – – 1 941 1 373 (1 932) (1 349) 9 24
Net cash resources (453) (1 315) 183 (46) 53 43 385 1 056 – – 168 (262)
– North America (1 047) (1 606) 115 (17) – – – – – – (932) (1 623)– South America 19 2 (6) (32) – – – – – – 13 (30)– UK and Europe 545 306 85 12 53 43 9 1 – – 692 362 – Asia Pacific 30 (17) (11) (9) – – – – – – 19 (26)– Africa – – – – – – 376 1 055 – – 376 1 055
Inventories 2 046 2 797 241 172 1 8 109 67 – – 2 397 3 044
– North America 1 214 1 960 100 49 – – – – – – 1 314 2 009 – South America 40 32 22 32 – – – – – – 62 64 – UK and Europe 651 599 66 64 1 8 – – – – 718 671 – Asia Pacific 141 206 53 27 – – – – – – 194 233– Africa – – – – – – 109 67 – – 109 67
Trade accounts receivable 2 863 2 308 704 817 65 70 149 73 – – 3 781 3 268
– North America 1 542 1 376 413 408 – – – – – – 1 955 1 784 – South America 35 36 68 101 – – – – – – 103 137 – UK and Europe 1 070 690 110 230 65 70 16 – – – 1 261 990 – Asia Pacific 216 206 113 78 – – – – – – 329 284 – Africa – – – – – – 133 73 – – 133 73
Liabilities (2 672) (2 636) (953) (1 031) (131) (148) (620) (757) 294 377 (4 082) (4 195)
– North America (1 100) (1 229) (381) (282) – – – – 25 9 (1 456) (1 502)– South America (10) (68) (75) (64) – – – – – – (85) (132)– UK and Europe (1 387) (1 059) (278) (484) (131) (148) (35) (13) 131 236 (1 700) (1 468)– Asia Pacific (175) (280) (219) (201) – – – – 20 – (374) (481)– Africa – – – – – – (585) (744) 118 132 (467) (612)
Trade accounts payable (2 368) (2 292) (596) (459) (8) (11) (144) (80) – – (3 116) (2 842)
– North America (1 030) (1 212) (341) (204) – – – – – – (1 371) (1 416)– South America (12) (24) (64) (31) – – – – – – (76) (55)– UK and Europe (1 146) (866) (106) (161) (8) (11) (4) – – – (1 264) (1 038)– Asia Pacific (180) (190) (85) (63) – – – – – – (265) (253)– Africa – – – – – – (140) (80) – – (140) (80)
The average number of employees for the year for each of the Group’s principal divisions was as follows: 916 1 059 1 217 2 050 253 233 637 488 – – 3 023 3 830
Annexure 1Subsidiary Companies and Joint Venture
91Datatec Annual Repor t 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 91
Issued Effective holding Unlisted shares Indebtedness
Nature of ordinary 2002 2001 2002 2001 2002 2001business capital % % R’000 R'000 R’000 R'000
Active SubsidiariesINCORPORATED IN SOUTHERN AFRICADatatec Management Services (Pty) Ltd O 100 100.0 100.0 – – 224 47RangeGate (Pty) Ltd O 10 000 79.1 100.0 – – 1 –Westcon AME (Pty) Ltd O 1 100.0 100.0 – – 35 (66)
INCORPORATED IN UK AND EUROPEComstor Belgium W 620 92.5 – – – – –Comstor Group Ltd W 2 010 000 92.5 85.3 – – 175 119Comstor Ltd W 2 92.5 – – – – –Comstor Networks GmbH W 24 329 92.5 85.3 – – 17 2Westcon GmbH W 1 92.5 85.3 4 4 – –Westcon UK Ltd W 2 92.5 85.3 – – 133 92Logical (UK) Ltd L 1 583 885 100.0 100.0 – – 5 –Logical e-Business Solutions L 1 810 100.0 100.0 – – – 2Logical GmbH L 255 646 100.0 100.0 – – – 10Logical Group Ltd L 72 000 000 100.0 100.0 621 289 205 –Logical Group Services Ltd (formerly Datatec Group Services Ltd) L 2 100.0 100.0 – – – 86Logical Networks GmbH L 25 000 100.0 100.0 – – – –Logical Networks SA L 77 600 100.0 60.0 – – – –Logical Strategy Ltd L 2 100.0 100.0 – – – –Regreb BV L 40 000 100.0 100.0 – – – –Satelcom UK Ltd L 59 380 100.0 100.0 – – – –Catalyst IT Partners Ltd M 441 810 75.0 75.0 – – – –Mason Group Ltd M 11 247 100 75.0 75.0 9 9 6 34Mason Communications Ltd M 119 403 75.0 75.0 – – – –Mason Communication Ireland Ltd M 2 75.0 75.0 – – – –Datatec UK Holdings Ltd O 50 000 100.0 100.0 – – (4) 5Rangegate Mobile Solutions Ltd O 100 79.1 100.0 – – 7 –
INCORPORATED IN US AND CANADABusiness Operation Services Corp. W 50 92.5 85.3 – – – –Comstor Inc. W 10 92.5 85.3 6 6 – –Eastpro Services Inc. W 10 92.5 85.3 – – – –Voda One Corp W 1 92.5 85.3 – – – –Westcon Canada Systems (WCS) Inc. W 173 228 92.5 85.3 – – – –Westcon Group Inc. W 46 448 296 92.5 85.3 674 423 (44) (27)Westcon.net Inc. W 10 92.5 85.3 – – – –Logical e-Business solutions Inc (Formerly Pudget Sound Systems Group, Inc.) L 36 554 100.0 100.0 – – – –Logical Networks Inc. L 54 100.0 100.0 – – – –Logical US Holdings Inc. L 100 100.0 100.0 – – – 382Network I US Inc. L 1 000 100.0 100.0 – – – –
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 92
Annexure 1 continued
Subsidiary Companies and Joint Venture
92 Datatec Annual Repor t 2002
IssuedEffective holding Unlisted shares Indebtedness
Nature of ordinary 2002 2001 2002 2001 2002 2001business capital % % R’000 R'000 R’000 R'000
Active Subsidiaries (continued)INCORPORATED IN SOUTH AMERICAWestcon Brazil W 987 748 92.5 85.3 – – – –Softnet- Logical SA (formerly Softnet SA) L 400 000 75.0 75.0 – – – 30Softnet - Logical Uruguay SA (formerly Softnet Uruguay SA) L 130 000 75.0 75.0 – – – –X-Net Cuyo SA L 2 000 000 75.0 75.0 – – – –
INCORPORATED IN AUSTRALIALAN Systems (Pty) Ltd W 100 000 92.5 85.3 – – – –Westcon Australia (Pty) Ltd W 1 92.5 85.3 – – – –Westcon Australia, Inc. W 100 92.5 85.3 – – – –Logical Australia (Pty) Ltd (formerly Logical Systems (Pty) Ltd) L 10 000 100.0 100.0 – – – –Logical Networks Ltd L 7 762 280 100.0 100.0 – – – –
INCORPORATED IN NEW ZEALANDLogical Networks Ltd L 500 000 100.0 100.0 – – – –Logical Secure Ltd L 100 100.0 100.0 – – – –Mentum Secure Ltd L 100 100.0 100.0 – – – –
INCORPORATED IN SINGAPORERBR Networks Pte Ltd W 100 000 92.5 85.3 – – – 24
INCORPORATED IN BRITISH VIRGIN ISLANDSDatatec International Holdings Ltd O 50 000 100.0 100.0 – – 38 35
Dormant Subsidiaries – – – – 2 6 3
Joint VentureAffinity Logic Holdings (Pty) Ltd O 10 017 570 47.5 47.5 2 2 65 65
Companies disposed ofLogical France SA (formerly Datatec France SA) L 5 520 800 – 100.0 – – – –Logical Procurement Management Services (Pty) Ltd (Australia) L 12 – 100.0 – – – –Logical Solutions (formerly Conexus Logical AG) (Switzerland) L 650 – 100.0 – – – –Logical Systems (WA) (Pty) Ltd (Australia) L 12 – 100.0 – – – –Logical Systems SA (France) L 55 208 000 – 100.0 – – – –Network I Australia (Pty) Ltd (Australia) L 12 – 100.0 – – – –Destiny Electronic Commerce (Pty) Ltd O 300 – 61.0 – – – –
1 316 735 869 843
W: Westcon L: Logical M: Mason O: Other Holdings
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 93
Annexure 2Associated Companies
93Datatec Annual Repor t 2002
Group Company
2002 2001 2002 2001
R million R million R million R million
Listed:
Siltek Limited:
Percentage holding 23% 23% – –
Carrying value – – – –
Market value – 4 – 4
Siltek, through its subsidiaries and associated
companies, distributed IT hardware, software and
networking products and provides integrated IT
software, networking and telecommunication
related service and solutions.
The company’s year-end is 30 June.
Unlisted:
Dotcom Trading 118 (Pty) Limited:(Held via Affinity Logic)
Percentage holding 40% 40% – –
Carrying value 1 4 – –
Directors' valuation of interest in associated company 1 4 – –
The nature of the company's business is desktop
and in-store system support.
The company's year-end is 31 December.
Network I Limited:
Percentage holding – 50% – –
Carrying value – 5 – –
Directors' valuation of interest in associated company – 5 – –
Network I provides on-line industrial strength
services and products, by providing value added
network intelligent solutions.
The company's year-end is 31 March.
1 9 – –
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 94
Annexure 3Investments
94 Datatec Annual Repor t 2002
Group Company
2002 2001 2002 2001
R million R million R million R million
Listed:
Cisco Systems, Inc.39 709 shares of $0.01 each 6 7 – –
Market value at 31 March 2002: $672 273
African Lakes Corporation plc 5 – 5 –
4 409 171 shares of 5 pence each
Market value at 31 March 2002: £297 619
Unlisted:
NetActive Limited 3 5 – –
(Held via Affinity Logic)
10 294 010 shares of 2 cents each
Directors' valuation: R3 million
The Mason Group Employee Benefit Trust 15 9 – –
1 104 500 shares of 10p each
Directors' valuation: R15 million
Metropolis* Transactive Holdings Limited – 4 – 2
31 652 664 shares of 1 cent each
(2001: 21 804 530 shares)
Hertiq 2118 (Pty) Limited – 2 – –
(Held via Affinity Logic) – –
Logical Secure Investments (NZ) – 3 – –
Korbitec Holdings (Pty) Limited – 4 – 4
29 34 5 6
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 95
Shares and Shareholders
95Datatec Annual Repor t 2002
Listed below are analyses of holdings extracted from the register of ordinary shareholders at 31 March 2002:
1 April 2001 to 1 April 2000 to 1 April 1999 to31 March 2002 31 March 2001 31 March 2000
Stock exchange performance Total number of shares traded ('000) 130 566 127 537 79 297Total number of shares traded as a percentage of total shares 95.0% 99.1% 66.7%Total value of shares traded (R million) 2 199 6 212 7 405
Prices (cents)Closing 1 650 1 650 11 600High 2 500 11 700 14 500Low 880 1 450 5 530
Percentage of shares held by non-public shareholders 4.8% 57.6%* 65.3%*Percentage of shares held by public shareholders 95.2% 42.4%* 34.7%*
The following are the principal shareholders whose holding directly or indirectly, including asset managers' investment funds, in the company total more than 5% of the issued share capital as at 31 March 2002:
Old Mutual Asset Management (Pty) Limited 45 801 940 33.34%Stanlib Limited 10 635 250 7.74%Prudential Asset Management (Pty) Limited 6 872 976 5.00%Sanlam Investment Managers (Pty) Limited 6 759 730 4.92%
No of shareholders No of shareholdersShareholder type in South Africa other than in South Africa Total shareholders
Nominal Nominal Nominalnumber Percentage number Percentage number Percentage
Public 6 863 83.4 243 11.8 7 013 95.2Directors 3 0.6 3 4.2 6 4.8
Total 6 866 84.0 246 16.0 7 019 100.0
*Per the certificated share register, prior to the introduction of STRATE and amendments to Companies Act(Act 61 of 1973), as amended
Shareholders’ Diary
Annual General Meeting 30 September 2002
Reports
Interim half-year to September 2002 Published November 2002
Preliminary announcement of 2003 annual results Published May 2003
2003 annual report Published July 2003
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 96
Notice to Members
96 Datatec Annual Repor t 2002
Notice is hereby given that the Annual General Meeting of members of Datatec Limited will be held in the auditoriumon Monday, 30 September 2002 at Building 8, Harrowdene Office Park, Western Service Road, Woodmead, RepublicSouth Africa at 14h00 for the purpose of transacting the following business:
1. To receive and consider the annual financial statements and Group annual financial statements for the year ended31 March 2002.
2. 2.1 To re-elect the directors retiring in accordance with the Articles of Association in one bulk resolution.
2.2 To re-elect the directors retiring in accordance with the Articles of Association. Please refer to the CurriculumVitae of the directors being re-elected on pages 6 to 7.
3. To grant the directors the power, until the next Annual General Meeting, to allot and issue, at their discretion, theunissued ordinary shares of the company subject to the Listings Requirements of the JSE Securities ExchangeSouth Africa and the relevant sections of the Companies Act (Act 61 of 1973), as amended.
4. To confirm the re-appointment of Deloitte & Touche as auditors for the ensuing financial year.
5. To ratify the directors’ remuneration for the past financial year.
6. To consider and, if deemed fit, pass with or without modification the following ordinary resolutions:
6.1 “That in terms of the Listings Requirements of the JSE Securities Exchange South Africa, the directors begiven the general authority to issue ordinary shares of one cent each (being a class already in issue) for cashas and when suitable situations arise, subject to the following conditions:
• that this authority shall not extend beyond 15 (fifteen) months from the date of this Annual GeneralMeeting or the date of the next Annual General Meeting, whichever is the earlier date;
• that the issue may only be made to public shareholders as defined in paragraphs 4.26 to 4.27 of theListings Requirements of the JSE Securities Exchange South Africa and not to related parties;
• that a paid press announcement giving full details, including the impact on net asset value and earningsper share, will be published at the time of any issue representing, on a cumulative basis within one year,5% or more of the number of shares of that class in issue prior to the issue;
• that issues in the aggregate in any one financial year may not exceed 15% of the number of shares of thatclass of the company's issued share capital, including instruments which are compulsorily convertible intoshares of that class; and
• that, in determining the price at which an issue of shares will be made in terms of this authority, themaximum discount permitted will be 10% of the average ruling price of the shares in question, asdetermined over the 30 business days prior to the date that the price of the issue is determined or agreedby the directors of Datatec.”
The approval of 75% of the votes cast by shareholders present or represented by proxy at this meeting isrequired for this ordinary resolution to become effective.
6.2 “That the directors be and are hereby authorised to amend the Datatec Share Option Scheme (“OptionScheme”) as follows:
• CLAUSE 1.2.13By deleting the words ‘less a 15% (fifteen per cent) discount’.
• CLAUSE 3.1By deleting the existing clause and substituting the following:
‘That the directors be and are hereby authorised to increase the maximum number of shares available interms of the Option Scheme to 15% (fifteen per cent) of the issued share capital from time to time’.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 97
Notice to Members continued
97Datatec Annual Repor t 2002
• CLAUSE 5.8
By inserting the following words after the word “exercised” in the first line of clause 5.8:
‘whether or not the beneficiary has retired’
• CLAUSE 5.8.3.1
By rewording this clause to read as follows:
‘within 12 (twelve) months after becoming a retrenched employee subject to clause 5.8.3.3. If the
beneficiary does not exercise the option within such period, it shall lapse;’
• CLAUSE 3.2
By deleting the words ‘1 000 000 (one million) shares, being 0.9% (nought decimal nine per cent) of the
issued share capital as at 18 August 1999’ and the substitution in place thereof of the following: ‘shares
aggregating at the time of the granting of such options not more than 1.5% (one decimal five per cent)
of the issued share capital of the company’.
• CLAUSE 5.9.4
By deleting the existing clause and substituting the following:
‘If not duly exercised by the tenth anniversary of the option date.’”
6.3 “That subject to the passing of the ordinary resolutions, any director of the company be and is hereby
authorised to sign all documents and perform all acts which may be required to give effect to the resolutions
passed at the meeting.”
7. To consider and, if deemed fit, pass with or without modification, the following special resolutions:
7.1 Repurchase by the company of its own securities
• “That the directors of the company be authorised from time to time to acquire issued shares in the
ordinary share capital of the company on the JSE Securities Exchange South Africa (“JSE”) “open market”
at a price no greater than 10% above the weighted average of the market value for the securities for the
five previous business days immediately preceding the date on which the transaction was agreed; and the
purchase by any of the company’s subsidiaries of shares in the company in the manner contemplated by,
and in accordance with, the provisions of section 89 of the Companies Act (Act 61 of 1973), as amended,
and provisions of the Listings Requirements of the JSE that may be applicable;”
• “that a paid press release giving such details as may be required in terms of the Listings Requirements of
the JSE be published when the company or its subsidiaries have repurchased 3% of the shares in issue;”
• “that the authorisation granted above shall remain in force from the date of registration of these special
resolutions by the Registrar of Companies until the conclusion of the next Annual General Meeting of the
company and, in any event, no later than 15 months from the date on which they were passed;”
• “that the repurchase by the company of its own securities above may not exceed 20% of the company's
issued ordinary share capital in the aggregate in any one financial year or, in the case of acquisition by any
of the company's subsidiaries, 10% of such issued ordinary share capital in the aggregate if such shares
are to be held as treasury stock;”
• “that the sponsor to the company provides a letter on the adequacy of working capital in terms of section
2.14 of the JSE Listings Requirements prior to any repurchases being implemented on the open market
of the JSE.”
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 98
Notice to Members continued
98 Datatec Annual Repor t 2002
As at the date of this report, the company’s directors undertake that they will not implement any such
repurchase in the 12 months following the date of this Annual General Meeting, unless:
• the company and the group would, after payment for such maximum repurchase, be able to repay its
debts in the ordinary course of business;
• the company’s and the group’s consolidated assets, fairly valued according to generally accepted
accounting practice and on a basis consistent with the last financial year of the company, would, after such
payment, exceed their consolidated liabilities;
• the company’s and the group’s ordinary share capital and reserves would, after such payment, be
sufficient to meet their needs; and
• the company and the group would, after such payment, have sufficient working capital to meet its needs.
The Board has no immediate intention to use this authority to repurchase company shares. However, the
Board is of the opinion that this authority should be in place should it become appropriate to undertake a
share repurchase in the future.
Reason for and effect of the Special Resolution
The reason for and the effect of the special resolution are to grant the company’s directors a general
authority, up to and including the date of the following Annual General Meeting of the company, to approve
the company’s purchase of shares in itself, or of shares in its holding company, or to permit a subsidiary of
the company to purchase shares in the company.
7.2 Ratification and approval of share options to non-executive directors, which are proposed to be granted
without discount.
That the company ratify, confirm and approve, in terms of section 223 of the Companies Act (Act 61 of 1973),
as amended, the grant of the following share options to non-executive directors, which are proposed to be
granted without discount:
Non-executive director Number of options Option price per share Date of grant
J F McCartney 125 000 R18.06 14 March 2002
C S Seabrooke 80 000 R18.06 14 March 2002
7.3 Electronic notification to and from shareholders
• “That in terms of section 62 of the Companies Act (Act 61 of 1973), as amended (“the Act”) the Articles
of Association of the company be amended as follows:
• the deletion of article 10.6 and the insertion of the following new sub-articles in place thereof:
10.6.1 “The form appointing a proxy which is not an electronic communication and the power of
attorney and other authority, if any, under which it is signed or a notarially certified copy of
such power or authority shall be deposited at the registered office of the company not less than
48 (forty-eight) hours (or such lesser period as the directors may determine in relation to any
particular meeting) at which the person named in the form proposes to vote, or in the case of
a poll not less than 24 (twenty-four) hours (or such lesser period as the directors may
determine in relation to the particular poll) before the time appointed for the taking of the
poll, and in default the form of proxy shall not be treated as valid.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 99
Notice to Members continued
99Datatec Annual Repor t 2002
10.6.2 The form appointing a proxy which is an electronic communication, where an address hasbeen specified for the purpose of receiving electronic communications in the notice ofmeeting or in the form itself, and the power of attorney or other authority, if any, under whichit is signed or a notarially certified copy of such power or authority shall be received at thatspecified address not less than 48 (forty-eight) hours (or such lesser period as the directorsmay determine in relation to any particular meeting) before the time for holding the meeting(including an adjourned meeting) at which the person named in the form proposes to vote,or in the case of a poll not less than 24 (twenty-four) hours (or such lesser period determinedas aforesaid in relation to the particular poll) before the time appointed for the taking of thepoll, and in default the form of proxy shall not be treated as valid.
10.6.3 No form appointing a proxy shall be valid after the expiration of 6 (six) months from the datewhen it was signed, which shall include signature in any form which the directors may requirefor the purpose of establishing the authenticity or integrity of an electronic communication,except at an adjourned meeting or on a poll demanded at a meeting or adjourned meetingin cases where the meeting was originally held within 6 (six) months from the said date,unless so specifically stated in the proxy itself. A vote given in accordance with the terms ofan instrument of proxy shall be valid notwithstanding the previous death or mental disorderof the principal or revocation of the proxy or of the authority under which the proxy wasexecuted, or the transfer of the share in respect of which the proxy is given, provided that nointimation in writing of such death, insanity, revocation or transfer as aforesaid shall havebeen received by the company at the office before the commencement of the meeting oradjourned meeting at which the proxy is used. In this Article reference to “in writing” shallinclude the use of electronic communication, subject to any terms and conditions decided bythe directors.”
• the deletion of the terms of article 10.7 and the insertion of the following new article in place thereof:
“Subject to the provisions of the Act, a form appointing a proxy shall be in writing, or may be byelectronic means including without limitation, electronic mail or facsimile.”
• the deletion of article 29 and the insertion of the following new sub-articles in place thereof:
29.1 “Notices shall be served by the company upon each member personally or by transmissionthrough the post in a prepaid letter, envelope or wrapper addressed to such member at hisregistered address or transmitted by electronic mail or facsimile to such registered address.
29.2 Any member may notify in writing to the company an address, electronic mail address orfacsimile number. Such address shall be deemed to be his registered place of address within themeaning of Article 29.1, and if he has not notified such address, he shall be deemed to havewaived his right to be served with notices.”
• the deletion of the words “as the directors may determine” in Article 29.3 and the insertion of thewords “as the directors may determine, and in accordance with the requirements of the JSE SecuritiesExchange South Africa.” in place thereof;
• the insertion of the words “Any notice sent by the company using electronic communication orpublication on a website shall be deemed to have been served on the day after it was sent. Proof thata notice contained in an electronic communication was sent in accordance with guidelines determinedfrom time to time by the directors shall be conclusive evidence that the notice was given.” at the endof Article 29.5;
• the deletion of article 29.7 and the insertion of the following new article in place thereof:
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 100
Notice to Members continued
100 Datatec Annual Repor t 2002
29.7 “Any notice or document delivered using electronic communication or publication on a website or
sent by post to any member or beneficial holder in pursuance of these articles shall, notwithstanding
that such member or beneficial holder be then deceased, and whether or not the company has
intimation of his death, be deemed to have been duly served in respect of any registered shares or
securities in respect of which such beneficial holder has or is deemed to have a beneficial interest,
whether held solely or jointly with other persons, until some other person be registered or disclosed
in his stead as the holder or joint holder thereof, and such service shall, for all purposes of these
articles, be deemed a sufficient service of such notice or document on his heirs, executors or
administrators, and all persons (if any) jointly interested with him in any such shares or securities.””
8. To transact such other business as may be transacted at an Annual General Meeting.
Members who have not dematerialised their ordinary shares or who have dematerialised their ordinary shares and
registered them in their own name are entitled to attend and to vote at the meeting. Such members are entitled to
appoint one or more proxies to attend, speak and vote in their stead. A proxy need not be a member of the company.
Proxies must be lodged at the registered office of the company not less than 48 (forty-eight) hours before the time
allotted for the meeting.
Members who have dematerialised their ordinary shares and registered them in the name of a CSDP or broker should
contact their CSDP or broker to make the relevant arrangements to attend/vote at the meeting.
By order of the board
I P Dittrich
Company Secretary
17 July 2002
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 101
Administration
101Datatec Annual Repor t 2002
DIRECTORATEName Date of appointment Date of resignation Position held at 31 March 2002
Executive DirectorsJ P Montanana (British) † October 6, 1994 Chief Executive OfficerS F Lawrence (British) † November 7, 2000 Chief Executive Officer: LogicalD B Pfaff † July 1, 2001 Executive DirectorR S Rindel † September 1, 1995 Group Finance DirectorA M Smith (American) † July 17, 2001 Chief Executive Officer: Westcon
Non-executive DirectorsL Boyd ‡ December 6, 2001 ChairmanC B Brayshaw * December 6, 2001 DirectorM Karpul August 30, 1996 DirectorJ F McCartney (American) ‡† May 11, 1998 Deputy ChairmanC M L Savage *† December 6, 2001 DirectorC S Seabrooke *‡ October 6, 1994 Director
ResignationsJ S James September 1, 1998 December 6, 2001M J Lamberti October 23, 1997 October 22, 2001
*Audit and Compliance Committee ‡Remuneration and Nomination Committee †Business Risk Committee
Registered Office
Building 8Harrowdene Office ParkWestern Service RoadWoodmead, 2148South AfricaTelephone +27 (0)11 233 1000Telefax +27 (0) 11 233 3300
Registration Number
1994/005004/06
Secretary
I P Dittrich
Office – UK
110 Buckingham AvenueSloughBerkshireSL14PFUnited KingdomTelephone +44 (0) 1753 797 100Telefax +44 (0) 1753 819 284
Office – US
520 White Plains RoadTarrytownNew York 10591USATelephone +1 914 829 7170Telefax +1 914 829 7184
Sponsors
Rand Merchant Bank 1 Merchant PlaceCorner Fredman Drive andRivonia RoadSandton, 2196South Africa
Transfer Secretaries
Computershare Investor ServicesLimited (previously MercantileRegistrars Limited)10th Floor 11 Diagonal StreetJohannesburg, 2000South Africa
Corporate law advisors andconsultants
Edward Nathan & Friedland (Pty)Limited4th FloorThe ForumMaude StreetSandton, 2196South Africa
Auditors
Deloitte & ToucheThe Woodlands Woodlands DriveWoodmeadSandton, 2148South Africa
Principal Bankers – SA
The Standard Bank of SouthAfrica LimitedCommercial Banking Centre78 Fox StreetJohannesburg, 2001
Principal Bankers – UK
Royal Bank of Scotland plcAbbey GardensReadingBerkshire
Principal Bankers – US
IBM Global FinancingNorth Castle DriveArmontNew York, 10504
Internet Address
www.datatec.co.zawww.westcon.comwww.logical.comwww.masoncom.com
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 102
102 Datatec Annual Repor t 2002Printed by Ince (Pty) Ltd
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 103
Form of Proxy
Datatec Annual Repor t 2002
I/We
of
being a member/members of the above-mentioned company, hereby appoint:
or failing him/her,
or failing him/her, the chairperson of the Annual General Meeting as my/our proxy to vote for me/us on my/ourbehalf at the Annual General Meeting of the company to be held at 14h00 on 30 September 2002 and at anyadjournment of that meeting.
Signed at this day of 2002
Signature
Please indicate with an “X” in the appropriate space on the right how you wish your votes to be cast. If you return thisform duly signed, without any specific directions, the proxy shall be entitled to vote as he/she thinks fit.
In favour of Against Abstainresolution resolution from voting
1. Adoption of annual financial statements
2. Re-election of directors
2.1 Re-election of directors in one bulk resolution
2.2 Re-election of directors
3. Placing the unissued shares under the directors’ control
4. Confirming the re-appointment of the auditors
5. Ratifying directors’ remuneration for the past financial year
6. ORDINARY RESOLUTIONS
6.1 General authority to issue shares for cash
6.2 Amendment of Datatec Share Option Scheme
6.3 Authorise directors to give effect to the resolution
7. SPECIAL RESOLUTIONS
7.1 Repurchase by company of its own securities
7.2 Ratification and approval of share options to non-executive directors
7.3 Electronic notification to and from shareholders
A member entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend, speak andvote in his/her stead. A proxy need not be a member of the company. Proxies must be lodged at the registered officeof the company no less than 48 (forty-eight) hours before the time scheduled.
Please note that this proxy form is only for use by members who have not dematerialised their ordinary shares or whohave dematerialised their ordinary shares and registered them in their own name.
268014 – (DATT) – DATATEC – 29/7/02 – Proof No 12 – Page 104