Datatec Limited 2008 annual report 2008 annual report

Transcription

1 2008 annual report

2 Highlights Datatec Annual Report Financial highlights Revenue up 27% $4,0 billion (: US$3,2 billion) Gross margin 13,7% (: 13,1%) Operating profit up 25% $123,6 million (: US$99,1 million) Underlying* earnings per share up 21% 47,3 US cents (: 39,2 US cents) Cash distribution to shareholders up 20% 12 US cents (: 10 US cents) Operational highlights > Major acquisitions transform Westcon s European business and diversify product mix > Significant second half turnaround in the performance of Logicalis US > Creation of South American market leader with completion of US$77,2 million merger for Logicalis 2008 Financial results Revenue Distributable earnings Total assets Net (debt)/cash (31 936) Share performance on the JSE DATATEC VS SOFTWARE AND COMPUTER SERVICES SECTOR > Monthly 01/02/ /05/2008 based on a starting index of DTC JSE Software and computer services * excluding goodwill impairment, amortisation of acquired intangible fixed assets, profits or loss on sale of assets and businesses and unrealised foreign exchange movements on inter-company loans.

3 2 Our Group in brief OVERVIEW > WEB INFO > REVENUE BY REGION > Westcon Group, Inc. is the world s leading speciality distributor of networking, security, mobility and convergence products for leading technology vendors with particular expertise in the convergence of voice, data and video applications and technologies, including voice-over Internet Protocol (VoIP) security for networking and communications systems, videoconferencing and wireless connectivity. The Company s customers consist of value-added resellers, systems integrators and service providers that resell networking products and solutions to small- and medium-sized businesses, enterprise organisations and governments around the world. Westcon s primary vendor partners are Cisco, Nortel, Avaya, Juniper and Polycom, in addition to a host of other complementary vendors. Westcon, headquartered in New York, US and with operations in 18 countries, and approximately employees, adds value to its distribution activities by providing resources such as dedicated solutions programmes, technical expertise, sales and product training, engineering support and professional services. Among the solutions Westcon Group provides is the design and configuration of convergence and mobility networks, network extensions such as videoconferencing, network storage, unified messaging and network security. Westcon represents 71% of the Group s revenue and 68% of the Group s EBITDA % 46% Europe Asia-Pacific Americas 9% 1% Logicalis is an international provider of integrated ICT solutions, delivering secure, converged computing and communications infrastructure solutions and services, which sources its products from OEMs and distributors. They provide an end-to-end ICT delivery 42% capability for organisations work and social tools, their data centre and business integration, supported with a full suite of professional services, maintenance and managed services. Logicalis, headquartered in Slough, UK and with operations in nine countries in North America, South America and Europe and over employees, provides the architecture, deployment, integration and management of networks and systems to deliver solutions for over corporate and public sector customers. Logicalis customers include mid-market and large enterprise end-users, as well as telcos and service providers. Logicalis represents 8% 21% of the Group s revenue and 24% of the Group s EBITDA. North America South America United Kingdom Germany 49% Analysys Mason is the world s premier adviser in telecoms, IT and media. Through their global presence, they deliver strategy advice, operations support and market intelligence consulting services to leading commercial and public-sector organisations in over 80 countries. For more than 20 years, their intellectual rigour, operational experience and insight have helped their clients resolve issues ranging from development of operator strategy, evolution of national sector regulation and execution of major financial transactions, to the deployment of public and private network infrastructure. Analysys Mason consistently delivers significant and sustainable business benefits. The company has over 250 staff worldwide, with headquarters in London and offices in Cambridge, Dubai, Dublin, Edinburgh, Madrid, Manchester, Milan, Paris, Singapore and Washington DC. Analysys Mason represents 2% of the Group s revenue and 5% of the Group s EBITDA. Other emerging market holdings (Africa & Middle East) % 2% 5% 8% United Kingdom Europe Middle East and North Africa 18% 41% Asia USA Rest of world Westcon SA and Online Distribution are value-added networking distributors in South Africa and the Middle East, respectively, whose operations mirror those of the Westcon Group. African Legend Indigo is a provider of Enterprise Management Solutions, infrastructure solutions and professional services to the telecommunication industry, financial services and the public and private sectors in South Africa and the African continent. Comstor Middle East is a speciality distributor of Cisco-focused advanced technology solutions. Collectively these operations represent 6% of the Group s revenue and 4% of the Group s EBITDA % 28% South Africa Middle East and North Africa Sub-Saharan Africa 52%

4 3 EBITDA > SCOPE > GLOBAL MARKET PENETRATION > 120 US$ millions employees Operations in 18 countries 50 US$ millions employees Operations in 9 countries US$ millions employees Operations in 9 countries US$ millions employees Operations in 13 countries

5 4 Investment case Datatec offers shareholders an opportunity to invest in a leading international ICT Group that is uniquely positioned to take advantage of advances in networking, information security and convergence technologies. The spread of business activities across distribution, ICT Solutions, consulting and services provides the Group with multiple points of entry to the global market, and acts as a defensive hedge against the decline of any one vendor, geography or technology in a fastconsolidating and dynamic market. The Group has a strong operational management team, with considerable experience in the international ICT industry, and a successful track record of delivering organic and acquisition-led growth. REVENUE (ONGOING OPERATIONS) > EBITDA (ONGOING OPERATIONS) > HEADLINE EARNINGS/ (LOSS) PER SHARE > US$ millions 200 US$ millions 50 US cents (7) (7) OPERATING PROFIT PER EMPLOYEE > RETURN ON CAPITAL EMPLOYED > EBITDA MARGIN > % 16 16,3 15,9 4,0 % 3,5 3,8 3, ,5 3, , , , (10) (5) ,3 1,5 1,0 1,0 1,1 1, (1,4) 0,3 0,

6 Business streams Datatec Annual Report the Group s principal business streams. The spread of activities across these business streams not only provides the no particular vendor, technology, geography or industry sector dependency. 18% US$721 million Revenue 6% US$258 million Gross profit 17% US$95 million 25% US$135 million 76% US$3 029 million 58% US$317 million Distribution ICT Solutions Consulting & Services Strategy The Group s strategy is to deliver long-term, sustainable, above-average returns to shareholders through the development of its three principal operating divisions Westcon, Logicalis and Analysys Mason. These divisions are run as sector-focused standalone businesses to facilitate enhanced operational and financial performance as well as to react faster to technology change. The key elements of the Group s strategy include: and global presence. Our business philosophy Our business philosophy has its roots in an entrepreneurial culture. We strive to be ethical, honest, socially responsible and acceptable corporate citizens to all our stakeholders and to be an employer-of-choice attracting, developing and retaining talented people. We value business partnerships and we work towards creating shareholder value by developing a best-in-class portfolio of actively managed businesses operating in the high-value, fast-growing sectors of

7 6 Our history and vendor brands 1986 > Datatec was founded in 1986 as a distributor of networking access and communications solutions. The Group comprised two separate business divisions: Datatec Networking and Communications and POStec. Jens Montanana was the founder and chief architect behind Datatec Datatec successfully listed on the Johannesburg Stock Exchange and raised R9 million by way of an initial public offering. The listing placed the group in a strong position to take advantage of the expanding data communications and networking market. Revenues and profits grew significantly in the first reporting period. A third business division called PIPEX SA was formed in the same year UUNET Internet Africa was established as a joint venture between Datatec and UUNET Technologies offering extensive national and international access to the Internet as well as specialised design and support services Westcon completes four acquisitions NOXS, Crane, ReView Video and Cernet which opens up new opportunities in convergence, security and mobility in Europe, the US and Latin America. Westcon Africa Middle East acquires 51% stake in Sparnoon-Dynatech expanding its African footprint to seven African countries. Logicalis US acquires Carotek, a leading HP enterprise systems partner. Logicalis is awarded a US$150 million contract to operate public sector broadband aggregation service for the Welsh Assembly. The Group made a successful debut on AIM in London in October 2006 and since admission has become the largest technology stock on the AIM market. Datatec concluded its BEE transaction with African Legend Technologies. Logicalis made a further three acquisitions, Alliance Consulting, Computech Resources and CSF Solutions. Westcon Group became the world s largest distributor of Nortel products by adding the distribution operations of Ronco in the US The Group celebrated its 20th anniversary and reported record revenue figures. Datatec declared a maiden distribution of 5 US cents a share. >

8 International expansion - Datatec UK was established as a focused Internet technology and networking solutions value-added distributor in the wake of the acquisition of a number of distribution businesses in the UK. The acquisition of Logical Networks enabled the Group to provide the full scope of network integration services to blue chip companies in the UK and Europe. > 1998 The acquisition of US distributor Westcon Inc. saw the consolidation of Datatec s distribution businesses on five continents under the Westcon brand. The Group successfully achieved the transition from a regional player to a truly international operation The acquisition of the Manchester-based Mason Communications, a strategic telecommunications consultancy, saw the Group fulfil its strategy of providing networking-based products and services to organisations across the full spectrum of the IT supply chain Logicalis made three strategic acquisitions, all aimed at enhancing the company s position as a strategic IBM partner in the US and UK. Analysys Mason was formed out of the merger of the Mason Group and Analysys Consulting and Research, expanding the Group s global footprint and positioning it to take advantage of the burgeoning growth in mobile telephony > Logicalis sold its Australian and New Zealand operations to IBM Global Services for US$66 million. The sale came after an unsolicited offer from IBM Datatec sold its 76% stake in UUNET SA to WorldCom for over US$140 million. The Group made significant advances in its strategy to divest and realign those South African investments and businesses that were no longer core or synergistic in nature.

9 8 Six-year review for the year ended 29 February In US Dollars () Revenue Discontinued operations Operating profit before finance costs, depreciation and amortisation Operating profit/(loss) before goodwill adjustment/impairment (5 356) Westcon Logicalis (6 811) (7 390) Analysys Mason (1 400) Other Holdings (1 636) (5 916) (5 743) (4 686) (8 124) (4 747) (loss) (5 602) (6 727) (10 730) Discontinued operations (4 256) 342 (5 454) Operating profit/(loss) (13 219) (31 774) (20 522) (29 080) (26 383) (31 683) Attributable profit/(loss) (26 612) (31 513) Headline earnings/(loss) (9 213) (9 842) (16 775) (6 589) Non-current assets the parent Minorities interest Non-current liabilities Net cash inflow/(outflow) from operating activities (3 626) (31 948) Net cash (outflow)/inflow from investing activities ( ) (60 334) (54 382) (3 365) (32 594) Net cash inflow/(outflow) from financing activities (12 213) borrowings (31 936) Headline earnings/(loss) per share (7) (7) Basic earnings/(loss) per share (19) (23) Net tangible asset value per share

10 9 Summary of statistics Ratios Return on total assets 6,6% 7,2% 6,1% 1,0% 0,1% (0,6%) Return on capital employed 15,9% 16,3% 13,5% 2,3% 0,3% (1,4%) Return on ordinary shareholders funds 16,6% 16,9% 14,3% 1,5% (1,0%) (2,2%) 0,15:1 0,12:1 0,11:1 0,01:1 0,02:1 0,07:1 1,3:1 1,5:1 1,5:1 1,6:1 1,4:1 1,5:1 3,8% 3,8% 3,1% 1,1% 1,1% 1,0% Operating profit margin 3,1% 3,2% 2,6% 0,6% 0,0% (0,3%) 4,6 5,2 6,0 1,6 0,1 6,1 4,6 3,4 1,4 5,8 9,2 Stock exchange performance (JSE + AIM) Total number of shares traded ( 000) Total number of shares traded as a percentage of total shares 91,5% 60,7% 51,0% 39,7% 42,6% 65,9% Total value of shares traded (R million) Prices (cents) High Low Market capitalisation (R million) P:E ratio (17) 4 Shares issued Weighted average (million) Employees Number of employees at end of year Average number of employees Operating profit per employee () (5) (10) Gross assets per employee () Exchange rates Rand/US$ income statement translation rate 7,1 7,0 6,4 6,2 7,2 9,7 Rand/US$ balance sheet translation rate 7,7 7,2 6,2 5,8 6,6 8,1 Notes: 2003 represents an 11 month period for all Group companies other than Westcon, which is included for a 12-month period. Revenue in years 2003 to 2006 has been restated to consider the effect of the change in accounting for the sale of vendor maintenance contracts. Net tangible asset value per share is calculated on net asset value exclusive of intangible assets and capitalised development costs and the number of shares in issue at the end of the financial period and 2004 numbers have been restated in accordance with IFRS. Years prior to 2004 are presented under the previously applicable SA GAAP. Detailed segmental information is set out in Note 33 of the annual financial statements on pages 130 to 133. Return on total assets is calculated utilising operating profit. Return on capital employed is calculated utilising profit before goodwill adjustment/impairment and total shareholders funds and non-current liabilities. Return on ordinary shareholders funds is calculated utilising profit before goodwill adjustment/impairment and after net finance costs. Debt includes all long-term liabilities including amounts due to vendors of a long-term nature. The SA Consumer Price Index is sourced from The Standard Bank of South Africa Limited.

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13 12 Chairman s statement Stephen Davidson OBITUARY LESLIE BOYD > Leslie became Chairman of Datatec in December 2001 and made an invaluable contribution to the Group as Chairman of the Board at an important stage of the Group s development. He will be fondly remembered and we all owe him a debt of gratitude for his wise stewardship over the last six years. delighted to report continued success in the growth and development of our business, the satisfaction my colleagues and the untimely death of our previous on 28 March 2008 after a short

14 13 During the year, the Group completed a number of acquisitions which have improved its competitive position, geographic reach and enhanced our operational leverage around the world. Our increased scale and broader international reach, together with our comprehensive solutions and services, have helped the Group to expand into high-growth emerging markets and developing economies. strong performance for the Group with further increases in revenues and earnings, and significant progress reported across all areas of the business. As a result of our revenue target of US$4 billion (up by 27%) over the prior year. Despite a slowdown in the US, the preemptive steps we took during the middle of last year, coupled with tight operating cost controls and improving productivity, have underpinned our solid progress. Profits grew at all levels of the income statement and gross margins increased in all divisions. The Group continues to benefit from its international reach, geographic diversity and sector focus on solutions and services to multinational corporate customers, integrators, service providers and business users around the world. We believe we are well-attuned to improving our business through a combination of model has proved to be relatively defensive in more difficult market conditions. Significantly, over half of our business is now derived from outside the US. During the year, the Group completed a number of position, geographic reach and enhanced our operational leverage around the world. Our increased scale and broader international reach, together with our comprehensive solutions and services, have helped the developing economies. By virtue of this strong market position, the Group has been able to take advantage of favourable market conditions in most regions and markets. Whilst trading conditions remain subdued in the US, as yet there appears to have been little impact on demand in the rest of the world. Europe, South America, Asia-Pacific and, in particular, emerging markets have continued weakening US Dollar has helped to underpin the broadbased global demand for technology products (which are mostly priced in US dollars) and the lower growth conditions in the US have been largely offset by stronger growth elsewhere. The US and European operations continued to account for a large proportion of the Group s revenues and profits but, as planned, the higher growth emerging market operations are now contributing an ever increasing proportion of the Group s business. Now 58% of the Group s revenues are derived from outside North US for the first time. This is as a result of faster organic For the year as a whole 42% of revenues were generated from North America, 43% from Europe, 6% from Asia-Pacific, 6% from the Middle East and Africa and 3% from South America.

15 14 Chairman s statement CONTINUED The growth in South American operations is particularly notable. We firmly believe that this continent represents a major growth market for advanced technology products to have a significant impact on our business in the year ahead. its Latin American operations with those of Promon Tecnologia, the leading Brazilian network integrator and transaction for Datatec as it catapults Logicalis into becoming the leading independent integrator, not only in Brazil, but across South America. This earnings enhancing transaction came shortly after Westcon also increased its presence in Brazil, by adding a full service capability to distribute and support the country. Both initiatives should transform our operations in South America and we look forward to reporting on progress in these markets later in the year. PERFORMANCE > 2008, Group revenue increased by 27% (12% organic) to over US$4 billion (: US$3,2 billion), while gross margin increased from 13,1% to 13,7%. Gross profit increased by 32% from US$415,2 million to US$547,1 million, while operating costs increased 34% from US$295,8 million to US$396,4 million, which operate at higher margins with higher operating costs. 26% to US$150,8 million (: US$119,4 million). Operating profits increased by 25% to US$123,6 million (: US$99,1 million). Underlying earnings per share rose 21% to 47,3 US cents (: 39,2 US cents) and headline earnings (: 40,8 US cents). Shareholders will benefit from a 20% increase in share (90 SA cents) (: 10 US cents per share (72 SA cents)) out of share premium, which represents a cover of 3,8 times relative to headline earnings. CORPORATE GOVERNANCE > Datatec 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 adopt the principles of corporate governance contained PROSPECTS > During the coming year we believe that the Group will continue to benefit from its improving to high-growth emerging markets and developing economies should help balance any slowdown in the more mature markets of the US and Western Europe. We remain confident that the Group s business model will remain resilient and continue to deliver growth as demand, even as other areas of the global economy show signs of weakness. businesses will continue to improve driven by recent system and process enhancements, the depth of its

16 15 management and operating leverage brought through scale and geographic diversity. However, we will maintain prudent management of the Group s cost base and tight controls on working capital. The current year has started well and in line with deterioration in global markets, but is confident of continuing improvement in Datatec s financial performance in the year ahead. BOARD AND APPRECIATION > During the year we made a number of significant Board changes, including 28 March of roles across the Group for nine years. Prior to taking up his new position he was Group corporate director, Group s corporate Head Office functions and emerging Group company secretary for five years, and successfully managed the Group s dual listing in London during my fellow directors for their continued contribution and Datatec s employees for their splendid efforts throughout the year. Datatec between 1998 and 2002 and has been the Stephen Davidson director, and chairman of the audit, risk and compliance committee, who stood down from the Board at the Group s annual general meeting on 6 August. he joined the Board in resignation from the Group in order to pursue alternative Dittrich, who was appointed as Group Finance Director with effect from 1 May 2008, after joining the Board on 1 March 2008.

17 16 Board of Directors Jens Montanana Chief Executive Officer Age: 47 (British) Date of appointment: 6 October 1994 Jens is the founder and chief architect behind Datatec, which he established in Between 1989 and 1993 Jens served as managing director and vice-president owned subsidiary of US Robotics which was MA, an early pioneer of network switching of Datatec which listed on the JSE Limited in November 1994 and on the Alternative 100% owned subsidiary company, Logicalis. 2. Ivan Dittrich Group Finance Director Age: 35 (South African) Date of appointment: 1 March 2008 been with Datatec for the past nine years. responsible for investor relations and group dual listing in London during Stephen Davidson Independent Non-executive Chairman Age: 52 (British) Date of appointment: 1 February Stephen is chairman of SPG Media plc, Enteraction TV Ltd and Digital Marketing positions in investment banking, most recently at WestLB Panmure where he was global head of media and telecoms, investment banking, then vice-chairman of investment banking. From 1993 to 1998 Association from 1996 to John McCartney Independent Non-executive Director Age: 55 (American) Date of appointment: 16 July director of Datatec from 11 May 1998 to 30 September 2002 and has been a president and chief operating officer for of US Robotics in John is also a

18 Datatec atec Annual Report Prof Wiseman Nkuhlu Independent Non-executive Director Age: 64 (South African) Date of appointment: 1 September 2006 Prof Nkuhlu, who was trained as a chartered accountant and who served currently serves as chairman of Pan-African and AngloGold Ashanti. Between October 2000 and July 2005 he served as economic advisor to President Thabo Mbeki New Partnership for Africa s Development 6. Cedric Savage Independent Non-executive Director Age: 69 (South African) Date of appointment: 6 December 2001 in 1977 as managing director of Tongaat Foods and thereafter progressed to and director of other JSE-listed companies, and Denel. 7. Chris Seabrooke Independent Non-executive Director Age: 55 (South African) Date of appointment: 6 October 1994 Limited, chairman of Setpoint Technology Holdings Limited and Metrofile Holdings Limited and deputy chairman of Massmart Holdings Limited. He is also a director of Net1 UEPS director of a number of unlisted companies, Partners Fund Nick Temple Independent Non-executive Director Age: 60 (British) Date of appointment: 1 October 2002 Nick has had a distinguished career positions around the world. He was one of He currently serves as a director of a number of LSE- listed companies including also the chairman of a number of privatelyowned companies

19 18 Chief Executive Officer s report Jens Montanana The spread of activities across these three business streams provides the Group not only with multiple points of leverage a defensive businesses model with no particular vendor, technology, geography or industry

20 19 We will continue to target faster growth emerging markets and developing countries, as demonstrated by our recent transactions in Brazil, Turkey and Africa. These markets are attractive because of their often superior growth characteristics and lower cost of entry when compared to more mature markets represented our fifth successive year of improvement in revenues and earnings across the Group. We continue to benefit from our scale and target of US$4 billion, with the non-us operations now accounting for 58% of total revenues (: 52%). The Group s operations in Asia-Pacific, Africa and the Middle East and South America continued to grow and now account for 15% of the Group s revenues (: 14%). 13,7% and increased operating profit before finance 26%. Operating profits rose 25% to US$123,6 million from US$99,1 million, and headline earnings per 40,8 US cents). Underlying earnings per share grew by 21% from 39,2 US cents to 47,3 US cents. Of the US$4 billion revenues generated during 2008, some 76% came from product distribution, principally through Westcon Group, but also from our other operations in Africa and the Middle East (eg. Westcon derived principally from Logicalis but also includes our The balance of 6% is attributable to revenues derived from consulting and services generated across our operating units, which comprise consulting revenues of Analysys Mason and attached services from both the services and other professional services. These activities they contributed more than 17% of the Group s gross profit. Despite a slowdown in the US, tight operating cost controls and improving productivity have underpinned solid progress for the year as a whole and in the second half of the year in particular. Each of our principal business divisions, Westcon, Logicalis and Analysys Mason, had strong years and are described further below and in more detail in their own divisional reports on pages 28 to 49. for the Group, this year we have also provided an analysis of revenue streams across the Group s principal how both revenues and profits are derived. The spread of activities across these three business streams provides the Group not only with multiple points business model with no particular vendor, technology, geography or industry dependency. MARKET > While the financial and consumer sectors remain under pressure in the US and increasingly in some parts of Europe, as yet there seems to have been limited impact on the corporate market with respect to The weak US Dollar has helped to underpin the broad-based global demand for technology products

21 20 Chief Executive Officer s report CONTINUED cycles of innovation driven by the convergence of personal online communications use, unleashing a whole new generation of data-intensive and network-hungry applications and new content services. Significantly, unlike the setback following the dot.com collapse in shifted their business models away from direct selling in favour of growing third-party channels such as through resellers and distributors to improve market access. This continuing trend clearly supports the positioning of Datatec and its divisions in distribution channels, solutions integration and professional services. STRATEGIC FOCUS > The Group continues to make good progress with its strategy to deliver long-term, sustainable, above-average returns to shareholders by focusing on a combination of organic growth in the During the year, the Group completed a number of enhanced its overall scale and global presence. These overviews below and in more detail in the relevant divisional reports on pages 28 to 49. opportunities to consolidate where we can improve the Group s market share and financial returns or facilitate ongoing participation of the local management of individuals and ensuring that their interests are aligned to the Group s, Datatec benefits substantially from their local knowledge and contacts and allows the Group to scale rapidly without adding substantially to Head Office costs. Specifically, we will continue to target faster growth emerging markets and developing countries, as demonstrated by our recent transactions in Brazil, Turkey and Africa. These markets are attractive because of their superior growth characteristics and lower cost of entry when compared to more mature markets. Further WESTCON > Westcon accounted for 71% of the Westcon is the world s leading speciality distributor in networking, security, mobility and convergence for Avaya, Juniper and Polycom. Despite the softening of the US market, Westcon delivered another strong performance. Overall revenue increased 26% from US$2,3 billion to US$2,9 billion, US$319 million in revenue, in addition to an organic revenue increase of 12%.

22 21 Gross margins increased from 9,5% to 10,4% with gross profit increasing 37% from US$216,2 million to US$296,7 million. The increase is attributable to gross margins in Europe and Asia-Pacific. from US$82,7 million to US$102 million, while overall Across all regions Westcon continued to gain market solutions in higher growth SMB/SME sectors, and through providing outsourced logistics and procurement services to a growing number of international service providers and global system integrators. During the year, Westcon invested heavily in developing its convergence and information security portfolio which products made up 55% (: 60%) of Westcon s revenue, 11% Nortel (: 13%), 11% Avaya (: 9%), 13% security (: 4%) and 10% other Westcon s revenue was generated in Europe, followed by 45% in the Americas and 9% in Asia-Pacific. During the year the Group completed a number of market position, broaden its portfolio and strengthen its vendor relationships. Westcon into a market-leading position in Europe in not just data networking, but also in the high-growth The integration of these assets has progressed well and they have made a strong contribution to the improved performance of Europe in the year under review. videoconferencing solutions, added voice and to high-growth markets, Westcon also made a number of strategic investments in Eastern Europe and South America. a 50% stake in wholly owned subsidiary Neteks, a networking and security distributor whose vendor year. As a result of the joint venture, Westcon Group became the leading networking and security distributor in that region. With a GDP of US$358,5 billion and population of over 71 million, Turkey is an important increasingly important role. services from its established Westcon operations in Brazil. This new organic initiative has the potential to

23 22 Chief Executive Officer s report CONTINUED steps in the Group s strategy to leverage Weston s scale geographically to mirror the growth objectives of its leading vendor partners. LOGICALIS > Logicalis accounted for 21% of the solutions, delivering secure, converged computing and communications infrastructure and services. Specialising in the areas of advanced technologies, the Group s integrated services portfolio comprises the architecture, deployment, integration and management of customers networks and systems to deliver optimum solutions that meet their business needs now and into the future. performed strongly. Tougher market conditions in the US accelerated a strategic assessment of the US business model during the first half and a restructuring which resulted in multiple service delivery activities being unified under a focused management team and a streamlining of the cost base. Revenue for the year increased by 22% to US$845,1 million (: US$693,1 million) including 2008 organic revenue increased by 10%. Product and solutions sales growth of 19% year-onyear generated additional demand for consulting and technical services which increased by 27%. Managed services and annuity revenues grew 33% year-on-year. Gross margin percentage for the year was 22,9% (: 22,3%) with services and annuity margins off-setting slightly weaker product margins. The gross profit increased 25% on the prior year to US$193,8 million (: US$155 million). Florida, whilst broadening and deepening its relationship with HP. The Group also purchased the outstanding 20% minority interest in its South American operations and increased its stake in its Germany-based services business to 75%. Across the business, the Logicalis management has increased the focus on client-specific solutions that leverage the full Logicalis portfolio. Each region has developed single solutions sales and consulting services units. This approach improves the value added and further strengthens client relationships. A significant number of major long-term customer contracts have recently been secured. Most notable was the awarding of a US$150 million seven-year contract with the Welsh Assembly Government for the provisioning and support of a new national broadband network. of the market rate by offering a customer-driven portfolio of solutions that address business efficiencies through growing economies. the leading Brazilian network integration businesses, completed in May 2008, is significant. The combination of Logicalis South American businesses in Argentina,

24 23 has transformed Logicalis into the largest network integrator in South America, with over 500 employees The merger also provides a solid foundation for further growth in the Latin American market and increases Logicalis capability to service major multinational clients across the region. We anticipate a growing proportion of profits to be that profits will be derived evenly from our operations in the US, Europe and South America. ANALYSYS MASON > Analysys Mason accounted Analysys Mason provides strategic and technical consulting to many of the industry s leading service providers, regulators and government bodies. television and online media content is being fuelled by widespread deployment of faster broadband internet infrastructure. The Group is particularly well positioned to this market around the world. Revenues grew to US$63,5 million (: US$61,4 million). Telecoms strategy consulting revenues have continued to enjoy strong growth in recent months with a compound annual growth of 12% over the last three years. Analysys Mason has also seen international revenues now representing 60% total revenue (: 55%). Much of this growth has come region where a Dubai office was recently established to capitalise on the opportunity in that area. Gross margin improved to 40% (: 36,3%), (: US$6,2 million) at a margin of 10,9% (: 10,1%) and operating profit of US$6,2 million (: US$5,8 million). On 19 February 2008 Analysys Mason completed that can be offered to clients. The business will be fully integrated into the Analysys Mason consulting model additional revenue in Analysys Mason has increasingly worked to deliver projects that span the full business development cycle of its clients, including research, strategy, planning and enhancing the value it delivers to customers, and in response to clients who are currently engaging with other parts of the Group, it has consolidated its portfolio of offerings under the integrated Analysys Mason brand. EMERGING MARKET HOLDINGS > Datatec s Africa and Middle East operations made up 6% of the Group s holding company for Datatec s 55% stake in Westcon up 23% to US$85 million (: US$69,2 million) and African-focused businesses which distribute products similar to the rest of Westcon.

25 24 Chief Executive Officer s report CONTINUED The other WAME operation s revenues were its first reporting period as part of the Group. The gross be achieved by better procurement capability and the model. African operation formed in partnership with African Legend Technologies as part of South Africa s Black Economic Empowerment programme. This business generated revenue of US$51,1 million (: loss of US$0,2 million). distributor for data networking products and services, covering the Middle East, Western Asia and North Africa, revenue increased by 24% to US$55,6 million Middle East, started operations in February. growing market in the Middle East. PROSPECTS > There is no clarity yet on the impact of the financial crisis in the US and how it may affect the broader economy long term. Recent poor economic US Dollar is helping to underpin a relatively strong tech sector with demand in fast-growing emerging economies off-setting any softening of the US market. Whilst Datatec is not immune to any slowdown in the global economy, we remain confident that our global leading vendor portfolio will help to insulate the Group against any adverse market conditions We believe that the defensive nature of our business model will continue to generate superior financial performance over any cycle. We are aiming to double the proportion of our revenues recent investments in South America will contribute of our growth coming from organic operations, with The growth outlook for Westcon SA remains strong, will take a further 12 months before starting to realise the higher growth opportunities and deliver margins in line with the rest of the Group. The growth in the Middle East market has been sustained this year and is hospitality sectors. will continue to improve in the year ahead, driven by value-added services streams across the Group. The in the medium term.

26 25 For the year ahead, we have set a number of core objectives for the business: We will report on progress against these objectives in Jens Montanana

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29 28 Westcon divisional report Tom Dolan John O Malley The company views its focus on advanced technologies as the key differentiator between Westcon and its broad-line multinational competitors. Management believes that its core-vendor partners, Cisco, Nortel, Avaya, Polycom and Juniper, will continue to develop new technology categories for which Westcon can offer valued-added solutions developed specifically to help its reseller customers compete effectively in the market. HIGHLIGHTS > Revenue up 26% to US$2,9 billion REVENUE % BY VENDOR > (: US$2,3 billion) 13% 11% 10% 55% Gross profit up 37% to US$297 million (: US$216 million) 11% Cisco Nortel Avaya Security Other EBITDA up 23% to US$102 million (: US$83 million)

30 29 While the financial markets in the US and other regions continue to tighten, opportunities in networking particularly convergence, security and mobility continue to expand. Demand for effective IT security remains paramount as companies begin to rely increasingly on mobile hardware and applications this has created significant demand for VoIP security products that protect mobile networks and devices. distributor of networking, security, mobility and convergence products for leading technology vendors data and video applications and technologies, including and communications systems, videoconferencing and wireless connectivity. The company s customers consist of value-added resellers, systems integrators and service providers that resell networking products and solutions to small- and medium-sized businesses, enterprise organisations and governments around the world. Avaya, Juniper and Polycom, in addition to a host of other complementary vendors. Westcon adds value to its distribution activities by providing resources such as sales and product training, engineering support and professional services. Among the solutions Westcon Group provides is the design and configuration of such as videoconferencing, network storage, unified messaging and network security. STRUCTURE > Westcon Group operates its multinational distribution business through its branded customers through its world-class logistics capabilities, powerful solutions programme infrastructure, innovative financing alternatives and through its highly skilled sales, marketing, technical and operational staff. oriented advanced technology solutions and operates in North and South America, Europe, Australia, Asia offerings, which are centred on convergence, security and mobility, include OneDefense, OneVoice, OneNetwork and OneWave. and Europe, is focused on delivering solutions from vendors like Nortel and Avaya, while providing a wide range of complementary voice and data also offers security solutions from vendors like Blue Nokia and many others. Westcon programmes America, is focused on delivering convergence and unified communications solutions from Avaya while hardware and applications SUMMARY >

31 30 Westcon divisional report CONTINUED 2008 OPERATIONAL HIGHLIGHTS > > Organic growth of 12% > Gross margins improve to 10,4% > NOXS and Crane acquisitions create leadership position in Security and Convergence > Significant improvement in product mix > Completed acquisition of Review Video (US), a specialist distributor of networked videoconferencing and collaboration solutions > Acquired Cernet (Americas), providing entry into Mexico and Central American markets > Entered into a strategic joint venture in Turkey prior year. The company achieved this growth through a combination of strong organic growth and strategic Telecommunications which together significantly increased Review Video, a specialist distributor of videoconferencing a multinational basis, while broadening its technological vendor partners such as Avaya and Polycom. Westcon s advanced technology focus is a key factor supporting the higher-than-average gross margin that the company achieves. Enabling and supporting this success is a set of marketing strategies which is geared to leverage the internal intellectual capital of any sales and marketing team against the customer base of the whole company. These marketing strategies are embodied in Westcon Group s branded programmes, which are now available to customers all over the world.

32 31 Westcon will continue to seek to leverage its international reach and global scale for its vendor partners which are increasingly turning to Westcon to help them to develop their global channels to market, especially for more complex technologies. OneVoice and OneDefense were launched in Singapore and Turkey, OneWave and OneNetwork were launched were launched in Brazil. Westcon s technology-focused solutions programmes continue to provide a very customers. Westcon Group continued to perform ahead of budget it firmly held its ground in other regions. The company forged important vendor relationships around the globe, signing a distribution agreement with Juniper to include Europe. enhancing its programme-offering worldwide, Westcon also offered many other added-value customer services States, targeted network and managed services in customers around the world. During the year, Westcon Group received several industry accolades from its peers and the media. For up the award for the last five consecutive years. CRN, an important channel publication in the United States, awarded Westcon Group with no less than 13 awards in its annual sourcing study. Among the awards Westcon picked up were number one Distribution Programmes, number one Emerging one Financing and available credit. Two notable channel publications in Europe, Microscope and CommsBusiness, also awarded Westcon Distributor PEOPLE > The key to Westcon Group s success around the world is its diverse and talented employees. Westcon employees in each of the markets in which it operates, and continually invests in its employees through internal training and career-development programmes. Westcon employs over employees around the world and

33 32 Westcon divisional report CONTINUED prides itself on its strong and stable workforce. The retention rate for employees with five years seniority is strong at 37%. During the year, Westcon launched Westcon University, an internal training and career development programme for employees, and also enhanced its orientation programme for new hires. to be more efficient, it is becoming more important for their networks to be able to support productivity- security remains paramount as companies begin to rely increasingly on mobile hardware and applications this that protect mobile networks and devices. This year, Westcon once again initiated a company survey to its global employee base to gain insight into company morale, alignment with strategic direction and overall satisfaction. This was the third year Westcon captured this information as a benchmark, and the survey continues to yield very positive results, as well as helping management gauge employee productivity issues. FINANCIAL PERFORMANCE > During the year, Westcon s revenue increased 26% to US$2,9 billion contributed US$319 million in revenue, resulting in an increase in organic revenue of 12%. This reflects an increase across all geographic regions due to strong CONTINUED FOCUS ON ADVANCED TECHNOLOGIES > The company views its focus on advanced technologies as the key differentiator between Westcon and its broad-line multinational competitors. Nortel, Avaya, Polycom and Juniper, will continue to develop new technology categories for which Westcon Gross margins increased from 9,5% in to 10,4% in 2008 with gross profit increasing 37% from US$216 million to US$297 million. The increase is coupled with increased gross margins in Europe and Asia-Pacific, offset by lower gross margins in the Americas. can offer valued-added solutions developed specifically to help its reseller customers compete effectively in the market. Additionally, by continually developing its portfolio of new complementary vendors, and through networking alternatives for its customers. and Asia-Pacific were offset by the twin effects of lower MARKETS > While the financial markets in the US and other regions continue to tighten, opportunities in networking particularly convergence, security and market contraction. As end-user companies face pressure Westcon used US$156 million for investing activities. Of this amount, US$145 million was used for US$163 million of cash, which was used to fund the

34 33 revenue followed by 11% for Nortel, 11% for Avaya, 13% for security and 10% for other developing vendors. From a geographic perspective, 46% of Westcon s revenue was generated in Europe followed by 45% in the Americas and 9% in Asia-Pacific. FURTHER PROSPECTS > Whilst the US market remains soft and the outlook remains uncertain, management remains confident that Westcon s multiyear growth trajectory will remain intact over the coming year. Westcon will continue to seek to leverage its international reach and global scale for its vendor partners which are increasingly turning to Westcon to help them to develop their global channels to market, There are significant opportunities to further consolidate and invest in new markets to parallel the objectives of our major partners. Geographically we see the biggest growth opportunities to be in Asia-Pacific and Latin Europe by virtue of our increased scale and operating efficiencies. Westcon s strengths are its geographic diversity and synergistic technology, coupled with a sector specialism that has positioned us at the forefront of the global ingredients and depth of management to continue to further growth in the year ahead.

35 34 Logicalis divisional report Los Angeles office Ian Cook Overall, investment in IT is expected to continue to show steady growth over the next few years with a number of higher growth areas driven by convergence and unified communications, consolidation and virtualisation technologies. Industry analysts also forecast strong growth in outsourced managed services. Nigel Drakeford-Lewis HIGHLIGHTS > Revenue up 22% to US$845,1 million REVENUE % BY VENDOR > (: US$693,1 million) 21% 11% 2% 39% Gross profit up 25% to US$193,8 million (: US$155,0 million) 27% IBM Cisco HP Others EMC EBITDA up 35% to US$36,2 million (: US$26,8 million)

36 35 The group s focus remains on higher demand advanced technologies that deliver secure, converged computing and communications infrastructures. These include wireless, IP communications, storage and data management, intelligent networking and security. OVERVIEW > Logicalis is an international provider of integrated information and communication technology and communications infrastructure and services. Specialising in the areas of advanced technologies the group s integrated services portfolio comprises the architecture, deployment, integration and management of customers networks and systems to deliver optimum solutions that meet their business needs now and into the future. Our business model is built around helping our customers use technology to embrace, support and drive their strategic business processes. We help them advanced technical skills, world-class products, and employs around people worldwide, including highly trained service specialists who design, specify, meet the needs of over corporate and public sector customers. To achieve this, Logicalis maintains strong partnerships with technology leaders such as THE YEAR IN REVIEW > Logicalis management is focused on building strong businesses that provide the core information and communication technologies that strategy with above-market-rate organic growth targets. Tougher market conditions in the US in the first half of the year caused planned revenue growth not to materialise. This accelerated a strategic assessment of the US business model and resulted in service delivery being unified under a focused management team and a streamlining of the cost base to match the ongoing activity level. After a weak first-half performance, for the full year, group revenues of US$845,1 million were up 22% and year. During the financial period under review, Logicalis Alabama, Tennessee and Florida, while strengthening its revenue by US$14 million in the fiscal year. During the year, the group also purchased the 20% minority interest in its South American operations and increased its stake in a Germany-based services business to 75%. After the year-end, on 17 March 2008, the group operations across South America with the business of

37 36 Logicalis divisional report CONTINUED 2008 OPERATIONAL HIGHLIGHTS > > Organic growth of 10% > Gross margin expanded to 22,9% > Robust growth in profitability in the UK operations > South America had very strong revenue growth of 71% > Completed acquisition of Promon largest independent network integrator in South America > US H1 restructure resulted in strong profit recovery despite softening in the market integrator, to create a regional market leader with a 2 May strong consulting and service offerings. PT enjoys a marketleading position in the Brazilian service provider and telecommunications market, and complements Logicalis Under the terms of the merger, Logicalis holds 70% of the shares of the enlarged holding company which will own all of the South American operations with Promon SA, PT s parent, retaining the remaining 30% shareholding. The combined operation will be the largest independent network integrator in South America with almost 500 employees and annualised revenues approaching US$300 million. The will trade under the Logicalis name whilst the Brazilian operation will be called PromonLogicalis and will be based The focus of the division will be to capture synergies across South America by providing cross-border solutions and services to customers in the region. The board and management of PromonLogicalis Latin America will comprise

38 37 The group will seek to make further acquisitions that extend its services business as well as its participation in other strategic geographic markets. This transaction marked an important step for Logicalis, to realise its plans to double revenues and improve the increase its geographical reach into the faster growing economies. Management has long believed that there is a significant market opportunity for an integrator to South American market. The merger with PT provides the platform for further growth in the South American market and enhances Logicalis capability to service major multinationals that operate in the region. Logicalis now enjoys the following commanding market positions: mid-market segment). Uruguay and Brazil. MARKETS > the year under review saw trading conditions soften compared to the previous year with economic growth conditions remained strong, driving investment in 71% growth in revenue. advanced technology products enjoying growth of servers market, HP enjoyed high, single-digit year-on- systems and technology group revenues of -3% (driven by lower zseries and iseries revenues). number of higher growth areas driven by convergence and unified communications, consolidation and strong growth in outsourced managed services. Latin year to decisions are increasingly being made by functional computing platforms and applications are becoming value-added resellers such as Logicalis increasingly need to engage with customers on a business level to identify the issues for which solutions will be designed. Logicalis will focus on new sales and partnering models, developing and maintaining deep skills across a broad spectrum of technologies and applications, better marketing, leveraging vendor and distributor relationships as well as strong financial and business management. STRATEGY > Logicalis solution-led and service-oriented go-to-market strategy is built around four proposition

39 38 Logicalis divisional report CONTINUED portfolio of solutions underpinning each theme. Each of these themes is focused on enabling our customers achieve the key strategic goals of business agility, continuity, responsibility and governance. The group s strategy is based on three key principles: services to our customers. growth in profit and value by being a leading player in our chosen markets and with strength in scale, efficiency objectives include: US and Latin American operations. orientation tied to better strategic marketing and proposition development. technologies. growing the capabilities of our sales team, through support. our customer bases. brand. driving efficiencies. measurement by operation and by business line. Logicalis will focus on building long-term corporate relationships by: partner for our entire portfolio. service capability through investment in resources and competitors can gain entry. higher demand, advanced technologies that deliver secure, converged computing and communications storage and data management, intelligent networking and security. This strategy, combined with our established technical skills, has been recognised by our key vendors for the year under review. for its integrated management system supporting computing and communications solutions, information certification, the Environmental Management System.

40 39 Moving forward, Logicalis will seek to make further participation in other strategic geographic markets. FINANCIAL PERFORMANCE > Revenue was US$845,1 million for the year ended 29 February This compares to revenue of US$693,1 million 10% over the prior year on a like-for-like basis. Logicalis market. Product sales growth of 19% year-on-year generated additional demand for consulting and technical services which increased by 27%. Managed services and annuity revenues grew 33% year-on-year. The days sales outstanding for accounts receivable of 44 days, was better than the 50 days achieved at 28 February. Net cash was US$44,3 million, a significant increase on the US$8,6 million at 28 February, with the increase primarily due to the profits generated for the year, the reduction in the accounts receivable days sales outstanding and some favourable trading terms with certain suppliers. PEOPLE > and management works closely with its vendors to ensure that employees are trained appropriately, taking full advantage of vendor-funded training schemes wherever possible. We are committed to building an environment where each employee can fulfil his or her potential. Total gross margin percentage for the year was margins offsetting slightly weaker product margins. The total gross margin increased 25% on the prior year. previous financial year, lower than the 25% growth in gross margin. Further leverage benefits were held back by the failure of planned revenue growth in the US to the US operations. previous financial year, an increase of 35%. After charges for depreciation and amortisation of intangible assets, the total operating profit was FUTURE PROSPECTS > The three main goals for the coming year are to achieve a revenue growth rate in operating margins by increasing the services and annuity to focus on driving sales volumes, by continuing to develop compelling solutions, growing the customer With the increased uncertainty in the macro-economic outlook, management is alert to any reduction in revenue from market-related drivers. However, Logicalis remains focused on delivering the right solutions to our customers

41 40 Analysys Mason divisional report Simon Jones Analysys Mason s reputation is built upon the sector-specific knowledge, intellectual rigour, and operational experience of its consultants, whose expertise provides industry-leading insight into issues facing the convergence industries of telecoms, IT and media. Bill Moore, Finance Director HIGHLIGHTS > REVENUE % BY GEOGRAPHY > Revenue up 3,4% to US$63,5 million (: US$61,4 million) 18% 8% 26% Gross profit up 14% to US$25,4 million 5% 2% (: US$22,3 million) MENA Asia US UK 41% Europe Rest of world EBITDA up 11% to US$6,9 million (: US$6,2 million)

42 41 The internationalisation of the company has continued to improve throughout the year, with 60% of all business now derived from outside the UK. OVERVIEW > Analysys Mason is established as the consulting, market intelligence and implementation services on a global basis. Analysys Mason provides strategy advice, operations support and market intelligence to leading players in the industry, including: operators, broadcasters, vendors, financial institutions, regulators, new media companies, public sector organisations and enterprises. Analysys Mason has a wide range of clients in over 80 countries around the world which it services from Madrid, Manchester, Milan, Paris, Dubai, Singapore significant was the improving operating leverage derived ( US$6,2 million) and would have been greater but for some restructuring costs. The revenue gains were accompanied by better utilisation of consultants, reflected in the overall improvements in both gross and net margins. The internationalisation of the company has continued to improve throughout the year, with 60% of all business North Africa in particular continued to show strong growth and Analysys Mason opened an office in Dubai to make the most of this opportunity. North America and Asia have also showed good progress in. Analysys Mason offers end-to-end solutions that support a client s entire business development cycle and offers a portfolio of services which is delivered out of two major divisions: consulting and research: on setting strategy, planning for change, and implementing that change. research products. THE YEAR IN REVIEW > Mason improved its financial performance at all levels of the income statement. Revenue grew modestly to US$63,5 million ( US$61,4 million) but more Strategic telecoms consulting remained strong during the year, especially for new emerging markets driven by and management in the research division led to a strong turnaround in performance with a resurgence of revenue. The group continues to invest actively in this area. Analysys Mason continued to win challenging and group s three strongest client categories continue to be government.

43 42 Analysys Mason divisional report CONTINUED 2008 OPERATIONAL HIGHLIGHTS > > Further globalisation of client base with 60% of revenues now coming from non-uk clients > Core telecoms consulting revenue have had 12% CAGR over the last three years > Strategy consulting business had record performance at both revenue and profit > Research business had strong revenue growth of 24% > Established Dubai office for Middle East and North Africa (MENA) region > Completed the acquisition of Redbox Consulting in February 2008 On 19 February 2008 Analysys Mason completed the the range of services that can be offered to clients. The business will be fully integrated into the consulting division revenues in MARKETS > Analysys Mason s addressable market continues to be characterised by rapid technological and regulatory change. While strategy work has continued to grow at a pleasing rate there has been a significant shift in the market away from large-scale network roll-out projects in developed markets, to more business-driven operational improvement, restructuring, operator launch and optimisation projects. The group responded to this change by focusing on its core by 12% per year since 2005/6. There are a number of key industry drivers which will drive the business over the coming year. These include: product innovation, fibre deployment. markets.

44 43 Strategic telecoms consulting remained strong during the year, especially for new emerging markets driven by deregulation and mergers and acquisitions, such as the Middle East and Africa. Changes to the business model and management in the research division led to a strong turnaround in performance with a resurgence of revenue. service providers cash flow impact of legacy decline vs digital content and applications. dividend review. STRATEGY > Analysys Mason s reputation is built upon the sector-specific knowledge, intellectual rigour, media. The group s service portfolio is clearly defined into strategy, implementation, planning and review, with market intelligence at the centre of its work. Analysys Mason delivers services to the industry across five major areas (see diagram overleaf). Analysys Mason has increasingly worked to deliver projects that span the full business development cycle, with its strategy of continually enhancing the value it delivers to partners, and in response to clients who are currently engaging with all parts of the group, the group is now moving to offer the full portfolio of client services under a single brand. On 30 April 2008 the new brand was launched and the group s four constituent companies (Analysys single name: Analysys Mason. FINANCIAL PERFORMANCE > Revenue grew to telecoms consulting revenues have seen a much stronger improvement with compound annual growth of 12% over the last three years. Analysys Mason has also seen revenues now represent 60% of total revenue (: 55%). Much of this growth has come from the Middle increased to US$5,9 million (: US$3,8 million). This improvement in profitability has been driven by a stepped increase in gross margin to 40% (: 36,3%). PEOPLE > advisory group Analysys Mason s success depends

45 44 Analysys Mason divisional report CONTINUED CLIENTS > Fixed and mobile operators, broadcasters, financial institutions, regulators, public sector bodies, enterprises, IT and technology companies, equipment manufacturers ANALYSYS MASON OFFICES > Europe, Asia, Americas, Middle East and Africa Client presence CONSULTING AND RESEARCH SERVICES > STRATEGY PLANNING IMPLEMENTATION REVIEW Establishing direction Preparing to excel Delivering success Measuring up Service portfolio MARKET INTELLIGENCE > Research reports and continual industry intelligence services retaining the best people in the sector to maintain the group s leadership in the markets it serves remains a key strategic objective for the business. Today Analysys Mason employs 254 consultants around the world, servicing clients in more than 80 countries. The group s employees have had a major influence on the industry for more than 20 years and have been involved in many groundbreaking projects such as: Asia. used by regulators to govern the operation of the sector. parties and regulators. institutions. Marketing and recruitment will continue to be focused on enhancing Analysys Mason s reputation in growth and solutions, and consulting to the media and geographical markets. Management will continue to look for ways to improve productivity and enhance operational synergies as a platform to accelerate future growth.

46 45 FUTURE PROSPECTS > opportunities in established markets and sectors, Analysys Mason continues to make the most of group synergies and much potential remains for the group to broaden and deepen both its thought leadership-based service offerings and its geographic footprint. Organisation priorities for 2009 include: and end-to-end service portfolio. geographic market penetration. leadership across the entire portfolio. transformation and operations improvement. implementation businesses. consulting, geographic and publications scale. strategy. Management remains very conscious of the uncertain economic climate we face and retains a prudent and cautious approach to recruitment, cost management and growth initiatives.

47 46 Other emerging markets holdings (Africa and Middle East) divisional report The growth in the Middle East market has been sustained this year and is expected to remain buoyant during the next 12 months with investments expected in the finance, health and hospitality sectors. HIGHLIGHTS > REVENUE % BY BUSINESS > Revenue up 73% to US$246 million (: US$142 million) 28% 21% 51% EBITDA up 54% to US$5,7 million (: US$3,7 million) Westcon SA and Westcon Africa ALI Online and CME Operating profit up 56% to US$5,0 million (: US$3,2 million)

48 47 WESTCON AFRICA MIDDLE EAST (PTY) LTD ( WAME ) > was formed in to be the holding company for Datatec Ltd s 55% stake in Westcon principally African-focused businesses which distribute similar products to the rest of Westcon. bearing loans from Datatec Ltd. For the year under review, the WAME group of companies produced revenue of US$135,6 million and SA contributed revenue of US$84,8 million (: US$69,2 million) which represents 23% growth. Gross margins were 10,3% down from 12,1% in the prior year, however, management does not believe this to be US$2 million. These other WAME operations produced revenues of US$50,8 million at a gross margin of 9,6%. This only a slow upward trend on gross margin. This will be achieved by better procurement capability and gradual operations was US$0,1 million during this period. The growth outlook in Westcon SA remains strong. However, management believes that other WAME operations will take a further 12 months before they start to realise their full potential to develop opportunities in the high-growth market in Africa. Thereafter they are Group. ONLINE DISTRIBUTION LIMITED > is a value-added distributor for networking products and services covering the Middle East, Western Asia, and North Africa. Through its network of resellers Online has developed the business of the vendor partners across these geographies. increased marginally by 7% to US$2,9 million. By virtue

49 48 Other emerging markets holdings (Africa and Middle East) divisional report CONTINUED 2008 OPERATIONAL HIGHLIGHTS > > Improvements in market share, geographic reach and new vendors > Significant revenue growth (73%) mainly acquisitive > Pan Africa footprint established > Investments in organic startups (Comstor ME) impacted margins > South African IT services group AL Indigo performing profitably into new geographies Online is poised for an increased The growth in the Middle East market was sustained the broadline distributors continues to depress margins. However, management remains confident that Online s value-added approach will help it to maintain the current levels of operating margins. COMSTOR MIDDLE EAST LTD > started its operations in the Middle East in February. During the year ME achieved overall revenue of US$13 million. However, being the start-up year, the company made a small Middle East. AFRICAN LEGEND INDIGO > of Enterprise Management Solutions including the supply of soft/hardware and support, configuration support, software customisation, initial installation planning as well as professional services including implementation and project management, disaster recovery, maintenance, knowledge

50 49 solutions to the telecommunications industry, to financial services, to the public sector with its vendor partners Sun wireless mobile technology systems integration business and mobile supply chain solutions to sectors such as retail, industrial, manufacturing, transport and logistics. For the year ended 29 February 2008 the company achieved revenues of US$51,1 million (: US$28,3 million) and

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53 52 Finance report for the year ended 29 February 2008 Ivan Dittrich, Group Finance Director The Group has continued with its policy of making an annual distribution to shareholders and has decided to make a cash distribution of 12 US cents per share (: 10 US cents per share) out of share premium, which represents a cover of 3,8 times relative to headline earnings.

54 53 INTRODUCTION > This review provides further insight into the performance and financial position of the Group otherwise indicated, focuses primarily on continuing operations. This review is not comprehensive and should be read in conjunction with the annual financial statements presented on pages 90 to 150. The annual financial statements have been prepared in accordance with the Group s published accounting policies, which PERFORMANCE > Our trading results were solid, and represent another year of continued organic growth. Group revenue increased by 27% (12% organic) to over US$4 billion (: US$3,2 billion), while gross margin increased from 13,1% to 13,7%. Of the Group s US$4 billion revenue in the year, 42% was generated from North America, 43% from Europe, 6% from Asia-Pacific, 3% from South America and 6% from the Middle East and Africa. Gross profit increased by 32% from US$415,2 million to US$547,1 million, while operating costs increased 34% from US$295,8 million to US$396,4 million, mainly operate at higher margins with higher operating costs. to US$150,8 million (: US$119,4 million), US$5,3 million (: US$6,3 million). Amortisation US$10,3 million (: US$5,4 million) as a result of during the past year. Operating profit increased by 25% to US$123,6 million (: US$99,1 million). The net interest charge in the year was US$15,3 million (: US$9,7 million) as utilisation of Westcon facilities resulting in profit before US$89,4 million. 30,5% in, primarily due to the utilisation and rate for the financial year ended 28 February 2009 is Underlying* earnings per share rose 21% to 47,3 US cents (: 39,2 US cents). HEPS increased by 12% to 45,6 US cents (: 40,8 US cents). The Group issued 14,5 million new shares during the year. 7,2 million shares were issued in May in connection with an institutional placing, 5,1 million * excluding goodwill impairment, amortisation of acquired intangible fixed assets, profits or loss on sale of assets and businesses and unrealised foreign exchange movements on inter-company loans.

55 54 Finance report CONTINUED shares. A further 1,1 million shares were repurchased by the company share trust and are held as treasury shares. well as enhanced its overall scale. 1 March, the pro forma revenue would have they had been included for the entire year. DIVIDEND POLICY > The Group has continued with its policy of making an annual distribution to shareholders and has decided to make a cash distribution of 12 US cents per share (: 10 US cents per share) out of share premium, which represents a cover of 3,8 times relative to headline earnings. 27% and payables and provisions increased by 33%. The increase in receivables, inventory and payable balances is in line with revenue growth and is, to a the year. Goodwill and other intangible assets have increased from US$183,3 million to US$339,3 million POST-RETIREMENT BENEFITS > The Group s retirement benefit funds comprise a number of defined contribution funds throughout the world. The Group has no liability to these funds other than the monthly payment of staff contributions. The Group has no liability in terms of postretirement medical aid contributions for staff. DEBT LEVELS > Our overall attitude to debt remains conservative. The Group is dependent on its bank overdrafts, working capital lines of credit and trade finance facilities to operate. These facilities generally repayable on demand, are secured against the assets of the subsidiary company to which the facility is made available and contain certain covenants which include This policy is subject to annual review and may be changes in reported earnings resulting from applying fair value accounting principles, or as circumstances dictate. BALANCE SHEET > Ordinary shareholders funds at the reporting date were US$654,7 million, representing a US$117 million increase from US$537,7 million in. The change is due primarily to the share placement which took place in May of for US$35,4 million, as well as shares issued as part of the (: US$3,47). not obtained for such violation, this may, amongst other things, result in that breached facility becoming repayable on demand. There were no breaches of covenants during the year. For full details refer to Note 17 and Note 21 of the annual financial statements. The interest cover ratio at 5,6 times (: 6,5 times) Furthermore, Datatec has no restrictions on its borrowing powers in terms of its memorandum and articles of association. Working capital remained tightly controlled. Receivables increased 34% over the year, inventory increased by CASH FLOW > activities (after working capital changes) amounted to

56 55 US$32,3 million (: cash outflow: US$3,6 million). The Group paid US$16,8 million to shareholders as a capital distribution in July and US$35,4 million was received from an institutional placing in May. The Group ended the year with net debt of US$31,9 million, including long-term and short-term debt (28 February net cash: US$98 million). BUSINESS RISK AREAS > The Group s success and our performance over the last five years, indicate that our overall strategy of supporting decentralised, standalone business units mitigates the business risks that we face. Our managers are held accountable for the performance of their business units, which includes understanding and responding to the financial and operational risks they face. The Board, however, recognises that some elements of risk management can be achieved only on an integrated basis and as such, are controlled centrally. The Group s risk management policies and procedures are summarised in the corporate governance report on pages 59 to 67. The risk management process has identified certain key risks faced by the Group some of which are summarised below. The risks identified below do not necessarily comprise all those affecting the Group and the risks listed are not set out in any particular order of priority. Additional risks and uncertainties not presently known to the Group or the directors or that the Group or the directors currently deem immaterial may also adversely affect the Group s business or operations. Financial risk related to financial instruments > These interest rate risk. The Group seeks to minimise the effects of these risks by using derivative financial instruments derivative financial instruments where appropriate, fluctuations upon future operating results and there can have a material adverse effect on its business, operating results or financial condition. Dependence on key vendors > The Group is particularly renew or materially adversely changes its agreement or arrangements with the Group, it could materially reduce the Group s revenue and operating profit and thereby seriously harm the Group s business, financial condition and results of operations. Working capital > As a speciality distributor of technology vendors, the Group s business is working Westcon s working capital needs are utilised to finance accounts receivable and inventories. Westcon largely relies on revolving credit and vendor inventory purchase financing for its working capital needs. Typically, to enable it to promptly meet anticipated customer demand. Westcon maintains inventory levels based on its projections of future demand and market conditions. Any sudden decline in demand or technological change Whilst Westcon takes steps to mitigate this risk by including protective provisions in its purchase agreements with vendors, there can be no assurance that such risks will be obviated. Management of future growth and acquisition risk > The Group s planned growth strategy will continue to place additional demand on the Group s management, customer support, administrative and technological

57 56 Finance report CONTINUED effectively, its business operations or financial conditions may deteriorate. To date, the business of the Group has Group may have to decrease the value attributed to the Payment discounts, product rebates and allowances > The Group receives significant benefits from purchase and prompt payment discounts, product rebates, allowances and other programmes from vendors based on various factors. A decrease in purchases and/or sales of a particular vendor s products could negatively affect the amount of volume rebates the Group receives from such vendor. Because some purchase discounts, product rebates and allowances from vendors are based on percentage increases in purchases and/or sales of products, it may become more difficult for the Group to larger discounts due to the current size of its revenue from time to time from participation in some of their programmes. senior management team and key technical personnel would be very difficult to replace and the loss of any of these key employees could harm the business and prospects of the Group. Other risks faced by the Group include > THE FUTURE > The continued management of risk will be critical in all markets. Our business units have delivered good results over the last number of years and despite widespread macro-economic concerns, we remain cautiously optimistic about the year ahead. Dependence on key personnel > The Group s future success depends largely upon the continued employment key employees have personal relationships with principal vendors and customers which are particularly important Ivan Dittrich Group Finance Director

58 Board Charter/Terms of reference Datatec Annual Report CONSTITUTION > The primary objective of the MEMBERSHIP > The number of directors shall not be less than four directors and not more than 15. The appointment of directors shall be recommended by the whole. respectively. Unless varied by these terms of reference, the appointment of directors will be governed by the articles of association RESPONSIBILITIES OF THE BOARD > The Board will be responsible for, inter alia: is planned. and monitoring management in implementing Board plans and strategies. management. statements and all related information. to conclude that the business will continue as a going concern in the financial year ahead or why it will not, and, in that case, what steps the Board is taking to remedy the situation. to itself and delegating other matters with the necessary written authority to management. accountability of assets. loss. internal control procedures. are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements. laws, regulations and codes of business practice, and that it communicates with its shareholders and relevant and with substance prevailing over form. conflicts of interest, particularly relating to directors and management. diversity and demographics makes it effective. and authority on the Board, such that no individual or block of individuals can dominate the Board s decision taking. in the notice of the annual general meeting, or any other shareholder meeting, is accompanied by a full directors should be present. Board. The Board should have unrestricted access to all

59 58 Board Charter CONTINUED carried out. The Board may delegate any of its responsibilities to committees of the Board. MEETINGS > Board considers appropriate, but it will normally not meet less than four times a year. Any Board member conducted shall be given to members of the Board. Board. GENERAL > terms of reference, may obtain such outside or other independent professional advice as it considers necessary to carry out its duties. have access to professional advice both inside and its duties. subject to the approval of the Board. review by the Board. PROCEEDINGS AT MEETINGS > and proceedings of the Board will be governed by the meetings. These shall be reviewed and approved by the members of the Board.

60 Corporate governance Datatec Annual Report 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 principles of corporate governance contained in the COMPLIANCE WITH THE KING II REPORT AND THE COMBINED CODE > corporate governance is fundamental to the relationship Throughout the year ended 29 February 2008 and up to the date of approval of this annual report and complied with the provisions set out in Section 1 of following matters: during the year having previously operated as a evaluation annually in October as noted in the annual report. Although it was not recorded in the annual report, the October 2006 evaluation concluded that all directors continued to be effective and those directors proposed for re-election at the annual general meeting in August were fully supported by the entire board. The resolutions proposed for re-election of directors at the 2008 annual general meeting will record the result of the annual assessment for the individual directors concerned. BOARD OF DIRECTORS > At 29 February 2008, the acumen to ensure impartial and objective viewpoints in decision-making processes and standards of conduct. The financial and business skills of the directors to be balanced, thus enhancing the effectiveness of the Board. the Board since 6 December 2001 and served in that role throughout the financial year ended 29 February Following Mr Boyd s untimely death on 28 March from the Board following the annual general meeting in August 2008 at which time the Board had intended to a balance of authority and precludes any one director The Board has appointed Nick Temple to be the senior Board previously between May 1998 and September continues to act in that role.

61 60 Corporate governance CONTINUED Board and on 1 May 2008 took over from David Pfaff as Group finance director. Mr Pfaff has decided to resign from the Group in order to pursue new investment opportunities. Following the changes in the directorate since 29 February 2008 the Board will consist of eight directors. Full details of the directorate are set out on pages 16 and 17. The Board retains full and effective control over the and decisions in the subsidiary companies. 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 Group s risk management and internal controls, communications policy, and director selection, orientation and evaluation. These responsibilities are set out in the approved Board that they have adhered to the terms of reference as ended 29 February unrestricted access to timely financial information, all Group information, records and documents. During the year, the Board received presentations from the management teams of its major subsidiaries enabling it depth. 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 Group s business, competitive posture 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. Formal appraisal processes are in place to monitor Board performance. A Board self-assessment review is performed annually. At the same time assessments are performed on the committees of the Board, as well as the of the directors retires by rotation each year and are eligible for re-election by shareholders at the annual general meeting. This year at the annual general meeting Mr Montanana and Mr Temple will retire by rotation and, being eligible, offer themselves for re-election. On basis of the annual evaluation of the Board and of the performance of individual directors, the performance and commitment of Mr Montanana and Mr Temple throughout their periods of office were highly satisfactory. The appointment of new directors in the previous year is also the subject of ratification by shareholders annually history with Datatec and an intimate understanding of the Group s operations and businesses around the world, including all financial aspects. He is familiar management of the Group, in addition to having gained management, financial and corporate finance roles. The Board is of the opinion that Mr Dittrich will make a significant contribution to the Group. The Board strongly recommends the re-appointment of Mr Montanana, Mr Temple and Mr Dittrich and recommends shareholders vote in favour of their re-appointment at the annual general meeting.

62 61 6 March (Scheduled) 30 April (Nonscheduled) 15 May (Scheduled) 18 July (Scheduled) 6 August (Scheduled) 5 September (Nonscheduled) 23 October (Scheduled) 4 March 2008 (Scheduled) 13 May 2008 (Scheduled) L Boyd P P P P P P P P N/A P P P P N/A N/A N/A N/A N/A S J Davidson P P P P P P P P A N/A N/A N/A N/A N/A N/A N/A P P N/A N/A N/A P A P P P P J P Montanana P P P P P P P P P L W Nkuhlu P P P P A P P P P D B Pfaff P P P P P P P P P P P P P P P P P P P A P P P P P P P N J Temple P P P P P P P P P P = Present A = Absent N/A = Not a director at the time The Board has established the following committees to assist it with its duties: AUDIT, RISK AND COMPLIANCE COMMITTEE > The Mr Brayshaw retired from the Board in August and Mr Seabrooke succeeded him as chairman of the committee. The committee considers its chairman, members are: of Accountancy degrees from Natal University, an MBA from the University of the Witwatersrand and a Fellow of the Mathematics and Statistics from the University of Aberdeen. The chairman of the committee is not the chairman of the one of the committee members. This is encouraged by the that his participation as a member of the committee with functioning of the committee and thereby improves the The committee operates within defined terms of reference the Board and meets at least three times a year, when

63 62 Corporate governance CONTINUED without management present, at least once a year. is invited to attend the sub-committee meetings. The committee is satisfied that it has met its responsibilities for the year with respect to its terms of reference. The committee s charter is available on the Group s website ( or from the company secretary. The principal functions of the committee are to review the annual financial statements, the half-yearly results announcement, monitor the effectiveness of internal controls, assess the risks facing the business, discuss the findings and recommendations of the internal and plans and to review the effectiveness of the internal and on the committee s activities at each Board meeting. Westcon Group has its own separate audit committee committee are submitted to, and form part of, the documentation made available to the Datatec Audit, operating subsidiary companies have financial review and compliance committees. Full reports from these subcommittees are submitted to the Datatec Audit, Risk and an audit committee in respect of these subsidiaries. The there is appropriate independence relating to non-audit audit services including valuation and accounting work where its independence might be compromised by later auditing its own work. Other non-audit services provided approved by the chairman of the committee or by the full the audit fee. audit partner and those of South African subsidiaries every five years and the other subsidiary audit partners every seven years. The committee has adopted the same policy. The committee assists the Board in reviewing the risk management process and significant risks facing the Group. The committee sets the Group s risk strategy 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 as described later in this report. meetings to date of this report. 26 April (Non-scheduled) 10 May (Scheduled) 11 October (Scheduled) 8 February 2008 (Scheduled) 8 May 2008 (Scheduled) P P N/A N/A N/A S J Davidson P P P P P L W Nkuhlu A P P P P P P P P P P P P P P P = Present A = Absent N/A = Not a member of the committee at the time

64 63 The committee identifies and monitors, at least annually, key performance indicators and key risks, including operational, physical, human resources, technology, continuity, credit, market and compliance risks. will be available at the annual general meeting to answer REMUNERATION COMMITTEE > The Remuneration Stephen Davidson assumed the role of chairman of the The committee operates within defined terms of reference as set out in its charter, and authority granted to it by the Board and meets at least three times a year. The chief invited to attend these meetings, but neither may take any part in decisions regarding their own remuneration. The committee is satisfied that it has met its responsibilities for the year with respect to its terms of reference. The committee s charter is available on the Group s website ( or from the company secretary. The committee is responsible for making recommendations to the Board on the Group s directors and certain senior managers of the Group. The committee is also responsible for the Group s remuneration policies and the allocation of share-based payments in terms of the Group s share-based incentive schemes. recommended by the Board and ratified by shareholders at the annual general meeting. Full disclosure of individual directors remuneration appears on page 77. The chairman of the committee will be available at the committee s work. NOMINATION COMMITTEE > The Nomination this report. 6 March 15 May 18 July 23 October 4 March May 2008 L Boyd P P P P P N/A S J Davidson P P P P P P N/A N/A P A P P P P P P P P N J Temple P P P P P A P = Present A = Absent N/A = Not a member of the committee at the time Refer to remuneration report on pages 68 to 81.

65 64 Corporate governance CONTINUED Stephen Davidson assumed the role of chairman of the The committee operates within defined terms of reference as set out in its charter, and authority granted to it by invited to attend these meetings, but neither may take any part in decisions regarding their own succession. 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 Act. Datatec Management Services (Pty) Limited, a South African company, is the legal entity which is the company secretary. This company is managed by Simon subsection (d) of the Act appears on page 88. The committee is satisfied that it has met its responsibilities for the year with respect to its terms of reference. The committee s charter is available on the Group s website ( or from the company secretary. The committee is responsible for making recommendations on the composition of the Board generally. Director appointments are formal and transparent. The chairman of the committee reports on the committee s activities at each Board meeting. The chairman of the committee will be available at the committee s work. of this report. 6 March 23 October 4 March 2008 L Boyd P P P S J Davidson P P P N/A A P P P P N J Temple P P P P = Present A = Absent N/A = Not a member of the committee at the time RISK MANAGEMENT > Datatec s Board is responsible for the total process of risk management and has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. The Board and the Audit, Risk and activities as a standard item on its agenda and actively participate in discussions around risk topics raised. Each of the significant subsidiaries of Datatec regularly reviews their strategic risks and has followed a consistent according to standard risk rating guidelines based on defined in terms of the following assessment criteria: ratings are defined in terms of the overall likelihood of a risk materialising. These criteria formed the basis for High-risk areas are further analysed to identify potential root causes. This allows Datatec to: and organisational control.

66 65 Mitigating actions and associated monitoring/assurance identified to monitor and manage specific risk areas on The Group reports annually on key risk areas identified by the risk assessment processes described above in the Finance Report see page 55. FINANCIAL AND INTERNAL CONTROL > The Board has management and internal control throughout the financial year under review and up to the date of approval of the annual report and accounts in accordance with the revised guidance. 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 revenues and assets. These controls are implemented and maintained by skilled company personnel. Board is able to report that procedures are in place for monitoring and evaluating the effectiveness of the internal submit control self-assessment programmes annually and management is monitored against internal control norms in other Group companies. Action is taken where ratings Nothing came to the attention of the directors or arose out of the internal control self-assessment process, internal material breakdown in the functioning of the Group s internal controls, procedures and systems had occurred during the course of the year. in the major subsidiaries which will allow these subsidiaries to continue their critical business processes in the event of a disastrous incident impacting their activities. Such documented procedures are reviewed subsidiaries are in the process of ameliorating them. INTERNAL AUDIT > the activities and the appropriateness of the systems of internal control, risk management and governance processes. Datatec has outsourced the internal audit operates within defined terms of reference as set out in its charter, and authority granted to it by the Audit, Risk audit has met its responsibilities for the year with respect to its terms of reference. secretary on day-to-day matters, and to the chairman of the involving an independent review of the Group s own risk assessments. The internal audit team attends and presents its The objective of internal audit is to assist the Board in the effective discharge of its responsibilities. 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.

67 66 Corporate governance CONTINUED employer. 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 is open to new partnerships that will increase shareholder value as well as plough back skills and resources into the South African community and into the local communities round the world in which Group companies operate. All the South African operations have committed themselves to a transformation process designed to minimise barriers to All employees of the Group have been notified of a available to call to report anonymously any matter of concern. Any significant matter reported in this way is No significant matters were reported on the whistleblowing hotline during the year under review. SAFETY, HEALTH AND ENVIRONMENT > A formal safety, health and environmental policy has been implemented and approved by the Board. Datatec recognises its obligation to reduce the risk of injury in the working environment and to supply a clean and safe workplace. The Group undertakes to comply with health and safety regulations as set in the jurisdictions in which the Group operates around subsidiaries have individual health and safety policies. The Group s social responsibility activities are detailed on page 82. ORGANISATIONAL INTEGRITY AND ETHICS > The Group operates on a basis of decentralised management been approved by the directors and has been rolled 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. The been met during the year under review. Datatec maintains a 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 is assessed in the selection and promotion process and the basis entrenched in the company culture. Although the Group operates in a predominantly office and warehouse-based environment the Group recognises its responsibility to safeguard the environment in the course of conducting business operations. Where applicable each operating subsidiary has its own environmental policy. Datatec has set the following environmental objectives to be applied across the Group using best practice in environmental management. The Group will: issues. possible. by active involvement.

68 67 SHARE DEALINGS > code to regulate dealings by its directors and applicable 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 corporate governance, the Datatec Remuneration or when in possession of unpublished price-sensitive or inside information relating to Datatec. The closed periods include the periods between Datatec s interim and financial year-end reporting times and the dates on which the relevant results are published, and any time when Datatec is trading under a cautionary announcement. Employees may nonetheless on application, and at the their share options while Datatec is trading under a cautionary announcement provided that the JSE Listings they are not in possession of unpublished price-sensitive or inside information relating to Datatec. options during a period of one month prior to the starting date of such a closed period. This concession has been made in accordance with clause of the Datatec Share Option Scheme whereby the directors shall be entitled if in their opinion special circumstances exist and in consequence of which they consider it reasonable to permit the exercise of the option (in whole or in part) prior to the date on which it could be otherwise exercised, to permit such exercise. No employee shall, however, be permitted price-sensitive or inside information relating to Datatec. INVESTOR RELATIONS AND SHAREHOLDER COMMUNICATION > Datatec is committed to providing timely, transparent and full disclosure to all its stakeholders on both financial and non-financial matters. The Group maintains a dialogue with its institutional shareholders via a planned programme of and the Group Finance Director together with nominated investor relations management. These activities include regular meetings and presentations to analysts, institutional as well as biannual meetings with institutional investors after the release of the Group s interim and final results. The Group s website ( provides current and historical financial and other information on the Group including formal announcements, presentations, webcasts as well as annual reports. Datatec also disseminates information to stakeholders who subscribe to the Group s investor relations programme on the website. Press releases, announcements and notifications are distributed via to subscribers as soon as they become publicly available. Shareowners and their appointed representatives are encouraged to attend Datatec s annual general meeting, to vote on the resolutions placed before the meeting and to conduct relevant discussions with the Group s directors. As noted above, the chairmen of the annual general meeting and are available to answer GOING CONCERN > The directors assessment on the Group as a going concern is set out on page 91.

69 68 Remuneration report The Board has delegated responsibility for remuneration principles that determine the remuneration of the committee has taken into account the provisions and which has been approved by the Board. is appropriate to their scale of responsibility and performance and which will attract, motivate and retain individuals of the necessary calibre. The underlying base pay above median levels by comparison with relevant comparator companies and to provide the necessity of being competitive in the different parts of the world in which the Group operates, particularly the the 2008 financial year was: 16 July ). Director may be invited to attend meetings of the in any discussions regarding their own remuneration. REMUNERATION PHILOSOPHY > The Remuneration which it has set the remuneration package for each rewarded for their contribution to the Group s operating and financial performance at levels which take account of the performance linked share-based incentives are considered The basic objective of the policies is that the SUMMARY OF REMUNERATION > The remuneration main ingredients designed to balance long- and short- the form of share-based incentive schemes (also with performance targets). The last two elements are designed to encourage and reward superior performance and to receive retirement and other benefits as outlined below. BASE SALARY > directors is subject to annual review and is set with ANNUAL BONUS PLAN > participate in an annual bonus plan based on the achievement of short-term performance targets set for of corporate performance (HEPS, PBT and operating cash flow), share price performance, divisional objectives (where applicable) and the achievement of individual objectives. These targets are reviewed base salary for the Group Finance Director.

70 69 OTHER BENEFITS > pensions, the provision of car allowances or a fully maintained car, medical insurance and death and disability insurance. The total value of benefits received by each director is shown on page 77. During the financial year under review the Group contributed J P Montanana and D B Pfaff to private pension schemes, with the individuals contributing 5% of their salary. SHARE-BASED REMUNERATION > Datatec operates the Group employees: Before the introduction of these schemes in August 2005 share options were granted to Group and subsidiary employees under the Datatec Share Option Scheme. dilution effect is included in the diluted earnings per share figure. Details of these schemes are given below. Datatec s subsidiaries operate a number of cash-settled share-based incentive schemes for their senior employees. Summaries of these schemes are also provided below. THE DATATEC LIMITED SHARE APPRECIATION RIGHTS SCHEME 2005 ( SARS ) > Eligible employees may receive annual grants of Share Appreciation Rights (SARs), Vesting of the SAR is subject to performance conditions. The duration and specific nature of the performance conditions and performance period are stated in the letter of grant. The condition that has been imposed for all grants of SARs to date is that HEPS must increase by two inflation over a three-year performance period. Retesting of the performance conditions is permitted on the first and second anniversary of the end of the performance period (i.e. years 4 and 5). For the initial, 2005, SARs awards, a pro-forma HEPS base of 15 US cents was implemented, as opposed to the actual HEPS base of 4 US cents. Therefore period will be applied to a base HEPS of 15 US cents, before the SARs will vest. For the 2006 and SARs awards the actual HEPS base of 26,9 US cents and 40,8 US cents, respectively, were used. letter of grant, will lapse. Details of the three issues under the Datatec Limited SARs Scheme made to date are given below: Datatec Limited Share Appreciation Rights Scheme Date of issue 17 May 17 May August 2005 Number of SARs issued Number of SARs lapsed since issue (70 031) (46 849) (75 245) Number of SARs remaining in issue at 29 February Number of eligible employees to whom SARs were issued Number of lapsed holdings of SARs (1) (1) (2) Number of employees remaining entitled to SARs at 29 February Grant price (Rand) 38,64 22,79 13,76 Life 7 years 7 years 7 years

71 70 Remuneration report CONTINUED The SARs in issue during the year ended 29 February weighted average shares for the year. of Datatec SARs was made to five key employees of by Westcon SARs were granted at a price of shares at the time of issue). These SARs vest one-third on issue, one-third on the first anniversary of issue and three years after vesting. Vesting of the second and third division meeting certain performance criteria. Refer to the limits for the SARS below. THE DATATEC LIMITED LONG-TERM INCENTIVE PLAN 2005 ( LTIP ) > Eligible employees receive annual grants of conditional awards. The conditional awards will vest after the performance conditions have been satisfied. The duration and specifics of the performance condition and performance period are stated in the letter of grant. The intended performance period is three years. The performance condition that is relative to the TSR of an international peer group. No retesting of the performance condition will be allowed. The performance condition will determine if, and to what portion of the award. The conditional awards which do not vest at the end of the three-year performance period will lapse. conditional awards in issue during the year ended 29 February 2008 constitutes a 0,28% dilution of the preceding the issue date, holding the shares, and reinvesting shares, until 28 February three years later, and then selling the portfolio on that day. The TSR calculation will be on the nearest trading day following the start and the nearest trading day following the end of the three-year period, and be smoothed by computing the TSR in the same manner for months preceding 28 February in each year of issue. Subject to the participant remaining in the employment of TSR condition will lapse and will be of no further force and ranks greater than the median of the peer group, TSR condition, which becomes unconditional and will vest, will be linearly apportioned as the ranking of subject to the TSR condition will lapse and will be of

72 Date of issue 17 May 17 May August 2005 Number of conditional awards issued Number of conditional awards lapsed since issue (52 523) (35 918) (56 190) Number of conditional awards remaining in issue at 29 February Number of eligible employees to whom conditional awards were issued Number of lapsed holdings of conditional awards (1) (1) (2) Number of employees remaining entitled to conditional awards at 29 February condition will lapse and will be of no force or effect whatsoever. THE DATATEC LIMITED DEFERRED BONUS PLAN 2005 ( DBP ) > Eligible employees will be permitted to use a will be made to the participant after a three-year pledge period on the condition that the participant remains in shares over the period. The participant remains the full owner of the pledged shares for the duration of the pledge period and will enjoy all shareholder rights in respect of the pledged shares. Pledged shares can be withdrawn from the pledge at any stage, but the matching award is forfeited in this case. DBP by two eligible employees as follows: on on 18 August The commitment to issue matching shares for the pledged shares held during the year ended 29 February 2008 average shares for the year. Refer to the limits for the DBP below. LIMITS TO THE SARS, LTIP AND DBP > The aggregate number of shares which may be allocated under the Datatec s ordinary shares in issue from time to time. DBP only and not to options previously issued under the Datatec Share Option Scheme. The face value of the grants made to an employee in 80% of his/her base salary at the date of the offer. The face value of the grants made to an employee in 80% of his/her base salary at the date of the offer. The face value of the matching shares in any financial year made under an award to an employee under the date of the offer. THE DATATEC SHARE OPTION SCHEME > Since the 2005, no new options have been granted under the Datatec Share Option Scheme. Under the terms of the Datatec Share Option Scheme options could be granted participant being limited to 1,5% of the issued share capital. Options previously granted under the Datatec

73 72 Remuneration report CONTINUED Share Option Scheme will run their course in terms of the rules of the scheme. Options were granted to employees the 30 day average closing market price prior to the date of such grant (always subject to a minimum price of 2,00 ZAR). Options vest over a period of four years from the date on which the option was granted at the rate of 25% per annum at each anniversary of the date of grant. Options granted, unless such option lapses through the death or termination of employment of the option holder. As at 29 February (: ) share options had been (: ) share options had been granted Westcon s board of directors has authorised the Westcon compensation committee to administer the Westcon Plan. The compensation committee determines the estimated value of a Westcon ordinary share on the date of grant. Share options granted under the Westcon Plan are of employment due to death or total disability, and for three months after other terminations of employment other than just cause. For share appreciation rights granted under the plan, termination due to death, disability or retirement results in immediate redemption of any vested but unredeemed share appreciation rights. Under any other separation of service all vested and unvested share appreciation rights will immediately terminate. Number of holders Number of options Option price per share R5 R R10 R R20 R R30 R R40 R R50 R R60 R R70 R R80 R WESTCON GROUP, INC. SHARE INCENTIVE PLAN ( THE WESTCON PLAN ) > The Westcon Plan has been in operation since January 2001 and provides share options and share appreciation rights for the purchase of up to Westcon common shares to employees, directors (other than directors who serve on the compensation committee), consultants and other advisers to Westcon. Grants of share appreciation rights allow the holder to receive a payment based on the appreciation of Westcon s common stock. The Westcon Plan provides that in the event of a merger, consolidation, or sale of, all or substantially all of the assets of Westcon, or upon a dividend or other distribution, recapitalisation, share split or other similar corporate transaction, as more fully described in the Westcon Plan, the compensation committee may adjust: the number and type of shares (or other securities) that and the number and type of shares (or other securities) covered by each outstanding grant. The Westcon board of directors may suspend, amend or terminate the Westcon Plan at any time. However, unless approved by a majority of Westcon shareholders, no amendment no termination of the Westcon Plan or action by the Westcon board of directors in amending or suspending the Westcon Plan will affect or impair the rights of an option holder under any share option or share appreciation right previously granted. Share appreciation rights issued in the years ended

74 73 instalments over three years from the date of grant, are three years beginning with the date of each vesting five years from the date of grant. Westcon Group options included below from a former employee of Westcon Group. As of 29 February shares were available for future grants. Of the share options outstanding as of the completion of an initial public offering of Westcon s common shares. Additionally, if there is a change in control prior to an initial public offering of Westcon s common shares, the vested share options and share appreciation rights, as well as one-half of the unvested share appreciation rights, will be redeemed and paid based on the appreciation, if any, of Westcon s common shares. THE LOGICALIS GROUP CASH-SETTLED SHARE APPRECIATION RIGHT SCHEME 2005 ( THE LOGICALIS SAR SCHEME ) > Under the terms of the Logicalis SAR Scheme, SARs are granted annually to senior managers. The scheme is cash-settled which liability to the valuation share price and to establish both for vested SARs. Fifty percent of the SARs vest after 24 months and the remainder after 36 months. All rights issue. There are certain headline earnings performance conditions which govern the vesting of each award Date of issue 1 June 1 June and prior Number of SARs/options issued (116) (1 181) Number of SARs/options lapsed since issue (480) (318) (11 958) Number of SARs/options remaining in issue at 29 February Number of eligible employees to whom SARs/options were issued Number of lapsed holdings of SARs/options (3) (2) (42) Number of employees remaining entitled to SARs/options at 29 February Grant price (US$) 2 590, , ,62 Grant as a percentage of Westcon Group s issued share capital 1,13% 0,97% 10,23% Life 10 years 10 years 10 years

75 74 Remuneration report CONTINUED Details of the three annual grants of SARs under the Logicalis SAR Scheme made to date are given in the table below: Logicalis Group Share Appreciation Rights Scheme Date of issue 1 July 1 July July 2005 Number of SARs issued Number of SARs lapsed since issue (62 500) (65 000) ( ) Number of SARs remaining in issue at 29 February Number of eligible employees to whom SARs were issued Number of lapsed holdings of SARs (5) (3) Number of employees remaining entitled to SARs at 29 February Grant price (US$) 3,82 3,00 2,095 Grant as a percentage of Logicalis Group s issued share capital 1,16% 1,53% 1,74% Life 5 years 5 years 5 years ANALYSYS MASON SHARE BASED REMUNERATION > During the year ended 29 February 2008, Analysys Mason introduced a performance share plan to replace a performance warrant scheme and a shadow option scheme under the terms of which share-based remuneration had been granted in previous years. Details of the grants under these schemes are given in the table below. Analysys Mason share-based incentive schemes Date of issue 1 June 23 August August December 2004 Number of awards issued Number of awards lapsed since issue (5 755) (10 700) (12 820) (7 450) Number of awards remaining in issue at 29 February Number of eligible employees to whom awards were issued Number of lapsed holdings of awards (9) (14) (31) (25) Number of employees remaining entitled to awards at 29 February Grant price (GBP) 21,72 22,45 18,00 11,86 Grant as a percentage of Analysys Mason s issued share capital 2,25% 1,29% 1,90% 0,63% Life 3 years 4 years 4 years 4 years

76 75 THE WESTCON SA CASH-SETTLED SHARE APPRECIATION RIGHT SCHEME 2006 ( THE WESTCON SA SAR SCHEME ) > Under the terms of the Westcon SA SAR Scheme, SARs are granted annually to senior valuation of Westcon SA (and agreed other entities under management control) to mark the liability to the valuation share price and to establish both a grant price The SARs vest three years after the grant date. All rights issue. There are certain headline earnings performance conditions which govern the vesting of each award. THE ONLINE DISTRIBUTION CASH-SETTLED SHARE APPRECIATION RIGHT SCHEME 2006 ( THE ONLINE SAR SCHEME ) > Under the terms of the OnLine SAR Scheme, SARs are granted annually to senior managers. OnLine to mark the liability to the valuation share price and to establish both a grant price for new awards and by the end of the fifth year after issue. There are certain headline earnings performance conditions which govern the vesting of each award. Westcon SA Share Appreciation Rights Scheme 2008 Date of issue 17 May 17 May 2006 Number of SARs issued Number of SARs lapsed since issue Number of SARs remaining in issue at 29 February Number of eligible employees to whom SARs were issued 14 4 Number of lapsed holdings of SARs Number of employees remaining entitled to SARs at 29 February Grant price (ZAR) 74,71 39,73 Grant price as a percentage of Westcon SA notional share capital 2,25% 2,5% Life 5 years 5 years Online Distribution Share Appreciation Rights Scheme 2008 Date of issue 17 May 17 May 2006 Number of SARs issued Number of SARs lapsed since issue (3 600) (2 900) Number of SARs remaining in issue at 29 February Number of eligible employees to whom SARs were issued 11 7 Number of lapsed holdings of SARs (3) (2) Number of employees remaining entitled to SARs at 29 February Grant price (US$) 19,70 16,18 Grant as a percentage of OnLine notional share capital 1,7% 2,0% Life 5 years 5 years

77 76 Remuneration report CONTINUED NON-EXECUTIVE DIRECTORS REMUNERATION > directors received fees as approved by the annual general meeting as follows: remuneration above will also apply for the year ending 28 February The terms and conditions of appointment of company secretary. EXTERNAL APPOINTMENTS > Subject to the approval a directorship in one non-group listed company and to retain the fees payable from this appointment. company which provides hardware and software technology to enable transaction-based business solutions based on its series of proprietary software Mr Montanana has held this directorship since 1998 and does not receive any remuneration for his services. He holds shares and share DIRECTORS SERVICE CONTRACTS > directors have employment contracts as follows: Holdings Limited. The employment contracts of all by either party. directors retire in accordance with the articles of Retiring directors may offer themselves for re-election.

78 77 DIRECTORS EMOLUMENTS > for individual directors who held office during the financial years ended 29 February 2008 and 28 February have independently confirmed the emoluments disclosed below. Please refer to page 80 for details of directors share-based incentive awards. Year ended 29 February 2008 US$ Basic salary Bonus Fees* Pension Other benefits Total Executive directors J P Montanana D B Pfaff Total executive directors Non-executive directors L Boyd S J Davidson L W Nkuhlu N J Temple Total non-executive directors Total directors emoluments US$ of the emoluments referred to above have been paid by Datatec Limited and US$ have been paid by subsidiaries of Datatec Limited. *Fees as directors and committee fees.

79 78 Remuneration report CONTINUED Year ended 28 February US$ Basic salary Bonus Fees* Pension Other benefits Total Executive directors J P Montanana D B Pfaff Total executive directors Non-executive directors L Boyd S J Davidson from 1 February L W Nkuhlu from 1 September N J Temple Total non-executive directors Total directors emoluments US$ of the emoluments referred to above have been paid by Datatec Limited and US$ have been paid by subsidiaries of Datatec Limited. *Fees as directors and committee fees.

80 79 DIRECTORS SHARE INTERESTS > The interests of directors who held office at 29 February 2008 in ordinary shares 2008 Direct beneficial beneficial Associates Total Executive directors J P Montanana D B Pfaff Non-executive directors L Boyd S J Davidson L W Nkuhlu N J Temple Total over Datatec shares with a strike price of R35,00 per option which he purchased on 7 February 2008: premium of R5,86 per option. During the financial year, Mr Montanana sold three-year American call options over Datatec shares with a strike price of R9,48 per option which he had purchased on 28 February 2005 at a premium of R4,32 per option. When he was appointed a director on 1 March 2008, Mr Dittrich held no Datatec shares. Direct beneficial beneficial Associates Total Executive directors J P Montanana D B Pfaff Non-executive directors L Boyd S J Davidson L W Nkuhlu N J Temple Total At the date of this annual report, there have been no changes to the total shareholding of the current directors of the

81 80 Remuneration report CONTINUED DIRECTORS SHARE-BASED INCENTIVES > Directors holding office at 29 February 2008 held the following Datatec share options (under the Datatec Scheme): Grant date price (ZAR) Options held at beginning of year Granted during the year during the year Options held at year-end J P Montanana , , , , , Sub-total , Sub-total D B Pfaff , , , , Sub-total , , Sub-total Total *Appointed as a director on 16 July. Option Scheme. Mr Dittrich held the following share options when he was appointed a director on 1 March 2008: at a

82 81 Directors holding office at 29 February 2008 held the following share appreciation rights (under the SARS): Grant date price (ZAR) Awards held at beginning of year Granted during the year Forfeited during the year Awards held at year-end J P Montanana , , , Sub-total D B Pfaff , , , Sub-total Total Mr Dittrich held the following share appreciation rights when he was appointed a director on 1 March 2008: Grant date Awards held at beginning of year Granted during the year Forfeited during the year Awards held at year-end J P Montanana Sub-total D B Pfaff Sub-total Total of US$2 590 per share.

83 82 Corporate social investment Datatec s origins are firmly entrenched in South Africa and the company has always been conscious of its responsibilities towards the community and economy that fostered its initial growth. The Datatec Educational to support educational organisations with a specific focus on uplifting the standard and talent in the fields of mathematics, science and technology within previously disadvantaged communities. Trust has actively supported the following initiatives: CENTRE FOR INNOVATION > brings mathematics, science, entrepreneurship and computer skills training to local schools and communities. The centre is also used by Protec, a national organisation involved in technology skills training within disadvantaged communities. working with computers and Siyakhula is helping bridge interventions developed specifically for the South African Enrichment Programme aims to provide support to both educators and learners in nearby high schools by means of educator development, career guidance and mentoring, and supplementary tutoring. Siyakhula is currently engaging over learners from two partnering schools and over 140 educators. Siyakhula is is the most effective tool for establishing a more OLIVER S HOUSE > Based on Gauteng s East Rand, Oliver s House provides free after-school education to surrounding areas. Tuition includes five matric subjects as well as computer literacy and adult literacy classes. THE MATHS CENTRE > Professional and accomplished teachers are essential to any educational structure. Johannesburg, aims to uplift the standard of mathematics, science and technology teaching in government schools. learning these disciplines and serves as a resource base for teachers in those curriculums. SIYAKHULA COMPUTER LITERACY AND SCHOOLS ENRICHMENT > Situated between the economically Gauteng lies the small, but ambitious, communitybased non-profit organisation, Siyakhula. Siyakhula is about empowering underserved and under-resourced communities through educational initiatives. For eight years, Siyakhula has offered practical and accessible computer literacy training as a stepping stone towards further study, learnership, employment and/ or entrepreneurial opportunities. The vast majority of EDUCATION ALIVE > The Education Alive training centre struggle with maths, science and technical subjects. The centre also offers literacy classes and is part of Applied educators, parents, learners and college students in disadvantaged communities. The recently launched Work Readiness Programme is aimed at unemployed workplace. The programme consists of Education established accounting practices. To date, 80% of the trainees have been offered full learnership contracts. Of course, Datatec s philanthropic endeavour is not limited to South Africa. Through the Group s various subsidiaries around the world, many initiatives, both internally driven and locally focused, have received support.

84 83 WESTCON > Westcon follows a dedicated policy in the form of charitable donations. They support various causes with the main focus on family health and well- financial year included breast cancer awareness, blood number of food drives. Westcon has sponsored many charities over the years including the American Parkinson list a few. deduction and matching programme up to $500 for its employees. Westcon has also held various fundraising events and provides support to volunteers by allowing them paid volunteer leave. LOGICALIS > Logicalis policy is to encourage its various operations to make their own contribution to the communities within which they work. Not only does this approach ensure operational buy-in at a local level, but it also means that monies are fed directly into the community that might otherwise be overlooked. All employees are encouraged to bring suitable opportunities to local management for review. The following is a list of just some of the initiatives supported over the past year. Foundation, an independent charity supported by a number of major companies, which provides grants to small local voluntary groups that tackle needs at the grassroots of the community. This commitment will foundation supports children and young people with special needs, people with long-term disabilities, the elderly, homeless and people with mental health needs. ANALYSYS MASON > Analysys Mason has supported local and international charities of all sizes. They have empowering homeless young women, to international worldwide. Analysys Mason has also continued to donated to over a number of years. Funds raised for this have come directly from the company as well as donations from staff of both their time and money. Logicalis US has made donations and held fund-raising events for the following charities: Big Brothers, Big Sisters of Metropolitan Detroit which provides one-to- of disaster and helps people prevent, prepare for, engages individuals and organisations in creating a healthy and sustainable environment.

85 84 Shareholders diary Annual general meeting 4 August 2008 Reports Published 15 October 2008 Announcement of 2009 annual results Published May annual report Published July 2009 Shares and shareholders 1 March to 29 February March 2006 to 28 February 1 March 2005 to 28 February 2006 Stock exchange performance Total number of shares traded ( 000) Total number of shares traded as a percentage of total shares 93,2% 60,7% 51,0% Total value of shares traded (R million) JSE Limited prices (SA cents) High Low London Stock Exchange (AIM) prices (UK pence) 209,5 236,2 High 314,0 256,5 Low 172,5 202,5 Public/non-public shareholding Percentage of shares held by non-public shareholders 29,2% 7,2% 32,9% Percentage of shares held by public shareholders 70,8% 92,8% 67,1% Shareholders Shareholder type Shareholders in SA other than in SA Total shareholders Number Percentage of shares Nominal number Percentage of shares Nominal number Percentage of shares Directors 3 0,3% 3 7,0% 6 7,3% Shareholders over 10% 2 20,9% 2 20,9% Share Trust (Treasury shares) 1 1,0% 1 1,0% Total non-public 6 22,2% 3 7,0% 9 29,2% Public ,9% ,9% ,8% Total ,1% ,9% ,0% more than 3% of the issued share capital as at 29 February 2008: ,0% ,6% Jens Montanana (Director) ,7% ,7% Liberty Life Assoc of Africa (SA) ,2%

86 Value added statement Datatec Annual Report Revenue Other income not included in revenue: Loss on disposal and closure of discontinued operations (31) Less: Paid to suppliers for materials and services ( ) ( ) Total value added Distributed as follows: Employees Salaries, wages and benefits Providers of capital Financing costs Government Total value distributed Depreciation and amortisation Goodwill adjustment (4 224) Minorities interests (4 382) (2 103) Total value distributed and reinvested % 69% 23% 67% 7% 5% Employees Providers of capital Government Reinvested in the Group 5% 5%

87 86

88 87 annual financial statements CONTENTS > 88 Board approval 88 Certificate by secretary 89 Report of the independent auditors 90 Directors report 94 Group and Company accounting policies 102 Group income statement 103 Group balance sheet 104 Group statement of changes in equity 105 Group cash-flow statement 106 Notes to the Group annual financial statements 136 Annexure 1 Subsidiary companies 138 Company income statement 139 Company balance sheet 140 Company statement of changes in equity 141 Company cash-flow statement 142 Notes to the Company annual financial statements

89 88 Board approval for the year ended 29 February 2008 The Group annual financial statements for the year ended 29 February 2008 are prepared in accordance with International Financial Reporting Standards, the Companies Act of South Africa and incorporate transparent and responsible disclosure, together with appropriate accounting policies. The directors are responsible for the maintenance of adequate accounting records, the preparation and integrity of the Group annual financial statements and all related information. The directors are also responsible for the systems of internal control which are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability of assets and to prevent and detect material misstatement and loss. The directors believe that the Group has adequate resources to continue in operation for the foreseeable future and accordingly the financial statements have been prepared on a going-concern basis. The Group annual financial statements which appear on pages 90 to 150 were approved by the Board of Directors on 13 May 2008 and are signed on its behalf by: J P Montanana Chief Executive Officer I P Dittrich Group Finance Director 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 29 February 2008, 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. S P Morris For and on behalf of Datatec Management Services (Pty) Ltd Secretary 13 May 2008

90 Report of the independent auditors for the year ended 29 February 2008 Datatec Annual Report TO THE MEMBERS OF DATATEC LIMITED We have audited the annual financial statements and group annual financial statements of Datatec Limited, which comprise the directors report, the balance sheet and the consolidated balance sheet as at 29 February 2008, the income statement and the consolidated income statement, the statement of changes in equity and the consolidated statement of changes in equity and cash-flow statement and the consolidated cash-flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 90 to 150. Directors responsibility for the financial statements The Company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company and of the Group as at 29 February 2008, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. Deloitte & Touche Registered Auditors Per I T Marshall Partner 13 May 2008 Buildings 1 and 2 Deloitte Place The Woodlands Woodlands Drive Woodmead Sandton Docex 10 Johannesburg Private Bag X6 Gallo Manor 2052 South Africa National Executive: G G Gelink Chief Executive A E Swiegers Chief Operating Officer G M Pinnock Audit D L Kennedy Tax & Legal and Financial Advisory L Geeringh Consulting L Bam Corporate Finance C R Beukman Finance T J Brown Clients & Markets N T Mtoba Chairman of the Board A full list of partners and directors is available on request.

91 90 Directors report for the year ended 29 February 2008 NATURE OF THE BUSINESS PROFILE AND GROUP STRUCTURE Datatec ( the Company ) and its subsidiaries ( the Group ) is an international ICT networking and related 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 communications convergence products ( Westcon ), ICT infrastructure solutions and services ( Logicalis ) and telecommunications strategy consulting ( Analysys Mason ). The Group also has other interests which are included with the Group Head Office under Other Holdings. These encompass the Group s distribution and integration businesses in the Middle East and Africa. GROUP FINANCIAL RESULTS Commentary on the Group financial results is given in the finance report on pages 52 to 56. Full details of the financial position and financial results of the Group are set out in the financial statements on pages 90 to 150. SHARE CAPITAL Authorised share capital The authorised share capital of the Company at 29 February 2008 and 28 February is R made up of ordinary shares of one cent each. Issued share capital As at 29 February 2008, the issued share capital amounts to R divided into ordinary shares of one cent each (: R comprising ordinary shares). SHARE CAPITAL CHANGES DURING THE YEAR During the year, shares were issued to settle obligations in terms of the Datatec Share Option Scheme and shares were issued as part of the consideration for acquisitions. A further shares were issued in an institutional placement on the Alternative Investment Market ( AIM ) of the London Stock Exchange. In February 2008 Datatec executed a share buy-back where it repurchased and subsequently cancelled shares. A further shares were repurchased by the Company share trust during the year ended 29 February 2008 and are held as treasury shares. Financial details of the movement in share capital have been reflected in the statement of changes in equity on page 104, and in Note 16 in the annual financial statements. DIRECTORS Full details of the current Board of Directors appear on pages 16 and 17. During the year under review Mr John McCartney was appointed to the Board as an independent non-executive director with effect from 16 July. Mr Colin Brayshaw retired from the Board on 6 August. Mr Ivan Dittrich was appointed to the Board on 1 March 2008 to succeed Mr David Pfaff who has resigned from the Board with effect from 31 May Subsequent to the year-end Mr Leslie Boyd, the Group s Chairman, passed away suddenly after a short illness. Mr Stephen Davidson, who was Deputy Chairman, has succeeded to the role of Chairman. Mr Boyd had indicated his intention to retire from the Board after the Group s AGM in August at which time the Board had intended to appoint Mr Davidson as Chairman.

92 91 All directors, including non-executive directors, are required, in terms of the Company s articles of association, to retire at least every three years and may offer themselves for re-election. 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. Brief curricula vitae of directors are included on pages 16 and 17 and further information on the directors, including their interests in the shares of the Company and share-based remuneration schemes, are provided in the remuneration report set out on pages 68 to 81. GOING CONCERN The directors believe that the Datatec Group has adequate financial resources to continue in operation for the foreseeable future and accordingly the financial statements have been prepared on a going-concern basis. The Group is solvent and has access to sufficient cash resources. Shareholders funds are $655 million (: $538 million). Working capital remains well controlled. Receivables and inventory are of sound quality and adequate provisions are held against both. The Group has sufficient liquidity and borrowing capacity to meet its ongoing operating needs, including approved capital expenditure. At 29 February 2008 the Group had cash balances on hand of $245 million, bank overdrafts of $211 million and unused borrowing facilities of $334 million of which $177 million was available for draw down against existing collateral at that date. The Group has no need to undertake a capital restructuring and key executive management is in place. The Board is not aware of any new material changes that may adversely impact the Group relative to customers, suppliers, services or markets. The Board is not aware of any material non-compliance with statutory or regulatory requirements and there are no pending legal proceedings other than in the normal course of business. The Board is not aware of any pending changes in legislation in any of the major countries in which it operates that may affect the Group. INVESTMENTS AND SUBSIDIARIES Financial information relating to the Group s investments and interests in subsidiaries is contained in Annexure 1 of the Group financial statements and Note 4 of the Company financial statements. ACQUISITIONS The following significant acquisitions were concluded during the 2008 financial year: On 8 March, Westcon Africa Middle East acquired 100% of Jet Distribution Ltd and Resolv Computers Ltd for $3,8 million. On 24 April, Westcon Group, Inc. acquired NOXS Europe BV and NOXS Ireland Ltd from Unit 4 Agresso NV for a maximum cash consideration of $74 million. NOXS is a leading European distributor of security products and services with offices in France, Belgium, The Netherlands, Germany, the United Kingdom, Ireland and Italy. NOXS primary vendors include Juniper Networks, Checkpoint Systems, Trend Micro, Nokia and McAfee. On 3 May, Datatec Ltd acquired Crane Telecommunications Group Ltd, a leading UK-based European value-added distributor of voice, data and converged communications solutions for $42 million in cash and Datatec shares. Datatec subsequently transferred these shares in Crane to Westcon Group, Inc. On 31 May, Logicalis US Holdings, Inc. acquired Carotek s Information Technology Division, based in North Carolina for $7 million in cash and shares. On 16 July, Westcon Group, Inc. acquired the assets of ReView Video LLC, a leading US distributor of audio, network, videoconferencing and voice over IP ( VoIP ) solutions, for a cash consideration of $25 million.

93 92 Directors report continued for the year ended 29 February 2008 On 2 October, Logicalis Group Ltd purchased the 20% minority interest in its South American operations for $6 million, and on 30 September, increased its stake in a German services business to 75% for $2 million. On 1 September, Westcon Africa Middle East acquired 51% of International Technology Distributors FZCo which has since been renamed Westcon Africa FZCo ( Westcon Africa ) for a net $4,2 million (note that part of the consideration included the transfer of the investment in Jet Distribution Ltd and Resolv Computers Ltd). On 19 February 2008, Analysys Mason completed the acquisition of Redbox Consulting Services Ltd for $3,6 million. This acquisition will further enhance the range of services that can be offered to clients. Investments increased to $3,7 million, as a result of the joint venture transaction in respect of Neteks in Turkey. Comprehensive financial details of the acquisitions made during the year can be found in Note 34 in the annual financial statements. SPECIAL RESOLUTIONS OF THE GROUP On 30 August the Company registered a special resolution after receiving general shareholder approval at the Annual General Meeting ( AGM ) held on 6 August to repurchase its own securities or to effect the repurchase of the Company s securities by a subsidiary of the Company. On 30 August the Company registered a special resolution after receiving shareholder approval at the AGM held on 6 August to change its articles of association to: CORPORATE GOVERNANCE COMPLIANCE STATEMENTS A statement on the Group s corporate governance policies and procedures is set out in the corporate governance report on pages 59 to 67. 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 68 to 81. EVENTS OCCURRING SUBSEQUENT TO THE YEAR-END On 2 May 2008, Logicalis completed the merger of its Latin American operations with the leading Brazilian network integration businesses of Promon Tecnologia ( PT ). The initial announcement was on 14 March Logicalis paid PT s owner, Promon S.A., $77,2 million in cash and new Datatec shares for a 70% equity holding in the combined business which has since been renamed Promon-Logicalis Latin America Ltd ( PLLAL ). Promon S.A. will have a 30% equity interest in the business. The focus of the division will be to capture synergies across Latin America by providing cross-border solutions and services to customers in the region. The board and management of PLLAL comprise directors and executives from both Promon S.A. and Logicalis. CAPITAL DISTRIBUTION The Company will distribute out of share premium, in lieu of a dividend, 90 RSA cents per share (approximately 12 US cents per share) for the year ended 29 February 2008, in terms of the general authority granted to directors at the AGM held on 6 August. The capital distribution will be paid to shareholders on the Jersey branch register in GBP translated at the closing exchange rate on Thursday, 10 July 2008.

94 93 The salient dates are: Last day to trade Friday, 4 July 2008 Shares to commence trading ex the distribution Monday, 7 July 2008 Record date Friday, 11 July 2008 Payment date Monday, 14 July 2008 Share certificates may not be dematerialised or rematerialised between Monday, 7 July 2008 and Friday, 11 July 2008, both days inclusive. The Company has instituted a policy of making an annual distribution to shareholders subject to annual review which will be influenced by business growth, acquisition activity, or changes in reported earnings resulting from applying fair value accounting principles. ANNUAL GENERAL MEETING The AGM will be held at 12:00 on 4 August 2008 at the Sandton Sun Hotel, 5th Street, Sandton. In addition to the ordinary business of the meeting, as special business, shareholder consent will be sought to authorise directors to repurchase the Company s shares from time to time according to certain guidelines. Refer to the notice to the AGM on pages 151 to 156 of this report for further details.

95 94 Group and Company accounting policies for the year ended 29 February 2008 BASIS OF ACCOUNTING AND REPORTING The financial statements as set out on pages 90 to 150 have been prepared on the historical cost basis except for the revaluation of certain financial instruments. Significant details of the Group and Company s accounting policies are set out below which are consistent with those applied in the previous year, except for the adoption of IFRS 7 Financial Instruments: Disclosures which is effective for annual reporting periods beginning on or after 1 January, and the consequential amendments to IAS 1 Presentation of Financial Statements. The financial statements comply with the International Financial Reporting Standards ( IFRS ) of the International Accounting Standards Board, the JSE Listings Requirements, AIM Rules and the Companies Act of South Africa. ADOPTION OF NEW ACCOUNTING STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS The Group and Company have adopted the following statements and interpretations: New standards The impact of the adoption of IFRS 7 Financial Instruments: Disclosures and the changes to IAS 1 Presentation of Financial Statements has been to expand the disclosures provided in these financial statements regarding the Group and Company s financial instruments and management of capital (see Note 25). New interpretations Four interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current period. These are: IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies; IFRIC 8 Scope of IFRS 2; IFRIC 9 Reassessment of Embedded Derivatives; IFRIC 10 Interim Financial Reporting and Impairment; IFRIC 11 IFRS 2 Group Treasury Share Transactions. Two further interpretations are not yet effective but have been early-adopted, namely IFRIC 12 Service Concession Arrangements; and IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The adoption of these interpretations has not led to any changes in the Group s accounting policies, and has had no material impact on the Group and Company financial statements. New interpretations and standards not yet adopted At the date of authorisation of these financial statements, the following standards and interpretations applicable to the Group were in issue but not yet effective: Share-based Payment: Vesting Conditions and Cancellations (effective for accounting periods beginning on or after 1 January 2009); Business Combinations (effective for accounting periods beginning on or after 1 July 2009); Presentation of Financial Statements (effective for accounting periods beginning on or after 1 January 2009); Consolidated and Separate Financial Statements (effective for accounting periods beginning on or after 1 July 2009); Financial Instruments: Presentation together with consequential amendments to IAS 1 Presentation of Financial Statements: Puttable Financial Instruments and Obligations Arising on Liquidation (effective for accounting periods beginning on or after 1 January 2009); (Revised) Borrowing Costs (effective for accounting periods beginning on or after 1 January 2009); Operating Segments (effective for accounting periods beginning on or after 1 January 2009); and Customer Loyalty Programmes (effective for accounting periods beginning on or after 1 July 2008). The revised IFRS 3 Business Combinations standard has a number of amendments that will impact the Group for business combinations concluded post the effective date. The most significant of which are expected to be: professional costs associated with the transaction. Currently these costs are capitalised as part of the cost of the acquisition. accounting for the change in consideration depends on whether the additional consideration is an equity instrument or cash or other assets paid or owed. If it is equity, the original amount is not remeasured. If the additional consideration is cash or other assets paid or owed, the changed amount is recognised in profit or loss. Currently the contingent consideration, regardless of the manner in which it is settled, is remeasured and an adjustment is made to goodwill. goodwill method and such option may be elected on a transaction-by-transaction basis. IFRS 8 is a disclosure standard which may result in a redesignation of the Group s reportable segments but is not expected to have an impact on the reported results or financial position of the Group.

96 95 The directors believe that none of the other new or revised standards and interpretations will have a significant effect on the Group s accounting policies. KEY ASSUMPTIONS MADE BY MANAGEMENT IN APPLYING ACCOUNTING POLICIES In the application of the Group s accounting policies described below, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors which are considered to be relevant. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions concerning the future, and other key areas of estimation included in the Group s annual financial statements, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year: $55,0 million (: $20,7 million). The Group continually assesses the carrying value of its intangible assets recognised as part of historical acquisitions. This requires an estimation of the value in use, based on estimated future cash flows and discount rates, of the asset or cash-generating units to which these assets belong; (: $162,6 million). Similar to acquired intangible assets this requires an estimation of the value in use of the cash-generating unit to which the goodwill is allocated; included in the balance sheet at $29,3 million (: $22,4 million); analyses of these assumptions are provided in Note 25; respectively; BASIS OF CONSOLIDATION The Group reports in US Dollars in order to be consistent with the economic substance of the underlying events and circumstances of the Group s businesses. The US Dollar is the functional currency in which the major part of the Group s trading is conducted. Reporting in US Dollars reduces the distorting effects of changes in currency exchange rates, simplifies financial analysis and enhances the transparency of the financial results. Presenting financial information in US Dollars is also more meaningful to global investors and for international benchmarking. The translation for reporting purposes into US Dollars is done as follows: approximates the ruling exchange rates at the dates of the transactions. The consolidated Group financial statements incorporate the financial statements of the Company and all enterprises controlled by the Company up to the end of February each year. Control is achieved where the Group has the power to govern the financial and operating policies of an enterprise so as to obtain economic benefits from its activities. The operating results of Group entities have been included from the effective dates of acquisition to the effective dates of disposal. All significant inter-company transactions, balances, income and expenses have been eliminated in full on consolidation. On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition. To the extent that the cost of the acquisition, in excess of the fair value of the net assets acquired, is attributable to intangible assets that the entity holds for its own use or for rental to others, this value is recognised as an intangible asset. Any additional difference between the cost

97 96 Group and Company accounting policies continued for the year ended 29 February 2008 of acquisition and total net asset value of the entity is recognised as goodwill. The interest of minority shareholders is stated at the minority s proportion of the fair values of the net assets recognised (excluding goodwill). Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those of the Group. BUSINESS COMBINATIONS Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the conditions of recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of cost of the business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit and loss. The interest of minority shareholders in the acquiree is initially measured at the minority s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. FOREIGN CURRENCY TRANSACTIONS Transactions in currencies other than the reporting currency are initially recorded at the rates of exchange ruling on the dates of the transactions. At each balance sheet date, monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement except for profits and losses on exchange arising from equity loans which are taken directly to equity, until the entity to which the loan was made has been disposed of, at which time they are recognised as income or an expense. Exchange differences arising on equity loans and the translation of foreign subsidiaries are classified as equity and transferred to the Group s translation reserve. Such translation differences are recognised as income or expenses in the period during which disposals are effected. Where appropriate, in order to minimise its exposure to foreign exchange risks, the Group enters into forward exchange contracts. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. PROPERTY, PLANT AND EQUIPMENT Land and buildings comprise mainly warehouses and offices. All property, plant and equipment have been stated at cost less accumulated depreciation and impairment except land, which is shown at cost less impairment. Depreciation is calculated based on cost using the straight-line method over the estimated useful lives of the assets and their recoverable amount. The basis of depreciation provided on property, plant and equipment is: Useful lives (years) Office furniture and equipment 2 6 Motor vehicles 2 4 Computer equipment and software 2 6 Buildings 20 Leasehold improvements Period of the lease Land is not depreciated. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount.

98 97 Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement. LEASED ASSETS Assets leased in terms of agreements, which are considered to be finance leases, are capitalised. Capitalised leased assets are depreciated at the same rate and on the same basis as equivalent owned assets or over the term of the lease if this is shorter. The liability to the lessor is included in the balance sheet as a finance lease obligation. Lease finance charges are amortised over the duration of the underlying leases, using the effective interest rate method. Operating leases, mainly for the rental of premises, office furniture, computer equipment and motor vehicles are not capitalised and rentals are expensed on a straight-line basis over the lease term. CAPITALISED DEVELOPMENT EXPENDITURE An intangible asset arising from internal development (or from the development phase of an internal project) is recognised only if the Group can demonstrate all of the following: (a) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (b) its intention or ability to complete the intangible asset, and use or sell it; (c) how the intangible asset will generate probable future economic benefits, including the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; (d) the availability of adequate technical, financial and other resources to complete the development, and to use or sell the intangible asset; and (e) its ability to reliably measure the expenditure attributable to the intangible asset during its development. Capitalised development costs are amortised using the straight-line method over their useful lives, which generally do not exceed seven years. Expenditure on research activities is recognised as an expense in the period in which it is incurred. OTHER INTANGIBLE ASSETS Other intangible assets include those intangible assets acquired and identified as part of a business combination. Intangible assets are identifiable non-monetary assets without physical substance that an entity holds for its own use or for rental to others and include technology-based items like patents, copyrights and databases; customer-based items, research and development and contractbased items. An intangible asset is recognised when it meets the following criteria: (a) is identifiable; (b) the entity has control over the asset; (c) it is probable that economic benefits will flow to the entity; and (d) the cost of the asset can be measured reliably. Intangible assets are amortised using the straight-line method over their useful lives, which generally do not exceed 10 years. Intangible assets which do not meet the criteria listed above are recognised as an expense in the period in which it is incurred. GOODWILL Goodwill represents the excess cost of an acquisition over the fair value of the Group s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. For the purpose of impairment testing, goodwill is allocated to each of the Group s cash-generating units expected to benefit from the synergies of the combination. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. The carrying amount of goodwill (or relevant portion thereof) is included in computing the gains and losses on the disposal of an entity. Impairment tests are conducted annually on goodwill based on future discounted cash flows, and other appropriate methods. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

99 98 Group and Company accounting policies continued for the year ended 29 February 2008 A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is, when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. The results and assets and liabilities of associates and joint ventures are incorporated in these financial statements using the equity method of accounting. Any excess of the cost of acquisition over the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. Where a Group entity transacts with an associate or joint venture of the Group, profits and losses are eliminated to the extent of the Group s interest in the relevant associate or joint venture. IMPAIRMENT At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, its carrying amount is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately and are reflected in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but will never exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in the income statement. INVENTORIES Inventories, comprising merchandise for resale and raw materials, are stated at the lower of cost and net realisable value and are mainly valued on the weighted 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 for each contract. FINANCIAL INSTRUMENTS Measurement Financial instruments are initially measured at fair value, which includes transaction costs and approximates fair value. Subsequent to initial recognition these instruments are measured at amortised cost using the effective interest rate method. Investments Investments, other than investments in subsidiaries, are recognised on a trade-date basis and are initially measured at cost, including transaction costs. These investments are classified as either held-for-trading or available-for-sale, and are measured at subsequent reporting dates at fair value. An investment is classified as held-for-trading if it has been acquired principally for the purpose of selling in the near future, or it is part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking. An investment is classified as available-for-sale if it is not held for trading. Where securities are held for trading purposes, gains or losses arising from changes in fair value are included in the income statement for the period in operating profit. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the income statement for the period.

100 99 Fair value of listed investments is calculated by reference to the quoted selling price at the close of business on the balance sheet date. Unlisted investments are shown at fair value or at cost where fair value cannot be measured reliably. Fair value is determined with reference to independent valuations using discounted cash-flow analysis or other suitable valuation methodologies or recent arm s length market transactions between knowledgeable, willing parties. Trade receivables Trade receivables are recognised initially at cost, which approximates fair value and are subsequently measured at amortised cost using the effective interest rate method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or expense over the period of the instrument. Effectively, this method determines the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or, if appropriate, a shorter period, to the net carrying amount of the financial asset or liability. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all the amounts due according to the original terms of the receivables. Objective evidence includes observable data about the following loss events: In instances where there is clear and unassailable evidence that a trade receivable has been impaired and that there is no evidence to indicate that the trade receivable is recoverable and all reasonable measures to recover the amount have been exhausted, the Group would reduce the carrying amount of the impaired trade receivable directly against the asset account or the provision for impairment of trade receivables if one had previously been raised. Any increase or decrease in the provision for impairment of trade receivables or any reduction in trade receivables directly against the asset account is recorded in operating profit. Renegotiated financial assets Financial assets whose terms have been renegotiated to terms outside the entities normal terms and conditions, but the new terms are still within acceptable industry standards and norms, will not be deemed to have been derecognised and the renegotiated terms will be accounted for as part of the old financial asset. In those instances where an entity has renegotiated the terms of an existing financial asset to terms outside the entities normal terms and conditions and the new terms are beyond acceptable industry standards and norms, the financial asset will be deemed to have been derecognised and a new financial asset would be raised with the resultant gain or loss on derecognition being recognised in operating profit. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. Borrowings Borrowings are initially recorded at fair value, net of direct issue costs, and are subsequently measured at amortised cost using the effective interest rate method. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trade payables Trade payables are recognised initially at cost, which approximates fair value and are subsequently measured at amortised cost using the effective interest rate method.

101 100 Group and Company accounting policies continued for the year ended 29 February 2008 Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of the direct issue costs. 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. Non-current provisions are adjusted to reflect the time value of money. Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. AMOUNTS OWING TO VENDORS Amounts owing to vendors represent purchase considerations owing in respect of acquisitions. These purchase considerations are to be settled with the vendors in cash or shares on fulfilment of the relevant profit warranties. The amounts owing are interest-free and will be settled within the next year. Any additional amounts payable to vendors will be allocated to goodwill arising on acquisition and will have no effect on the income statement. TAXATION The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable income for the year. Taxable income differs from net income as reported in the income statement because it includes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group s liability for current tax uses relevant rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences which arise 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 income. 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 income will be available against which deductible temporary differences can be utilised. The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. 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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. REVENUE RECOGNITION Revenue is measured at fair value of the consideration received or receivable and, except for certain sales arrangements where the Group acts as agent, represents the invoiced value of sales and services rendered, excluding discounts and sales-related taxes. Revenue from sales arrangements where the Group acts as agent is recognised on a net basis and the commission or gross profit earned on these contracts is recognised as revenue. In respect of trading operations revenue is recognised at the date on which goods are delivered to customers or services are provided. Revenue and profits from the rendering of services on long-term and fixed-price contracts are recognised on the percentageof-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.

102 101 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. Within the Group, inter-company and inter-divisional revenue is eliminated on consolidation. Interest received is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. BORROWING COSTS All borrowing costs are recognised in profit and loss in the period in which they are incurred. SHARE-BASED PAYMENTS The Group issues equity-settled and cash-settled share-based incentives to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group s estimate of shares that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions. For cash-settled share-based payments the liability for the fair value of all unexercised share rights which are expected to vest, is determined initially at grant date and then revalued at each reporting date and amortised over the applicable period. Fair value is measured by use of a binomial model for equity-settled share-based payments and by use of a Black-Scholes-Merton model for cash-settled share-based payments. The expected life used in the models has been adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 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. DISCONTINUING OPERATIONS Discontinuing operations are significant, distinguishable components of the Group that have been sold, abandoned or are the subject of formal plans for disposal or discontinuance. Any operation disposed of subsequent to year-end is considered to be a discontinuing operation for disclosure purposes. Once an operation has been identified as discontinuing, comparative information is restated.

103 102 Group income statement for the year ended 29 February 2008 Notes 2008 Revenue Continuing operations Acquisitions Cost of sales ( ) ( ) Gross profit Operating costs ( ) ( ) Share-based payments 2 (8 688) (8 943) Operating profit before finance costs, depreciation and amortisation ( EBITDA ) Depreciation and amortisation 3 (26 805) (19 072) Operating profit before goodwill adjustment Goodwill adjustment 10 (421) (1 142) Operating profit Interest received Financing costs 4 (26 841) (19 295) Loss on disposal of investments 6 (55) Share of joint venture earnings Profit before taxation Taxation 5 (28 246) (27 305) Profit for the year from continuing operations Profit for the year from discontinued operations 6 24 Profit for the year Attributable to: Minority interests Equity holders of the parent Number of shares issued (millions) Issued Weighted average Diluted weighted average Earnings per share (cents) Basic 7 45,4 40,0 Diluted 7 44,6 39,2

104 Group balance sheet Datatec Annual Report as at 29 February 2008 Notes 2008 ASSETS Non-current assets Property, plant and equipment Goodwill Capitalised development expenditure Acquired intangible assets Investments Deferred tax assets Current assets Inventories Trade receivables Other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital and premium Non-distributable reserves Share-based payments reserve Distributable reserves Minorities interest Total equity Non-current liabilities Long-term liabilities Liability for share-based payments Deferred tax liabilities Current liabilities Trade and other payables Provisions Amounts owing to vendors Current tax liabilities Bank overdrafts Total equity and liabilities

105 104 Group statement of changes in equity for the year ended 29 February 2008 Share capital Share premium Nondistributable reserves Sharebased payments reserve Distributable reserves Equity attributable to equity holders of the parent Minorities Total equity Balance at 1 March (11 990) Difference arising on translation into US$ (35) (31 523) (4 290) (1 128) (5 418) Translation difference on equity loans Recognised directly in equity (35) (31 523) (1 128) Attributable profit for the year Total income/(expense) recognised for the year (35) (31 523) New share issues Capital distribution (6 589) (6 589) (6 589) Acquisitions Share-based payments Balance at 28 February Difference arising on translation into US$ (14) (14 887) (4 934) 50 (4 884) Translation difference on equity loans Recognised directly in equity (14) (14 887) (2 698) 50 (2 648) Attributable profit for the year Total income/(expense) recognised for the year (14) (14 887) New share issues Capital distribution (16 775) (16 775) (16 775) Acquisitions Share buy-back (1) (6 130) (6 131) (6 131) Share-based payments Balance at 29 February Non-distributable reserves relate to foreign currency translation reserves. The Group issues equity-settled and cash-settled share-based incentives to certain employees. Equity-settled share-based payments are measured at the fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group s estimate of the shares that will eventually vest. A liability equal to the portion of services received is recognised at the current fair value determined at each balance sheet date for cash-settled share-based payments.

106 Group cash flow statement Datatec Annual Report for the year ended 29 February 2008 Notes 2008 Cash flow from operating activities Cash generated from operations Interest received Financing costs (26 841) (19 295) Taxation paid 27 (29 809) (14 039) Net cash inflow/(outflow) from operating activities (3 626) Cash flow from investing activities Acquisition of subsidiary companies 28 ( ) (44 741) Acquisition of joint venture 12 (3 828) Proceeds on disposal of businesses and investments 29 (31) Additions to property, plant and equipment 30 (18 502) (10 632) Additions to capitalised development expenditure 11 (5 848) (5 040) Proceeds on disposal of property, plant and equipment Net cash outflow from investing activities ( ) (60 334) Cash flow from financing activities Net proceeds from issue of shares Capital distribution (16 775) (6 589) Share buy-back (6 131) (Decrease)/increase in amounts owing to vendors (2 044) Movement in minority interests Net proceeds from/(payment of) long-term liabilities (287) Net cash inflow from financing activities Net decrease in cash and cash equivalents ( ) (39 064) Cash and cash equivalents at the beginning of year Translation difference on opening cash position Cash and cash equivalents at end of year

107 106 Notes to the Group annual financial statements for the year ended 29 February REVENUE Sale of goods Services rendered Number of shares ( 000) 2008 Weighted average grant price Number of shares ( 000) Weighted average grant price 2. SHARE-BASED PAYMENTS The Group plans are detailed in the remuneration report on pages 68 to 81. They provide for a grant price equal or approximately equal to the market price at the date of the grant. The vesting periods for the different plans range between two and four years. Equity-settled schemes Datatec Share Appreciation Rights Scheme ( SARS ) (i) denominated in ZAR ZAR ZAR Outstanding at beginning of year , ,76 Granted during year , ,79 Forfeited during year (95) 35,64 (63) 18,44 Outstanding at end of year , ,83 Exercisable at end of year The ZAR-denominated SARs outstanding at 29 February 2008 had a weighted average remaining contractual life of 5,1 years (: 5,7 years). (ii) denominated in GBP GBP GBP Outstanding at beginning of year Granted during year 273 2,36 Forfeited during year Outstanding at end of year 273 2,36 Exercisable at end of year 91 2,36 The GBP-denominated SARs outstanding at 29 February 2008 had a weighted average remaining contractual life of 3,2 years. Datatec Long-Term Incentive Plan ( LTIP ) Outstanding at beginning of year Granted during year Forfeited during year (72) (49) Outstanding at end of year Exercisable at end of year Datatec Deferred Bonus Plan ( DBP ) Outstanding at beginning of year Granted during year Forfeited during year (22) Outstanding at end of year Exercisable at end of year

108 107 Number of shares ( 000) 2008 Weighted average grant price Number of shares ( 000) Weighted average grant price 2. SHARE-BASED PAYMENTS (continued) Datatec Share Option Scheme ( The Datatec Scheme ) ZAR ZAR Outstanding at beginning of year , ,39 Forfeited during year (88) 17,05 (679) 25,87 Exercised during year (2 225) 10,87 (856) 10,22 Outstanding at end of year , ,15 Exercisable at end of year , ,44 The weighted average share price at the date of exercise for the share options exercised during the year was ZAR 40,45 (: ZAR 29,43). The options outstanding at 29 February 2008 had a weighted average remaining contractual life of 4,81 years (: 5,66 years). Cash-settled schemes Westcon Group, Inc. Share Options US$ US$ Outstanding at beginning of year , ,00 Forfeited during year (1) 1 280,00 Outstanding at end of year , ,00 Exercisable at end of year , ,00 The options outstanding at 29 February 2008 had a weighted remaining contractual life of 3,8 years (: 5,7 years). Westcon Group, Inc. Share Appreciation Rights ( SARS ) US$ US$ Outstanding at beginning of year , ,00 Granted during year , ,00 Forfeited during year (1) 2 385,00 (1) 1 172,00 Exercised during year (1) 1 052,00 960,00 Outstanding at end of year , ,00 Exercisable at end of year 460 The options outstanding at 29 February 2008 had a weighted average remaining contractual life of 1,6 years (: 2,2 years). Logicalis Scheme ( The Logicalis SAR Scheme ) US$ US$ Outstanding at beginning of year , ,10 Granted during year 836 3, ,00 Forfeited during year (43) 3,00 (85) 2,31 Exercised during year (155) 2,10 Outstanding at end of year , ,53 Exercisable at end of year 460 The SARS outstanding at 29 February 2008 had a weighted average remaining contractual life of 2,9 years (: 3,8 years).

109 108 Notes to the Group annual financial statements continued for the year ended 29 February 2008 Number of shares ( 000) 2008 Weighted average grant price Number of shares ( 000) Weighted average grant price 2. SHARE-BASED PAYMENTS (continued) Analysys Mason Share-based Remuneration Schemes GBP GBP Outstanding at beginning of year 56 19, ,47 Granted during year 45 21, ,45 Forfeited during year (17) 12,99 (20) 15,98 Outstanding at end of year 84 20, ,40 Exercisable at end of year The awards outstanding at 29 February 2008 had a weighted average remaining contractual life of 2,1 years (: 3,3 years). The Westcon SA SAR Scheme ZAR ZAR Outstanding at beginning of year 25 39,73 Granted during year 23 74, ,73 Outstanding at end of year 48 56, ,73 Exercisable at end of year The SARs outstanding at 29 February 2008 had a weighted average remaining contractual life of 3,8 years (: 4,3 years). The OnLine SAR Scheme US$ US$ Outstanding at beginning of year 20 16,18 Granted during year 17 19, ,18 Forfeited during year (7) 18,13 Outstanding at end of year 30 17, ,18 Exercisable at end of year The options outstanding at 29 February 2008 had a weighted average remaining contractual life of 3,7 years (: 4,2 years). Fair value is measured by use of an actuarial binomial model for the equity-settled share-based payments and by use of a Black-Scholes-Merton model for cash-settled share-based payments. The expected life used in the models has been adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. In determining valuations, expected volatility was determined by calculating the historical volatility of the Group s share price over the previous four years. The expected volatility for share-based instruments that exist in unlisted subsidiary companies in the Group is based on peer data Expense in respect of equity-settled schemes Expense in respect of cash-settled schemes

110 OPERATING PROFIT Operating profit is arrived at after taking into account the following items: Auditors remuneration Audit fees Other services and expenses Taxation services Other services Less amount capitalised (2 027) Depreciation Office furniture, equipment and motor vehicles Computer equipment and software Land and buildings Leasehold improvements Amortisation of capitalised development expenditure Amortisation of other intangible assets Total depreciation and amortisation Foreign exchange gains Realised Unrealised Net foreign exchange gains Impairment losses recognised on trade receivables Reversal of impairment losses recognised on trade receivables (4 554) (3 060) Fees for services Administrative Managerial Technical Operating lease rentals Property Computer equipment Office furniture, equipment and motor vehicles Net (profit) loss on disposal of: Office furniture, equipment and motor vehicles (80) 6 Retirement benefit contributions Staff costs Directors emoluments Executive directors Salaries Incentive bonuses Benefits Non-executive directors fees Full details of directors emoluments are provided in the remuneration report on pages 68 to 81.

111 110 Notes to the Group annual financial statements continued for the year ended 29 February FINANCING COSTS Interest paid Finance leases Bank overdraft and trade finance TAXATION 5.1 Taxation charge South African normal taxation: Current taxation current year prior year (2 483) (70) Deferred taxation current year (230) (59) prior year Foreign taxation: Current taxation current year prior year (1 644) (2 813) Deferred taxation current year (3 159) prior year (926) Total taxation charge Reconciliation of taxation rate to profit before taxation South African statutory tax rate 29,0% 29,0% Tax losses utilised (5,2%) (9,8%) Permanent differences 7,2% 6,1% Foreign taxation rate differential 3,6% 4,7% Tax losses and other deferred tax assets not recognised (4,0%) 3,2% Prior year adjustment (4,4%) (2,7%) Rate adjustment (0,1%) 0,0% Effective taxation rate 26,1% 30,5% 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 be: Estimated future tax relief at an estimated tax rate of 27,6% (: 30,9%) is $11,8 million. A deferred tax asset of $4,7 million has already been recognised in respect of these losses (: $5,5 million) as set out in Note DISPOSALS AND DISCONTINUED OPERATIONS Loss on disposal of investments (55) Profit on disposal and closure of discontinued operations 24 Loss after taxation (31)

112 EARNINGS PER SHARE Reconciliation of attributable profit to headline earnings Profit for the year attributable to equity holders of the parent Headline earnings adjustments: Goodwill adjustments Loss on disposal and closure of discontinuing operations 31 Net (profit)/loss on disposal of property, plant and equipment (80) Tax effect 24 (2) Minorities interest (2) 0 Headline earnings Reconciliation of headline earnings to underlying earnings Underlying earnings adjustments: (2 366) Unrealised foreign exchange gains (5 315) (6 314) Amortisation of acquired intangible assets (918) Tax effect (3 074) (1 607) Minorities interest Underlying earnings US cents US cents Basic earnings per share 45,4 40,0 Headline earnings per share 45,6 40,8 Underlying earnings per share 47,3 39,2 The earnings metrics above are calculated on the weighted average number of shares in issue during the year of (: ). Diluted earnings per share 44,6 39,2 Diluted headline earnings per share 44,7 40,0 Diluted underlying earnings per share 46,4 38,5 The diluted earnings metrics above are calculated on the diluted weighted average number of shares in issue during the year of (: ), taking into account the difference between the number of shares issuable and the number of shares that would be issued at fair value in respect of the (: ) options granted, but not exercised INTEREST IN PROFITS AND LOSSES OF SUBSIDIARIES Interest in the aggregate amount of profits and losses of subsidiaries after taxation Profits continuing operations Losses continuing operations (171) (2 560)

113 112 Notes to the Group annual financial statements continued for the year ended 29 February Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value 9. PROPERTY, PLANT AND EQUIPMENT Office furniture, equipment and motor vehicles Computer equipment and software Leasehold improvements Land and buildings Included in property, plant and equipment are assets held under finance lease agreements with a book value of $0,3 million (: $0,1 million) which are encumbered as security for liabilities under finance lease agreements as stated in Note 17. A register of land and buildings is maintained at the Company s registered office and may be inspected by members of the public or their duly authorised agents. Movement of property, plant and equipment () Office furniture equipment and motor vehicles Computer equipment and software Leasehold improvements Land and buildings Total 2008 Net book value at beginning of year Subsidiaries acquired Additions Translation differences Disposals 11 (370) (99) (458) Depreciation (1 706) (9 354) (2 046) (76) (13 182) Net book value at end of year Net book value at beginning of year Subsidiaries acquired Additions Translation differences (74) Disposals (69) (90) 43 (116) Depreciation (1 340) (7 880) (1 106) (76) (10 402) Net book value at end of year

114 GOODWILL Net book value At beginning of year Arising on acquisition of subsidiaries Other Adjustment (421) (1 142) Balance at end of year Goodwill at cost Accumulated impairment (76 218) (75 797) Per division Westcon Logicalis Analysys Mason Other Holdings Impairment tests are conducted annually on goodwill based on value-in-use calculations of the cash-generating unit to which the goodwill belongs. This includes an assessment of future cash flows over periods ranging from three years to 10 years. The future cash flows are discounted at rates appropriate to the investment and vary from 10% to 15%. During the year goodwill reduced by $0,4 million (: $1,1 million). This reduction is primarily as a result of a deferred tax asset subsequently recognised in African Legend Indigo from the acquisition of African Legend in In terms of IFRS 3, if a tax asset is not recognised at acquisition due to uncertainty over its recoverability, but is subsequently realised through use of losses, there will be a benefit to income. The Group is required to reduce the amount of goodwill which is attributable to the value of the deferred tax asset and recognise this as an expense in the income statement. 11. OTHER INTANGIBLE ASSETS 11.1 Capitalised development expenditure Net book value At beginning of year Amounts capitalised Other (139) (15) Amounts amortised (3 278) (3 274) Balance at end of year Capitalised development expenditure at cost Accumulated amortisation and impairment (24 415) (21 137) 11.2 Acquired intangible assets Net book value At beginning of year Arising on acquisition of subsidiaries Disposals (875) Translation 517 Amortisation (10 345) (5 396) Balance at end of year Intangibles at cost Accumulated amortisation and impairment (17 975) (7 630)

115 114 Notes to the Group annual financial statements continued for the year ended 29 February INVESTMENTS Investments currently comprise one investment in a joint venture which is equity accounted. Details of the Group s investment are: % Ownership Fair value Name Country Neteks JV Turkey Summarised financial information in respect of the above joint venture: 2008 Total assets Total liabilities (12 458) Net assets Group s share of net assets of joint venture 764 Total revenue Profit for the period 242 Group s share of profits of joint venture DEFERRED TAX ASSETS/(LIABILITIES) 13.1 Movement of deferred tax assets Balance at beginning of year Arising on acquisition of subsidiaries 889 Charge/(credit) to income statement (2 975) Other movements (336) Analysis of deferred tax assets Capital allowances Provisions Effect of tax losses Other temporary differences Movement of deferred tax liabilities Balance at beginning of year (13 232) (5 875) Arising on acquisition of subsidiaries (8 604) (2 267) Credit to income statement (2 068) (5 050) Other movements (594) (40) (24 498) (13 232) Analysis of deferred tax liabilities Capital allowances (754) (1 506) Other temporary differences (23 744) (11 726) (24 498) (13 232)

116 INVENTORIES Spares/maintenance inventory Work in progress Finished goods Merchandise for resale Inventory provisions (16 202) (15 047) Obsolete inventory amounting to $1,7 million (: $3,9 million) was written off during the year. The Group has certain limited return policies with its major vendors to reduce risk of technological obsolescence of inventories. $208,1 million (: $202,7 million) inventories are encumbered. In December, one of Westcon s European subsidiaries entered into a new inbound inventory flooring agreement with a certain major vendor s purchases for a maximum of $11,0 million which extends payment terms from 30 days to 60 days. The agreement may be cancelled at any time with 60-days notice by either the Company or the vendor. The agreement bears an interest rate of 8% above the LIBOR rate (11,1% as of 29 February 2008). 15. TRADE RECEIVABLES Trade receivables Receivables allowance (10 436) (10 501) All trade receivables represent financial assets of the Group and are classified as loans at amortised cost. $699,1 million (: $535,2 million) of trade receivables are encumbered as set out in Note 21. The carrying value of receivables balances approximates the fair value. Trade receivables older than 90 days are assessed and provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. Before accepting any new customer, use is made of local external credit agencies, where necessary, to assess the potential customer s credit quality and define credit limits by customer. Limits attributed to customers are reviewed regularly. There are no customers who represent more than 5% of the total balance of trade receivables. Included in the Group s trade receivable balance are debtors with a carrying amount of $195,2 million (: $96,4 million) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. However, the weighted average write-off rate over recent years across all classes of trade receivables is 0,8% (: 0,7%). The Group is therefore confident that it has provided adequately for any possible bad debt write-offs, as the receivables allowances exceed this write-off rate.

117 116 Notes to the Group annual financial statements continued for the year ended 29 February TRADE RECEIVABLES (continued) Analysis of the age of financial assets that are past due but not impaired () North America South America UK and Europe Asia- Pacific Middle East/ Africa Total month past due months past due months past due months and greater past due month past due months past due months past due months and greater past due The increase in receivables past due but not impaired is as a result of the acquisitions during the year and higher levels of revenue. Reconciliation of the receivables allowance account () North America South America UK and Europe Asia- Pacific Middle East/ Africa Total 2008 Opening balance (3 280) (316) (4 777) (713) (1 415) (10 501) Impairment losses recognised on receivables (3 037) (138) (1 202) (626) (1 422) (6 425) Impairment losses reversed Bad debt write offs (227) Exchange gains and losses (43) (7) (53) 49 (54) Closing balance (4 585) (401) (2 815) (515) (2 120) (10 436) Opening balance (4 877) (436) (4 108) (646) (1 497) (11 564) Impairment losses recognised on receivables (2 282) (106) (929) (564) (703) (4 584) Impairment losses reversed Bad debt write offs (1 142) Exchange gains and losses 3 (325) (45) 121 (246) Closing balance (3 280) (316) (4 777) (713) (1 415) (10 501) In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and geographically diverse. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

118 TRADE RECEIVABLES (continued) Analysis of impaired trade receivables Included in the allowance for doubtful debts are individually impaired trade receivables with a balance of $38,3 million (: $43,3 million). The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of any expected collections. () North America South America UK and Europe Asia- Pacific Middle East/ Africa Total 2008 Gross value of debtors that have been individually impaired Impairment loss against these debtors (4 585) (401) (2 815) (515) (2 120) (10 436) Gross value of debtors that have been individually impaired Impairment loss against these debtors (3 280) (316) (4 777) (713) (1 415) (10 501) The Group does not hold any collateral against these specific debtors SHARE CAPITAL AND PREMIUM Authorised share capital (: ) ordinary shares of R0,01 each Issued share capital (: ) ordinary shares of R0,01 each Share premium Reconciliation of issued shares, share capital and share premium Number of shares Share capital Share premium Balance at 1 March Issue of shares for share options Issue of shares for acquisitions Issue of shares in institutional placement Capital distribution (6 589) Effects of foreign currency translation (35) (31 523) Balance at 1 March Issue of shares for share options Issue of shares for acquisitions Issue of shares in institutional placement Share buy-back ( ) (1) (2 400) Treasury shares acquired during the year (3 730) Capital distribution (16 775) Effects of foreign currency translation (14) (14 887) Balance at 29 February

119 118 Notes to the Group annual financial statements continued for the year ended 29 February SHARE CAPITAL AND PREMIUM (continued) Following the introduction of new share-based payment schemes during the year ended 28 February 2006, no more options were granted in the Datatec Share Option Scheme. Originally, the equivalent of up to 15% of the issued share capital was set aside for the granting of options. At the balance sheet date (: ) of the outstanding share options had been exercised and shares issued from the unissued share capital set aside for this purpose at 29 February As at 29 February 2008, share options (: ) had been granted but had not yet been exercised or lapsed. At the AGM on 6 August, up to unissued shares (: ) being 10% of the issued ordinary share capital were placed under the control of the directors until the next general meeting, subject to the provisions of section 221 and 222 of the Companies Act and the requirements of the JSE Limited. As of 29 February 2008 the Group held (: ) shares as treasury shares that had been acquired by the Datatec Share Incentive Trust These have been set-off against share premium. Details of the shares issued in respect of share options exercised, acquisitions of subsidiaries and institutional placements: Shares for share options Weighted average price (ZAR) Shares for acquisitions Price (ZAR) Institutional placements Price (ZAR) , ,16 Crane Telecoms , ,21 Intact Germany ,41 Logicalis South America ,85 Carotek LONG-TERM LIABILITIES Liabilities under capitalised finance leases Minimum lease payments Future finance charges (48) (73) Secured loans Other long-term liabilities Less: Current portion included in accounts payable (Note 18) (7 354) (770) Long-term portion Repayable within two years Repayable within three years Repayable within four years Repayable within five years Repayable after five years The long-term liabilities are reflected at amortised cost. Liabilities under capitalised finance lease agreements are repayable in monthly instalments at rates linked to prime interest rates, and relate to assets included under property, plant and equipment in Note 9, with a net book value of $0,3 million (: $0,1 million). The final repayment date is September Westcon On 15 December 2006, Westcon entered into a $40,0 million Second Lien Term Loan (the Term Loan ) with a financial institution. The proceeds from the Term Loan were used for the purpose of Westcon s working capital needs and for other general corporate purposes, and to repay existing indebtedness to Datatec, not to exceed $20,0 million. In, Westcon paid Datatec $15,8 million for existing indebtedness. Westcon was required to make annual mandatory payments based on an excess cash-flow calculation as defined under the Term Loan. The Term Loan was scheduled to mature in June In August, Westcon repaid and terminated the Term Loan. In August, Westcon entered into a $30,0 million Syndicated Term Loan. The Syndicated Term Loan has a seven-year term and matures in September The Syndicated Term Loan requires scheduled amortisation, as defined, which requires Westcon to make payments of $1,5 million every three months and one additional annual payment in 2009 and 2010 based on the effective cash flows in those respective years. In April, one of Westcon s European subsidiaries entered into a new three-year financing arrangement, maturing in March 2010, with a financial institution for up to a maximum of 19,0 million ($29,2 million equivalent at 29 February 2008), and bears interest at a rate of 1,50% above the LIBOR rate (4,6% as of 29 February 2008).

120 Trade and other payables 18.1 Trade payables Other payables Current portion of long-term liabilities (Note 17) The carrying value of liabilities approximates their fair value. Trade accounts payable will be settled in normal trade operations Foreign liabilities Uncovered foreign liabilities at the balance sheet date: Trade accounts payable US Dollars Euro Pounds Sterling Other Paraguayan Guanari 458 Argentinian Peso Peruvian Nuevo Sol 796 Uruguayan Peso Certain of Westcon s European subsidiaries have arrangements with a financial institution to provide up to an aggregate of $250 million of vendor inventory purchase financing which effectively enables Westcon to obtain extended payment terms (normally 60 days from receipt of product) on inventory it purchases from Cisco. Westcon becomes obligated to pay the financial institution upon receipt of the product, at which time title passes to Westcon. The financial institution may, at any time upon the occurrence of certain events, including late payments under the arrangements and a crossdefault to non-payment of other debt, terminate the funding. Obligations under these financings are guaranteed by Westcon Group, Inc. and several of Westcon s European subsidiaries and are secured by inventory and inter-company accounts receivable relating to the sale of Cisco products in Europe. Westcon s subsidiaries that are party to this funding must also comply with financial covenants that establish minimum liquidity and a minimum net profit before tax to revenue percentage and maximum leverage. These arrangements also prohibit Westcon s European subsidiaries from paying dividends to Westcon. As part of this arrangement, Westcon is required to maintain cash on deposit with the financial institution to be used as security. These deposits earn interest at the 30 day LIBOR rate. As of 29 February 2008, $184,4 million (: $180,2 million) was outstanding under these arrangements and is included in accounts payable.

121 120 Notes to the Group annual financial statements continued for the year ended 29 February Onerous contract provisions 2008 Other 19. PROVISIONS Balance at 1 March Amounts added Amounts utilised (1 229) (2 430) Amounts unused (25) (5 376) Translation differences Balance at 1 March Amounts added Amounts utilised (94) (4 272) Amounts unused (1 506) (626) Translation differences Balance at 29 February Total provisions at 29 February Onerous contract provisions relate to building rentals where the costs of the rentals exceed the economic benefits expected to be received therefrom. Other provisions are an accumulation of expected legal costs, restructuring provisions and provisions for possible taxes in some foreign jurisdictions. These provisions are exclusive of accounts receivable and inventory provisions AMOUNTS OWING TO VENDORS Purchase considerations owing Amounts owing to vendors represent purchase considerations owing in respect of acquisitions. These purchase considerations are to be settled with the vendors in cash or shares on fulfilment of the relevant profit warranties. The amounts owing are interest-free and will be settled within the next year. Any additional amounts payable to vendors will be allocated to the goodwill arising on acquisition and will have no effect on the income statement. 21. BANK OVERDRAFTS Total bank overdrafts at year-end South Africa and Other Holdings The Group has general short-term banking facilities amounting to R24 million (: R24 million) with The Standard Bank of South Africa Limited, bearing interest at the South African prime interest rate (14,5% as at 29 February 2008 and 12,5% as at 28 February ). In terms of the cash management system operated in SA, various cross-guarantees have been put in place to restrict the overall exposure to the amount of the banking facility. Datatec Limited stands guarantor to OnLine Distribution who have a facility of $1,5 million with HSBC Bank in the Middle East (: $1,5 million), backed by a lien on a deposit of $0,5 million by Online Distribution. The facility bears interest at 4,6% (: 10,3%) and inventory and accounts receivable balances have been pledged as collateral. Datatec Limited stands guarantor to Westcon SA (Pty) Ltd in respect of their supplier, Cisco Systems International BV. The guarantee is for an amount of $12 million and it expires on 30 June 2008.

122 BANK OVERDRAFTS (continued) Westcon In 2006, Westcon entered into a $150,0 million Revolving Credit Facility for its US and Canadian subsidiaries with various US and Canadian lenders and was scheduled to mature in June In August, Westcon amended the Revolving Credit Facility (the Revolver ) to increase the borrowing limit from $150,0 million to $250,0 million with substantially the same syndicate and to extend the maturity date. The Revolver has a five-year term and matures in August The Revolver also includes an accordion feature which gives Westcon the right to require the lead bank to increase the facility up to an additional $40,0 million without a vote of the syndicate by identifying a willing lender on these terms. The Revolver allows for the issuance of irrevocable commercial or standby letters of credit of up to $10,0 million. As of 29 February 2008, $2,1 million in letters of credit was outstanding, which reduced the amount available under the Revolver. The Revolver bears interest at the rate of LIBOR plus 1,25%. The Revolver also calls for a commitment fee of 0,2% per annum on the unutilised portion. Borrowings under the Revolver are collateralised by: (i) a pledge of 100% of the stock of Westcon s subsidiaries in the United States and a pledge of 66,7% of the stock of Westcon s subsidiary in Canada and (ii) a security interest in substantially all of the assets of Westcon s subsidiaries in the United States and Canada. The Revolver contains certain affirmative and negative covenants including, but not limited to, financial covenants establishing a minimum fixed charge ratio, minimum last 12-month EBITDA (as defined in the Revolver agreement) and total funded debt to EBITDA, and covenants that restrict Westcon s US and Canadian subsidiaries ability to incur debt, create liens, make acquisitions and investments, sell assets and place limitations on the ability of Westcon s US and Canadian subsidiaries to pay dividends to Westcon. As of 29 February 2008, Westcon was in compliance with all such covenants. The effective interest rate at 29 February 2008 was 4,7%. In February 2008, one of Westcon s United Kingdom subsidiaries entered into a new accounts receivable financing arrangement with a financial institution. Advances under this arrangement are generally available for up to 85% of the subsidiary s eligible accounts receivable up to a maximum of 45,0 million ($68,3 million at 29 February 2008), and bear interest at a rate of 1,5% above the LIBOR rate (4,6% as of 29 February 2008), or, if the discounting account is kept in a currency other than Euro, its equivalent for that currency quoted from time to time by HSBC Bank PLC (or its successors) for London-based accounts. The duration of this agreement is 36 months. Westcon s Australian subsidiary has an arrangement with a financial institution to provide up to $18,0 million of accounts receivable, foreign currency settlement and other financing. The advances under the accounts receivable arrangement are generally available for up to 85% of the subsidiary s eligible accounts receivable and bear interest at the financial institution s base rate plus 1,5% (currently 9,1% per annum). This arrangement contains financial covenants setting forth requirements for minimum earnings before interest and taxes to fixed charge coverage ratio, minimum after-tax retained earnings and minimum net inventory value to amount outstanding under the arrangement. Logicalis Logicalis operates a treasury management system with Barclays Bank PLC in the UK and has an overdraft facility, subject to an accounts receivable security covenant and a fixed and floating security charge, to a maximum of 12 million (: 2 million). During the year cross-guarantees were in place between the UK operating companies in order for them to benefit from pooling their financial resources by using the treasury management system. The overdraft facility is repayable on demand and bears interest at the UK base rate plus 1,75%. At 29 February 2008 the UK base rate was 5,25%. Logicalis Computing Solutions Limited has a standby letter of credit facility with Barclays Bank PLC under which a standby letter of credit for 5 million (: 4 million) has been provided to a supplier. This is secured by a Datatec Limited guarantee. Logicalis, Inc. has agreed a $60 million revolving credit facility with HSBC Business Credit (USA) Inc. in the US. The accounts receivable book of Logicalis, Inc. is security for the facility and the facility is subject to a minimum net income covenant and a fixed charge coverage covenant. The facility bears interest at HSBC s prime rate less 0,25% or US$ LIBOR plus 2% as selected by Logicalis at the time of each draw down. At 29 February 2008 the US prime rate was 6,0% and one month US$ LIBOR was 3,1%. At 29 February 2008, the funds drawn under the HSBC facility were $0,75 million (: $16,1 million) and the Barclays overdraft facility was not utilised (: nil). Analysys Mason Analysys Mason has access to general overdraft facilities amounting to 2 million (: 2 million), bearing interest at the UK base rate plus 1%. Covenants There were no breaches of covenants during the year.

123 122 Notes to the Group annual financial statements continued for the year ended 29 February COMMITMENTS 22.1 Capital commitments Capital expenditure authorised and contracted for Capital expenditure authorised but not yet contracted for Total capital commitments This expenditure will be incurred in the ensuing year and will be financed from existing cash resources and available borrowing facilities Operating lease commitments Due within one year: Property Office furniture, equipment and motor vehicles Computer equipment Total operating lease commitments due within one year Due between one and two years: Property Office furniture, equipment and motor vehicles Computer equipment Total operating lease commitments due between one and two years Due between two and three years: Property Office furniture, equipment and motor vehicles Computer equipment Total operating lease commitments due between two and three years Due between three and four years: Property Office furniture, equipment and motor vehicles Computer equipment 93 Total operating lease commitments due between three and four years Due between four and five years: Property Office furniture, equipment and motor vehicles Computer equipment 93 Total operating lease commitments due between four and five years Due after five years: Property Total non-cancellable operating lease commitments The fair value of the operating lease commitments is approximately equal to their carrying value Other commitments In the event of a change of control of Westcon, should Datatec International Limited directly own less than 51% of the issued capital shares of Westcon, Datatec International has committed to pay an amount of $1,7 million to Routine Capital Corp, whose shareholder is Tom Dolan (Westcon s CEO). This obligation expires upon the commencement of trading of Westcon common stock on the NASDAQ, New York, or London Stock Exchanges, or if Routine Capital Corp no longer owns a minority share in Westcon.

124 CONTINGENT LIABILITIES, GUARANTEES AND LITIGATION Datatec and its subsidiaries have issued, in the ordinary course of business, guarantees and letters of comfort to third parties in respect of trading facilities and lease commitments. In addition, the vendor inventory purchase financing referred to in Note 18 is generally guaranteed by Westcon. The Group has certain other contingent liabilities resulting from litigation and claims including breach of warranties where operations have been acquired or 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 outcome of these contingencies, that none of these contingencies will materially affect the financial position or the results of operations of the Group. 24. RELATED-PARTY TRANSACTIONS Sales and purchases between Group companies are concluded at arm s length in the ordinary course of business. For the year ended 29 February 2008, the intergroup sales of goods and provision of services amounted to $61,0 million (: $25,3 million). Datatec International Limited has a commitment to pay Routine Capital Corp, of which Tom Dolan (Westcon s CEO) is a shareholder, $1,7 million in the event of a change in control in Westcon. Refer Note Key management personnel compensation: Short-term employee benefits Post-employment benefits Share-based payment Key management personnel comprise the compensation of Chief Executive and Chief Financial Officers of Datatec subsidiaries. The remuneration of the Datatec CEO and Group Finance Director is included in directors emoluments in Note 3 and in the remuneration report.

125 124 Notes to the Group annual financial statements continued for the year ended 29 February FINANCIAL INSTRUMENTS 25.1 Financial risk management objectives The Group s senior management is responsible for monitoring and managing the financial risks relating to the operations of the Group. This is achieved through the use of internal risk analyses which analyse exposures by likelihood and magnitude of risks. These risks include market risk (including currency and interest risk), credit risk and liquidity risk. The Group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group s internal policies applicable at subsidiary level. Compliance with policies and exposure limits is reviewed by the internal auditors on a continual basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. When appropriate, management reports regularly to the Group s audit, risk and compliance committee. The Group s financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable, borrowings and derivative instruments Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The Group s overall strategy with respect to the debt and equity balance remains unchanged from. The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 17 and 21, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, Note 16, reserves and retained earnings Gearing ratio The Group s capital structure is reviewed on at least a semi-annual basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital. The gearing ratio at the year-end was: 2008 Long-term liabilities Short-term portion of long-term liabilities Cash and cash equivalents (34 179) ( ) Net debt (98 014) Equity Net debt to equity ratio 5% (18%) 25.3 Categories of financial instruments Financial assets Financial assets held for trading Loans and receivables (including cash and cash equivalents) Financial liabilities Financial liabilities held for trading (7 704) (1 996) Liabilities at amortised cost ( ) ( )

126 FINANCIAL INSTRUMENTS (continued) 25.4 Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of dealing only with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities. Concentration of credit risk did not exceed 5% of gross monetary assets at any time during the year. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high creditratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements (see Note 25.3), which is net of impairment losses, represents the Group s maximum exposure to credit risk without taking account of the value of any collateral obtained. Further information on the concentration of credit risk is detailed in the following table: () North America South America UK and Europe Asia- Pacific Africa/ Middle East 2008 Gross trade accounts receivable Less: allowance for bad debts (4 585) (401) (2 815) (515) (2 120) (10 436) Loans granted to third parties Other receivables Derivative financial assets Cash and cash equivalents Maximum on-balance sheet exposure Financial guarantees Maximum off-balance sheet exposure Gross trade accounts receivable Less: allowance for bad debts (3 280) (316) (4 777) (713) (1 415) (10 501) Loans granted to third parties Other receivables Derivative financial assets Cash and cash equivalents Maximum on-balance sheet exposure Financial guarantees Maximum off-balance sheet exposure The Group does not consider there to be any significant credit risk, which has not been adequately provided for at the balance sheet date. Furthermore, there has been no material change to the Group s exposure to credit risks or the manner in which it manages and measures the risk. Total

127 126 Notes to the Group annual financial statements continued for the year ended 29 February FINANCIAL INSTRUMENTS (continued) 25.5 Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Group s short, medium and long-term funding and liquidity requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and borrowing facilities and by continuously monitoring forecast and actual cash flows. The Group is dependent on its bank overdrafts and trade finance facilities to operate. These facilities generally consist of either a fixed term or fixed period but are repayable on demand, are secured against the assets of the company to which the facility is made available and contain certain covenants which include financial covenants such as minimum liquidity, maximum leverage and pre-tax earnings coverage. In certain circumstances if these covenants are violated and a waiver is not obtained for such violation, this may, amongst other things, mean that the facility may be repayable on demand. There have been no violations of covenants during the current year nor none that exist at year-end. Included in Note 21 is a listing of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk. The following tables detail the Group s remaining contractual maturity for its non-derivative and derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. 0 1 year 1 2 years 2 5 years > 5 years Total 2008 Trade payables ( ) ( ) Non-interest-bearing long-term liabilities (64) (384) (448) Fixed rate liabilities (612) (639) (12) (1 263) Variable rate liabilities ( ) (10 644) (38 703) ( ) Derivative financial liabilities (9 743) (9 743) Financial guarantees/commitments (10 433) (141) (10 574) Other (8 646) (2 799) (1 437) (12 882) ( ) (14 466) (40 293) ( ) Trade payables ( ) ( ) Non-interest-bearing long-term liabilities (50) (297) (347) Fixed rate liabilities (495) (181) (676) Variable rate liabilities (93 216) (43 363) ( ) Derivative financial liabilities (2 193) (2 193) Financial guarantees/commitments (10 644) (203) (10 847) Other (7 956) (1 024) (191) (9 171) ( ) (45 068) (191) ( ) There has been no material change to the Group s exposure to liquidity risks or the manner in which it manages and measures the risk Market risk management The Group s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see Note 25.7) and interest rates (see Note 25.8). The Group enters into a variety of derivative financial instruments to manage its exposure to foreign currency and interest rate risk, including: foreign currency; and There has been no material change to the Group s exposure to market risks or the manner in which it manages and measures the risk.

128 FINANCIAL INSTRUMENTS (continued) 25.7 Foreign exchange risk management The Group operates in the global business environment and undertakes many transactions denominated in foreign currencies. The Group is exposed to the risk of fluctuating exchange rates and seeks to actively manage this exposure, within approved policy parameters and through the use of derivative instruments. These instruments primarily comprise forward exchange contracts. Forward exchange contracts require a future purchase or sale of foreign currency at a specified price. The Group does not trade with forward exchange contracts for speculative purposes. Fluctuations in exchange rates also affect the translation of the profits of subsidiaries whose reporting currency is not the US Dollar. The most significant other currencies in which the Group trades are the South African Rand, Pound Sterling, and the Euro Foreign currency sensitivity analysis The following table details the Group s sensitivity to a 10% increase and decrease in the US$ against the relevant foreign currencies. Ten percent is the sensitivity rate that represents management s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period-end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit and other equity where the US$ strengthens 10% against the functional currency. For a 10% weakening of the US$ against the relevant currency, there would be an equal and opposite impact on the profit and other equity. (Gain)/Loss US$ GBP EUR Profit before tax (3 250) Other equity (339) (289) (2 929) (5 042) (106) Forward foreign exchange contracts ( FECs ) It is the policy of the Group to enter into FECs to cover specific foreign currency payments and receipts based on the known exposure generated. The Group also enters into FECs to manage the risk associated with anticipated sales and purchase transactions out to approximately six months within 100% of the anticipated exposure generated. The Group does not apply any hedge accounting. The Group s FECs were all bought at 29 February 2008 of which the contract amount is $171 million (: $110 million) which approximates fair value. Details of open FECs as at 29 February 2008 are: Purchases/(sales) 2008 EUR (30 216) US$ Other (117)

129 128 Notes to the Group annual financial statements continued for the year ended 29 February FINANCIAL INSTRUMENTS (continued) 25.8 Interest rate risk management The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts and forward interest rate contracts. The interest rate characteristics of new borrowings and the refinancing of existing borrowings are positioned according to expected movements in interest rates and defined risk appetite. The Group s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note (See Note 25.5) Interest rate sensitivity analyses The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. The applicable increase or decrease that represents management s assessment of the reasonably possible change in interest rates is dependent on the location of the borrowings. Globally, if interest rates had been between 50 and 200 basis points higher and all other variables were held constant, the Group s: $8,4 million increase); and The Group s sensitivity to interest rates has decreased during the current period mainly due to the reduction in variable rate debt instruments and the increase in interest rate swaps Interest rate swap contracts In January 2008, Westcon entered into an interest rate swap agreement to eliminate the variability of cash flows in the interest payments for $60 million notional amount of variable rate debt. This agreement was used to convert the variable rate on the revolving line of credit to a fixed rate of 4,03%. The variable rate is due to changes in the benchmark one-month LIBOR interest rate. Notional amounts do not quantify risk or represent assets or liabilities, but are used in the determination of cash settlements under the agreement. Westcon is exposed to credit losses from counterparty non-performance, but does not anticipate any losses from its agreement with a major financial institution CASH GENERATED FROM OPERATIONS Profit before taxation Adjustments for: Unrealised foreign exchange gains (5 315) (6 314) Share-based payments Share of joint venture earnings (121) Depreciation and amortisation (Profit)/Loss on disposal of property, plant and equipment (80) 6 Loss on disposal of investments 55 Interest received (11 533) (9 641) Financing costs Goodwill adjustment Other non-cash items (5 774) Operating profit before working capital changes Working capital changes: Increase in inventories (65 598) (58 246) Increase in accounts receivable (88 049) ( ) Increase in accounts payable

130 TAXATION PAID Amounts unpaid at beginning of year (14 876) (9 492) Amounts charged to the income statement excluding deferred tax (32 470) (19 280) Other movements and translation differences (143) Amount unpaid at end of year (29 809) (14 039) 28. ACQUISITION OF SUBSIDIARY COMPANIES The fair value of assets acquired and the liabilities assumed on the acquisition of subsidiary companies, net of cash acquired, is: Property, plant and equipment Intangibles Goodwill arising on acquisitions Accounts receivable Inventories Accounts payable ( ) (48 819) Long-term liabilities (2 009) (740) Net deferred tax (9 315) (2 267) Minority interest acquired (4 412) Refer also to Note 34 for details of all acquisitions during the year. 29. PROCEEDS ON DISPOSAL OF BUSINESSES AND INVESTMENTS Loss on disposal (31) (31) 30. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT Maintenance of operations: Office furniture, equipment and motor vehicles Computer equipment and software Leasehold improvements Expansion of operations: Office furniture, equipment and motor vehicles Computer equipment and software Leasehold improvements TRANSLATION DIFFERENCE ON OPENING CASH POSITION The translation difference on the opening cash position is calculated on opening cash balances of companies that hold cash in currencies other than the US$ and not on the net cash and cash equivalents included on the balance sheet at the beginning of the year, which is inclusive of cash held in US$ CASH AND CASH EQUIVALENTS AT END OF YEAR Cash resources Bank overdrafts ( ) (82 215)

131 130 Notes to the Group annual financial statements continued for the year ended 29 February SEGMENTAL REPORT For management purposes the Group is currently organised into four operating divisions which are the basis on which the Group reports its primary segmental information. Principal activities are: Westcon Global distribution of advanced networking and communication products Logicalis Provision of professional services and IT network integration Analysys Mason Strategic and technical telecommunications IT consultancy Other Holdings Other distribution and service-orientated interests in SA and the Middle East and the Group Head Office including the Group unrealised foreign exchange gains/losses. Westcon Logicalis Analysys Mason Condensed income statement Revenue North America South America UK and Europe Asia-Pacific Africa and Middle East Intersegmental (50 277) (20 894) (792) (3 134) (44) (28) EBITDA North America South America UK and Europe Asia-Pacific Africa and Middle East Datatec central costs and foreign exchange Depreciation and amortisation (15 246) (10 167) (10 055) (8 012) (705) (450) Operating profit before goodwill adjustments Goodwill adjustments 335 (1 477) Operating profit Interest received Financing costs (20 403) (13 840) (3 698) (3 914) (14) (9) Loss on disposal of investments Share of associate company earnings 121 Profit before taxation Taxation (20 190) (22 081) (5 365) (3 627) (1 630) (389) Profit after taxation continuing operations Profit after taxation discontinued operations Profit after taxation

132 131 Other Holdings Intergroup eliminations Total (4 571) (8 466) (17 122) (8 245) (29 421) (9 921) (8 589) (9 921) (1 244) (2 492) (1 479) (2 492) (1 479) (799) (443) (26 805) (19 072) (421) (421) (1 142) (2 726) (1 532) (26 841) (19 295) (55) (55) (1 061) (1 208) (28 246) (27 305)

133 132 Notes to the Group annual financial statements continued for the year ended 29 February SEGMENTAL REPORT (continued) Westcon Logicalis Analysys Mason Condensed balance sheet Total assets North America South America UK and Europe Asia-Pacific Africa and Middle East Property, plant, equipment, capitalised development costs and intangibles assets North America South America UK and Europe Asia-Pacific Africa and Middle East Net cash resources (82 510) North America ( ) (21 888) (12 905) South America UK and Europe (13 104) Asia-Pacific Africa and Middle East Inventories North America South America UK and Europe Asia-Pacific Africa and Middle East Trade accounts receivable North America South America UK and Europe Asia-Pacific Africa and Middle East Liabilities ( ) ( ) ( ) ( ) (16 026) (14 950) North America ( ) ( ) (97 773) (81 884) South America (33 529) (7 209) (34 689) (17 575) UK and Europe ( ) ( ) ( ) ( ) (16 026) (14 950) Asia-Pacific (74 367) (58 914) Africa and Middle East Trade accounts payable ( ) ( ) ( ) ( ) (1 688) (2 948) North America ( ) ( ) (68 608) (73 824) South America (15 568) (2 853) (29 700) (16 559) UK and Europe ( ) ( ) (30 036) (26 604) (1 688) (2 948) Asia-Pacific (61 499) (53 311) Africa and Middle East The number of employees for the year for each of the Group s principal divisions was:

134 133 Other Holdings Intergroup eliminations Total ( ) (34 793) ( ) (59 772) ( ) ( ) ( ) ( ) (68 218) (24 784) (6 178) ( ) ( ) (74 367) (58 914) ( ) (53 594) ( ) (53 594) (84 171) (29 121) ( ) ( ) ( ) ( ) (45 268) (19 412) ( ) ( ) (61 499) (53 311) (84 171) (29 121) (84 171) (29 121)

135 134 Notes to the Group annual financial statements continued for the year ended 29 February ACQUISITIONS IN SUBSIDIARIES/BUSINESSES Material susbsidiaries/business acquired Principal activity Date of acquisition Proportion of shares/ business acquired Fair value of acquisition Distribution business of Jet Distribution Ltd and Resolve Computers Ltd ( Westcon Africa ) Distribution 8/03/07 100% Distribution business of NOXS Europe BV ( NOXS ) Distribution 24/04/07 100% Distribution business of Crane Telecommunications Group ( Crane ) Distribution 10/05/07 100% Consulting business of Carotek Inc. ( Carotek ) IT Solutions 01/06/07 100% Distribution business of ReView Video LLC ( ReView ) Distribution 16/07/07 100% Distribution business of International Technology Distributers FZCo ( Westcon Africa ) Distribution 1/09/07 51% Further 50% of Intact GmbH ( Intact ) IT Solutions 30/09/07 50% Distribution business of Cernet of America, Inc. ( Cernet ) Distribution 1/10/07 100% Further 20% of Logicalis South America ( LSAL ) Consulting 2/10/07 20% Consulting business of Redbox Consulting Services Ltd ( Redbox ) Distribution 19/02/08 100% NOXS Crane Book value Fair value adjustment Fair value on acquisition Book value Fair value adjustment Fair value on acquisition Current assets Cash and cash equivalents Trade and other receivables Inventories Non-current assets Plant and equipment Deferred tax assets Investment Intangible assets Current liabilities Trade and other payables (44 060) (44 060) (58 464) (58 464) Non-current liabilities Deferred tax liabilities (5 242) (5 242) (4 075) (4 075) Long-term liabilities (12 336) Goodwill on acquisition Minority interest acquired/(recognised) Fair value of acquisition The above acquisitions represent the material subsidiaries and businesses acquired during the year. The amounts recorded in Other represent the balance of the acquisitions made during the year and earn-out payments made on acquisitions made in prior years. The earn-out payments represent additional goodwill as a result of certain profit targets being achieved. The revenue included from these acquisitions in 2008 was US$384,9 million. Had the acquisition date been 1 March, the pro forma revenue would have been approximately US$500 million. Since these acquisitions are fully integrated into existing operations it is not practical to establish the profit after tax contributed by the acquisitions in 2008, or the profit after tax which the acquisitions would have contributed to the Group if they had been included for the entire year.

136 135 Book value ReView Carotek Westcon Africa Other Total Fair value adjustment Fair value on acquisition Book value Fair value adjustment Fair value on acquisition Book value Fair value adjustment Fair value on acquisition Fair value on acquisition Fair value on acquisition (297) (297) (9 809) (9 809) (22 815) (22 815) (1 277) ( ) (9 317) (861) (861) (1 148) (1 148) (2 009) (5 690) (4 412)

137 136 Annexure 1 for the year ended 29 February 2008 Effective holding SUBSIDIARY COMPANIES Nature of business Issued ordinary capital 2008 % % Active subsidiaries INCORPORATED IN AFRICA African Legends Indigo (Pty) Ltd O ,0 100,0 Datatec Management Services (Pty) Ltd O ,0 100,0 Westcon SA (Pty) Ltd O ,0 55,0 Westcon Africa Middle East (Pty) Ltd O ,0 0,0 Westcon Africa (SADC) (Pty) Ltd O ,0 0,0 Westcon Africa FZCo O ,0 0,0 Scantec (Pty) Ltd O ,0 55,0 Westcon Africa (Tanz) O ,0 0,0 Resolv Computers Ltd O ,0 0,0 Westcon Africa (Nigeria) O ,9 0,0 Westcon Africa (Kenya) O ,0 0,0 Westcon Africa (Uganda) O ,0 0,0 INCORPORATED IN UK & EUROPE Comstor Belgium NV W ,4 97,4 Comstor Group Ltd W ,4 97,4 Comstor Networking SL W 97,4 Westcon France SAS W 97,4 Comstor Sweden AB W 97,4 Westcon (UK) Ltd W ,4 97,4 Westcon Group BV W ,4 97,4 Westcon European Holdings Ltd W 4 97,4 Westcon Group GmbH W 1 97,4 97,4 Westcon Deutschland GmbH W 1 97,4 97,4 Westcon Group European Operations Ltd W 5 97,4 97,4 Westcon Group European Holdings Ltd W 6 97,4 97,4 Westcon European Holdings Limited W 4 97,4 97,4 Westcon Acquisitions Ltd W 4 97,4 97,4 Crane Telecommunications Group Ltd W ,4 Crane Telecommunications Ltd W 2 97,4 Logicalis Group Ltd L ,0 100,0 Logicalis Group Services Ltd L 2 100,0 100,0 Logicalis UK Ltd (formerly Logicalis Network Solutions Ltd) L ,0 100,0 Logicalis (Ireland) Ltd L ,0 100,0 Logicalis Computing Solutions Ltd L ,0 100,0 Logicalis South America Ltd L ,0 80,0 Logicalis CSF Solutions Ltd L ,0 100,0 Hawke Systems Ltd L ,0 100,0 TBC Limited L ,0 100,0 Satelcom Ltd L ,0 100,0 Logicalis Deutschland GmbH L ,0 100,0 Logicalis Networks GmbH L ,0 100,0 Intact Integrated Services GmbH L 1 75,0 25,0 Intact Integrated Services Ltd L 1 100,0 100,0 Analysys Mason Group Ltd M ,2 86,5 Catalyst IT Partners Ltd M ,2 86,5 Mason Group Ltd M ,2 86,5 Mason Communications Ltd M ,2 86,5 Mason Communications Ireland Ltd M 2 88,2 86,5 Mason SiteFinder Ltd M 2 88,2 86,5

138 137 Effective holding SUBSIDIARY COMPANIES (continued) Nature of business Issued ordinary capital 2008 % % Active subsidiaries (continued) INCORPORATED IN UK & EUROPE (continued) Analysys Ltd M ,2 86,5 Analysys Research Ltd M 2 88,2 86,5 Analysys Consulting Ltd M 2 88,2 86,5 Analysys Venture Ltd M 2 88,2 86,5 Redbox Consulting Services Ltd M 3 88,2 Greening Associates Ltd M 1 88,2 Datatec International Ltd O ,0 100,0 Datatec UK Holdings PLC O ,0 100,0 Novell Africa (UK) Ltd O ,0 0,0 Jet Distribution Ltd O ,0 0,0 Westcon Africa (UK) Ltd O ,0 0,0 INCORPORATED IN US AND CANADA Westcon Group North America, Inc. W 82 97,4 97,4 Westcon Canada Systems (WCS), Inc. W ,4 97,4 Westcon Group, Inc. W ,4 97,4 Westcon CALA, Inc. W ,4 Cernet Tecnologia en Telecomunicaciones SA de CY (Mexico) W ,4 Pegasus Telecom LLC W ,4 97,4 ActiveSymbols, Inc. L ,0 100,0 Logicalis, Inc. L ,0 100,0 Logicalis US Holdings, Inc. L ,0 100,0 Logicalis Leasing, Ltd L ,0 100,0 Computech Resources, Inc. L ,0 100,0 Eisco Technology, Inc. L ,0 100,0 INCORPORATED IN SOUTH AMERICA Westcon Brasil Ltda W ,4 97,4 Soft Net SA (Argentina) L ,0 80,0 Softnet-Logical Paraguay SA L ,0 80,0 Softnet Uruguay SA L ,0 80,0 Softnet-Logical Comercial Importadora, Exportadora e de Servicos Ltda (Brazil) L ,0 80,0 X-Net Cuyo SA (Argentina) L ,0 80,0 Softnet Inc SA (Uruguay) L ,0 80,0 Softnet Logicalis Chile SA L ,0 80,0 Softnet Logicalis Perú SAC L ,0 80,0 INCORPORATED IN AUSTRALIA AND NEW ZEALAND LAN Systems (Pty) Ltd W ,4 97,4 LAN Systems Ltd (New Zealand) W 1 97,4 97,4 INCORPORATED IN SOUTH EAST ASIA Comstor Pte Ltd (Singapore) W ,4 97,4 Comstor Malaysia Sdn Bhd W 2 97,4 0,0 Analysys Consulting PTE Ltd M 1 88,2 86,5 INCORPORATED IN BRITISH VIRGIN ISLANDS Datatec International Holdings Ltd O ,0 100,0 Online Distribution Ltd O ,0 100,0 Comstor Middle East Ltd O ,0 100,0 W: Westcon L: Logicalis M: Analysys Mason Group O: Other Holdings

139 138 Company income statement for the year ended 29 February 2008 Notes 2008 R m R m Revenue management fee income Operating income/(costs) 8 (29) Foreign exchange gain Share-based payments equity settled (14) (10) Operating income Interest received Interest paid (5) (5) Profit before taxation Taxation 3 (35) (2) Profit for the year

140 Company balance sheet Datatec Annual Report as at 29 February 2008 Notes 2008 R m R m ASSETS Non-current assets Office furniture and equipment 1 1 Subsidiary companies Current assets Accounts receivable 4 5 Subsidiary company loans Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital and premium Non-distributable reserves Share-based payment reserve Distributable reserves Non-current liabilities Deferred tax liabilities Current liabilities Accounts payable Provisions 7 3 Taxation 16 Bank overdraft 8 * 5 Total equity and liabilities * Less than R1 million.

141 140 Company statement of changes in equity for the year ended 29 February 2008 Share capital R m Share premium R m Nondistributable reserves R m Share-based payments reserve R m Distributable reserves R m Total equity R m Balance at 28 February Profit for the year New share issues ** Capital distribution (44) (44) Share-based payments Balance at 28 February Profit for the year Transfers directly to distributable reserves* New share issues Capital distribution (118) (118) Share buy-back (18) (18) Share-based payments Balance at 29 February * During the current year an amount was received from a subsidiary company for the repayment of an inter-company loan that had, in previous years, been capitalised and subsequently written off against reserves, as part of a goodwill write-down in ** Less than R1 million.

142 Company cash-flow statement Datatec Annual Report for the year ended 29 February 2008 Notes 2008 R m R m Cash flow from operating activities Cash generated from operations Interest received Interest paid (5) (5) Taxation paid 13 Net cash inflow from operating activities Cash flow from investing activities Acquisition of subsidiary companies (277) (159) Net loans advanced to subsidiaries (17) (34) Net cash outflow from investing activities (294) (193) Cash flow from financing activities Proceeds from issue of shares Share buy-back (18) Capital distribution (118) (44) Net cash inflow from financing activities Net increase/(decrease) in cash and cash equivalents 83 (2) Cash and cash equivalents at the beginning of year Cash and cash equivalents at end of year

143 142 Notes to the Company annual financial statements for the year ended 29 February R m R m 1. OPERATING INCOME Operating income is arrived at after taking into account the following items: Auditors remuneration Audit fees current year 1 1 Other services 1 2 Less amount capitalised (2) Audit services and expenses 2 1 Foreign exchange gains Realised (8) (3) Unrealised (40) (130) (48) (133) Fees for services Administrative 5 3 Technical * * Secretarial * * Operating lease rentals Premises, office furniture, equipment and motor vehicles 2 1 Retirement benefit contributions 1 1 Staff costs Reversal of impairment intercompany loans This relates to the release of impairments raised in prior years against loans made to Westcon SA (Pty) Ltd, African Legend Indigo (Pty) Ltd and Datatec International Holdings Limited (BVI). Loss on sale of investments 14 Directors emoluments Executive directors Salaries * * Benefits * * Non-executive directors fees Full details on directors emoluments are provided in the remuneration report on pages 68 to INTEREST RECEIVED From subsidiary companies Other investments *Less than R1 million.

144 R m R m 3. TAXATION Taxation charge Current taxation current year 16 Deferred taxation current year Reconciliation of taxation rate to profit before taxation South African normal tax rate 29,0% 29,0% Tax losses utilised (23,7%) Permanent differences (4,0%) Disallowed expenses 0,6% Tax rate adjustment (0,2%) Effective taxation rate 29,4% 1,3% Datatec Limited has no estimated tax loss at the end of the financial year (: R36 million). Movement of deferred tax liabilities Balance at beginning of the year 2 Charge to income statement 19 Exchange differences Analysis of deferred tax liabilities Forex 22 2 Prepayments * Provisions (1) Rental smoothing * 21 2 *Less than R1 million.

145 144 Notes to the Company annual financial statements continued for the year ended 29 February R m R m 4. SUBSIDIARY COMPANIES Unlisted shares Datatec International Ltd Westcon Africa Middle East (Pty) Ltd 22 Datatec Integration Services (Pty) Ltd 13 Westcon SA (Pty) Ltd 22 Online Distribution Ltd African Legend Indigo (Pty) Ltd (formerly Rangegate SA (Pty) Ltd) 18 Comstor Middle East ** 2 Unlisted shares at cost Impairment of unlisted shares (7) Unlisted shares at written down value Net amounts owing by subsidiaries Total investment Presented as follows: Shares at cost and long-term portion of loans receivable Current portion of loans Current assets Directors valuation of unlisted investments is R4,0 billion (: R3,6 billion). The directors have reviewed the valuations and believe that the carrying value of the investment is reasonable. Details of investment in subsidiaries detailing the number of shares held are recorded in Annexure 1 of the Group Annual Financial Statements. Amounts due by/(to) Group Companies Loans ZAR-denominated Loans Datatec Management Services (Pty) Ltd African Legend Indigo (Pty) Limited (formerly Rangegate SA (Pty) Ltd)* 1 44 Westcon AME (Pty) Ltd ** 13 Analysys Mason Group Ltd ** Online Distribution ** Comstor Middle East* ** Logicalis Group Ltd 1 13 Westcon Group, Inc Datatec Integration Services (Pty) Ltd 28 Datatec Limited Share Incentive Trust EUR-denominated Loans Logicalis GmbH 8 USD-denominated Loans Logicalis Group Limited 11 Datatec Integration Services (Pty) Ltd 18 Datatec International Holdings Ltd 6 2 Logicalis Group Limited (LSAL) 15 Westcon Africa Middle East (Pty) Ltd 75 ** GBP-denominated Loans Logicalis Computing Solutions 11 Logicalis Group Ltd 112 Datatec International Holdings Ltd 7 Datatec International Ltd Datatec UK Holdings Ltd ** (4) Westcon Group European Operations 149 Analysys Mason Group Limited (1) Impairment provisions (18) (55) Net amounts owing by subsidiaries Loans amounting to R52 million are subject to interest at the UK base rate and there are no fixed repayment terms. Loans amounting to R93 million are subject to South African prime rate plus 2%. Loans amounting to R149 million are subject to the UK LIBOR six months rate plus 2% The remainder of the loans is subject to no interest and there are no fixed repayment terms. *These loan balances have been subordinated. **Less than R1 million.

146 R m R m 5. SHARE CAPITAL AND PREMIUM Authorised share capital (: ) ordinary shares of R0,01 each 4 4 Issued share capital (: ) ordinary shares of R0,01 each 2 1 Share premium During the year the following shares were issued in respect of share options exercised, share buy-backs and acquisitions in subsidiaries: Following the introduction of new share-based payment schemes during the year ended 28 February 2006, no more options were granted in the Datatec Share Option Scheme. Originally, the equivalent of up to 15% of the issued share capital was set aside for the granting of options. At the balance sheet date (: ) of the outstanding share options had been exercised and shares issued from the unissued share capital set aside for the purpose at 29 February (: ) share options had been granted but had not yet been exercised or lapsed. At the AGM on 6 August, up to unissued shares (: unissued shares), being 10% of the issued ordinary share capital, were placed under the control of the directors until the next general meeting, subject to the provisions of section 221 and 222 of the Companies Act and the requirements of the JSE Limited. As of 29 February 2008 the group held (: ) shares as treasury shares that had been acquired by the Datatec Share Incentive Trust These have been set off against share premium. Details of the shares issued in respect of share options exercised, acquisitions of subsidiaries and institutional placements: Shares for share options Shares for acquisitions Price (ZAR) Institutional placements Price (ZAR) ,16 Crane Telecoms , ,21 Intact Germany ,41 Logicalis South America ,85 Carotek R m R m 6. ACCOUNTS PAYABLE Other payables The carrying value of other accounts payable approximates the fair value.

147 146 Notes to the Company annual financial statements continued for the year ended 29 February PROVISIONS Balance at 1 March Amounts utilised (7) Balance at 28 February Amounts added 4 Amounts utilised (1) Amounts reversed Balance at 29 February Other R m 2008 R m R m 8. BANK OVERDRAFT Total borrowings at year-end * 5 *Less than R1 million. Datatec Limited has general short-term banking facilities amounting to R24 million (: R24 million) with The Standard Bank of South Africa Limited. In terms of the cash management system operated in SA, various cross-guarantees have been put in place to restrict the overall exposure to the amount of the banking facility. 9. COMMITMENTS Operating lease commitments Due within one year: Property 1 1 Due between one and five years: Property 1 2 Datatec Limited 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. 10. GUARANTEES Datatec Limited stands guarantor to OnLine Distribution who has a facility of $1,5 million with HSBC Bank in the Middle East (: $1,5 million), backed by a lien on a deposit of $0,5 million by Online Distribution. The facility bears interest at 4,6% (: 10,3%) and inventory and accounts receivable balances have been pledged as collateral. Datatec Limited stands guarantor to Westcon SA (Pty) Ltd in respect of their supplier, Cisco Systems International BV. The guarantee is for an amount of $12 million and it expires on 30 June 2008.

148 FINANCIAL INSTRUMENTS 11.1 Financial risk management objectives The Company s senior management is responsible for monitoring and managing the financial risks relating to the operations of the Company. This is achieved through the use of internal risk analyses which analyse exposures by likelihood and magnitude of risks. These risks include market risk (including currency and interest risk), credit risk and liquidity risk. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. When appropriate, management reports regularly to the Group s audit, risk and compliance committee. The Company financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable, and borrowings Capital risk management The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders. The Company s overall strategy with respect to the debt and equity balance remains unchanged from. The capital structure of the Company consists mainly of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital (Note 5), reserves and retained earnings R m R m 11.3 Categories of financial instruments Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Liabilities at amortised cost Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of dealing only with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. Trade receivables consist of sundry receivables. The carrying amount of financial assets recorded in the financial statements (see 11.3), which is net of impairment losses, represents the Company s maximum exposure to credit risk, concentrated all in South Africa, without taking account of the value of any collateral obtained. The Company does not consider there to be any significant credit risk which has not been adequately provided for at the balance sheet date. Furthermore, there has been no material change to the Company s exposure to credit risks or the manner in which it manages and measures the risk.

149 148 Notes to the Company annual financial statements continued for the year ended 29 February FINANCIAL INSTRUMENTS (continued) 11.5 Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Company s short-, medium- and long-term funding and liquidity requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and borrowing facilities and by continually monitoring forecast and actual cash flows. The following tables detail the Company s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows. 0 1 year R m Total R m 2008 Financial guarantees and commitments (50) (50) Financial guarantees and commitments (47) (47) There has been no material change to the Company s exposure to liquidity risks or the manner in which it manages and measures the risk Market risk management The Company s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see Note 11.7) and interest rates (see Note 11.8). The Company does not make use of derivative financial instruments to manage its exposure to foreign currency and interest rate risks. There has been no material change to the Company s exposure to market risks or the manner in which it manages and measures the risk Foreign exchange risk management The Company operates in the global business environment and undertakes many transactions denominated in foreign currencies. The Company is exposed to the risk of fluctuating exchange rates and actively seeks to manage this exposure, within approved policy parameters. Fluctuations in exchange rates also affect the translation of the profits of the Company whose reporting currency is the South African rand.

150 FINANCIAL INSTRUMENTS (continued) 11.7 Foreign exchange risk management (continued) Foreign currency sensitivity analysis The following table details the Company s sensitivity to a 10% increase and decrease in the US$ against the relevant foreign currencies. 10% is the sensitivity rate that represents management s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period-end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit and other equity where the US$ strengthens 10% against the functional currency. For a 10% weakening of the US$ against the relevant currency, there would be an equal and opposite impact on the profit and other equity. (Gain)/Loss US$ GBP EUR 2008 R m R m 2008 R m R m 2008 R m R m Profit before tax (1) (1) (45) (33) Other equity (2) (1) (15) (36) (1) 11.8 Interest rate risk management The Company is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. The interest rate characteristics of new borrowings and the refinancing of existing borrowings are positioned according to expected movements in interest rates and defined risk appetite. The Company s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note (see Note 11.5) Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. The applicable increase or decrease that represents management s assessment of the reasonably possible change in interest rates is dependent on the location of the borrowings. Globally, if interest rates had been between 50 and 200 basis points higher and all other variables were held constant, the Company s (: R0,7 million increase); and The Company s sensitivity to interest rates has decreased during the current period mainly due to the reduction in variable rate debt instruments and the increase in interest rate swaps.

151 150 Notes to the Company annual financial statements continued for the year ended 29 February R m R m 12. CASH GENERATED FROM OPERATIONS Profit before taxation Adjustments for: Unrealised foreign exchange gains (40) (130) Share-based payments Non-cash items reversal of impairment Interest received (48) (27) Interest paid 5 5 Other non-cash items (84) Operating profit before working capital changes 9 30 Working capital changes: Decrease in accounts receivable 1 2 Increase/(decrease) in accounts payable 1 (5) TAXATION PAID Amounts at beginning of year Amounts charged to income statement 16 Amount payable at end of year (16) 14. CASH AND CASH EQUIVALENTS AT END OF YEAR Cash resources Bank overdraft * (5) *Less than R1 million.

152 Notice of Annual General Meeting Datatec Annual Report DATATEC LIMITED (Incorporated in the Republic of South Africa) Registration number 1994/005004/06 Share code: DTC ISIN: ZAE ( Datatec or the Company ) Notice is hereby given that the Annual General Meeting of shareholders of Datatec will be held at the Sandton Sun Hotel, 5th Street, Sandton, Republic of South Africa, at 12:00 on 4 August 2008 for the purpose of considering and voting on the following resolutions with or without modification: 1. CONSIDERATION OF ANNUAL FINANCIAL STATEMENTS Ordinary Resolution Number 1 Resolved that the audited annual financial statements and Group annual financial statements for the year ended 29 February 2008 be and are hereby accepted. 2. RE-ELECTION OF DIRECTOR Ordinary Resolution Number 2 Resolved that Mr J P Montanana, who retires in terms of the Company s articles of association ( the articles ) and who offers himself for re-election, be and is hereby re-elected as a director of the Company. Please refer to page 16 for Mr Montanana s brief curriculum vitae. On behalf of the Board, the Chairman confirms that on the basis of the annual evaluation of the Board and of the performance of individual directors, the performance and commitment of Mr Montanana throughout his period of office was highly satisfactory. 3. RE-ELECTION OF DIRECTOR Ordinary Resolution Number 3 Resolved that Mr N J Temple, who retires in terms of the articles and who offers himself for re-election, be and is hereby reelected as a director of the Company. Please refer to page 17 for Mr Temple s brief curriculum vitae. On behalf of the Board, the Chairman confirms that on the basis of the annual evaluation of the Board and of the performance of individual directors, the performance and commitment of Mr Temple throughout his period of office was highly satisfactory. 4. ELECTION OF DIRECTOR Ordinary Resolution Number 4 Resolved that Mr I P Dittrich, who was appointed by the Board on 1 March 2008, be and is hereby elected as a director of the Company. Please refer to page 16 for Mr Dittrich s brief curriculum vitae. On behalf of the Board, the Chairman confirms that Mr Dittrich has a lengthy history with Datatec and an intimate understanding of the Group s operations and businesses around the world, including all financial aspects. He is familiar with the workings of the Board and the executive management of the Group, in addition to having gained considerable experience in various operational, group management, financial and corporate finance roles. The Board is of the opinion that Mr Dittrich will make a significant contribution to the Group.

153 152 Notice of Annual General Meeting continued 5. APPROVAL OF AUDITORS REMUNERATION Ordinary Resolution Number 5 Resolved that the directors of the Company be and are hereby authorised to fix and pay the auditors remuneration for the year ended 29 February RATIFICATION OF DIRECTORS REMUNERATION Ordinary Resolution Number 6 Resolved that the remuneration of the directors of the Company for the past financial year as reflected on page 77 of the annual report, of which this notice forms part, be and is hereby ratified. 7. APPROVAL OF NON-EXECUTIVE DIRECTORS REMUNERATION Ordinary Resolution Number 7 Resolved that the fees and committee fees of the non-executive directors of the Company for the 2008/2009 financial year, which remain unchanged from the previous financial year, as reflected on page 76 of the annual report of which this notice forms part, be and are hereby approved. 8. PLACE UNISSUED SHARES UNDER THE CONTROL OF THE DIRECTORS Ordinary Resolution Number 8 Resolved that the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control and authority of the Board of Directors of the Company in terms of section 221 of the Companies Act, Act 61 of 1973 ( the Act ) until the next Annual General Meeting and that the directors of the Company be and are hereby authorised and empowered to allot, issue and otherwise dispose of such unissued ordinary shares as they may deem fit, subject always to: shares in the Company being limited to a maximum number of unissued ordinary shares equal to 10% (ten percent) of the issued share capital, prior to any repurchase and cancellation of shares in the preceding year, of the Company from time to time. 9. GENERAL AUTHORITY TO ISSUE SHARES FOR CASH Ordinary Resolution Number 9 Resolved that in terms of the JSE Listing Requirements, the Board of Directors of the Company be and is hereby given the general authority by way of a renewable mandate to issue all or any of the authorised, but unissued, ordinary shares of one cent each in the share capital of the Company for cash as and when they in their discretion deem fit, subject to the Act, the articles, the JSE Listing Requirements and the following limitations: must be limited to such securities or rights that are convertible into a class already in issue; General Meeting, whichever is the earlier date; Requirements and not to related parties; Company s issued share capital, including instruments which are compulsorily convertible into shares of that class; including the impact on net tangible asset value, earnings per share and headline earnings per share, will be published at the time of any issue representing, on a cumulative basis within a financial year, 5% or more of the number of ordinary shares of that class in issue prior to the issue;

154 153 permitted be 10% of the weighted average traded price on the JSE of the shares in question, as determined over the 30 business days prior to the date that the price of the issue is determined or agreed between the directors of Datatec and the party subscribing for the securities; and The approval of a 75% majority of the votes cast in favour of such resolution by shareholders present or represented by proxy at this Annual General Meeting is required for this ordinary resolution to become effective. 10. AUTHORITY TO MAKE GENERAL PAYMENT TO SECURITIES HOLDERS Ordinary Resolution Number 10 Resolved that as contemplated in section 90 of the Act the Board of Directors of the Company shall, subject to the provisions of the Act, the articles and the JSE Listings Requirements, by way of a renewable mandate, be entitled to make a pro-rata payment to shareholders of the Company by way of a general payment from the Company s share capital or share premium, subject to the following limitations, namely that: General Meeting, whichever is the earlier date; exceed the Rand value of 20% (twenty percent) of the Company s issued share capital, but excluding minority interests and re-valuations of assets and intangible assets that are not supported by a valuation by an independent professional expert acceptable to the JSE prepared within the last six months, in any one financial year, measured as at the beginning of such financial year; and The directors of the Company undertake that they shall not implement the proposed general payment, unless for a period of 12 (twelve) months following the date of the notice of the Annual General Meeting: basis consistent with the last financial year of the Company, exceed the liabilities of the Company and the Group; JSE Listings Requirements. The directors of the Company intend to utilise the authority in terms of this Ordinary Resolution Number 10 in order to make a general payment to the shareholders of the Company, by way of a general payment from the Company s share capital or share premium. Although the Board has no immediate intention to use this authority to make general payments to shareholders by way of a general payment from the Company s share capital or share premium, the Board is of the opinion that this authority should be in place should it become appropriate to make such a payment. Announcements will be published on SENS and in the press setting out the terms and date of the general payment, the financial effects of the general payment prior to such payment being effected and complying with Section and Schedule 24 of the JSE Listings Requirements.

155 154 Notice of Annual General Meeting continued 11. AUTHORITY TO SIGN ALL DOCUMENTS REQUIRED Ordinary Resolution Number 11 Resolved that subject to the passing of terms of the Ordinary Resolutions 1 to 10, any director of the Company or the Company Secretary shall be and is hereby authorised to sign all documents and perform all acts which may be required to give effect to such Ordinary Resolutions number 1 to 10 passed at the Annual General Meeting. To consider, and if deemed fit, to pass the following special resolutions: 12. GENERAL AUTHORITY TO REPURCHASE SHARES Special Resolution Number 1 Resolved that the Board of Directors of the Company be authorised by way of a general authority given as a renewable mandate, to facilitate the acquisition by the Company or a subsidiary of the Company of the issued ordinary shares of the Company, upon such terms and conditions and in such amounts as the directors of the Company may from time to time determine, but subject to the articles, the provisions of the Act and the JSE Listings Requirements, when applicable and provided that: or its subsidiaries have cumulatively repurchased 3% (three percent) of the initial number of the shares of the Company in issue as at the time the general authority was granted and for each 3% in aggregate of the initial number of shares acquired thereafter; 15 (fifteen) months or until the next Annual General Meeting, whichever period is shorter; concerning shareholder spread requirements; the JSE Listings Requirements unless it has in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed (not subject to any variation) and full details of the programme have been disclosed in an announcement over SENS prior to the commencement of the prohibited period; prior understanding or arrangement between the Company and the counter party; share capital in the aggregate in any one financial year or, in the case of acquisition by any of the Company s subsidiaries, 10% (ten percent) of such issued ordinary share capital in the aggregate if such shares are to be held as treasury shares; the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the 5 (five) trading days immediately preceding the date of the repurchase of such ordinary shares by the Company or a subsidiary of the Company; and the JSE Listings Requirements prior to any repurchases being implemented on the open market of the JSE. As at the date of this report, the Company s directors undertake that they will not implement any such repurchase in the 12 (twelve) months following the date of this Annual General Meeting or for the period of the general authority, whichever is the longer, unless: period of 12 months after the date of the notice of the Annual General Meeting; consistent with the last financial year of the Company, would exceed the liabilities of the Company and the Group for a period of 12 months after the date of the notice of the Annual General Meeting; 12 months after the date of the notice of the Annual General Meeting; and 12 months after the date of the notice of the Annual General Meeting.

156 155 Reason for and effect of the Special Resolution The reason for and the effect of the special resolution are to grant to the directors of the Company a general authority, up to and including the date of the next Annual General Meeting of the Company or the expiration date of the period commencing on the date of passing of the special resolution and expiring on the date 15 (fifteen) months thereafter, to approve the Company s purchase of shares in itself, or to permit a subsidiary of the Company to purchase shares in the Company. The Board is of the opinion that this authority should be in place should it become appropriate to undertake a share repurchase. Additional disclosure For purposes of considering Ordinary Resolution Number 10 and Special Resolution Number 1 and in terms of the JSE Listings Requirements, the information below has been included in the Annual Report, in which this notice of Annual General Meeting is included, at the places indicated: Litigation statement The directors, whose names are given on pages 16 and 17 of the annual report of which this notice forms part, are not aware of any legal or arbitration proceedings, other than such proceedings disclosed on page 123, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Group s financial position. Directors responsibility statement The directors, whose names are given on pages 16 and 17 of the annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to this special resolution number 1 and ordinary resolution number 10 and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this special resolution contains all information required by law and the JSE Listings Requirements. Material changes Other than the facts and developments reported on in the annual report, there have been no material changes in the affairs or financial position of the Company and/or the Group since the date of signature of the audit report and the date of this notice. 13. TO TRANSACT SUCH OTHER BUSINESS AS MAY BE TRANSACTED AT AN ANNUAL GENERAL MEETING Voting and Proxies Members who have not dematerialised their shares or who have dematerialised their shares with own name registration are entitled to attend and vote at the Annual General Meeting and are entitled to appoint a proxy or proxies to attend, speak and vote in their stead. The person so appointed need not be a member. Proxy forms must be forwarded to reach the registered office of the Company or the Company s transfer secretaries, Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg 2001, or posted to the transfer secretaries at PO Box 61051, Marshalltown 2107, South Africa, so as to be received by them by no later than 12:00 on 31 July Members holding shares on the Jersey Branch register should forward the proxy form sent with this notice to Computershare Investor Services (Channel Islands) Limited in accordance with the instructions on the proxy form.

157 156 Notice of Annual General Meeting continued Proxy forms must be completed only by members who have dematerialised their shares with own name registration or who have not dematerialised their shares. On a show of hands, every member of the Company present in person or represented by proxy shall have one vote only. On a poll, every member of the Company present in person or represented by proxy shall have one vote for every share held in the Company by such member. Members who have dematerialised their shares, other than those members who have dematerialised their shares with own name registration, who are unable to attend the AGM but wish to be represented thereat, should contact their Central Securities Depository Participant ( CSDP ) or broker (as the case may be) in the manner and time stipulated in their agreement entered into by such member and the CSDP or broker (as the case may be) to furnish the CSDP or broker (as the case may be) with their voting instructions and, in the event that such members wish to attend the meeting, to obtain the necessary authority to do so. Such members who wish to attend the AGM in person must obtain the necessary letter of representation from their CSDP or broker. Members holding depositary interests in shares on the Jersey Branch register should forward the form of instruction sent to them with this notice to Computershare Investor Services (Channel Islands) Limited in accordance with the instructions on the form of instruction. By order of the Board S P Morris For and on behalf of Datatec Management Services (Pty) Ltd Company Secretary Sandton 2008

158 Form of proxy Datatec Annual Report DATATEC LIMITED ( the company ) (Incorporated in the Republic of South Africa) Registration number: 1994/005004/06 JSE Code: DTC ISIN: ZAE Please note that this proxy form is only for use by members who have not dematerialised their ordinary shares or who have dematerialised their ordinary shares and registered them with own name registration. I/We Of being a member/members of the abovementioned 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/our behalf at the Annual General Meeting of the Company to be held at 12:00 noon on 4 August 2008 and at any adjournment of that meeting. Signed at this day of 2008 Signature Please indicate with an X in the appropriate space on the right how you wish your votes to be cast. If you return this form duly signed, without any specific direction, the proxy shall be entitled to vote as he/she thinks fit. In favour of resolution Against resolution Abstain from voting ORDINARY RESOLUTIONS 1. Acceptance of annual financial statements 2. Re-election of J P Montanana 3. Re-election of N J Temple 4. Election of I P Dittrich 5. Approval of the auditors remuneration 6. Ratification of directors remuneration for the past financial year 7. Approval of non-executive directors fees and committee fees for the current financial year 8. Placing unissued shares under the control of the directors 9. General authority to issue shares for cash 10. Authority to make general payment to security holders 11. Authority to sign all documents required SPECIAL RESOLUTION 1. General authority to repurchase shares

159 158 Notes to form of proxy I. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or more proxies to attend, speak and vote in his/her stead. A proxy need not be a registered member of the Company. 2. Every member present in (person or by proxy and entitled to vote at the Annual General Meeting of the Company shall, on a show of hands, have one vote only irrespective of the number of shares such member holds. In the event of a poll, every member shall he entitled to that proportion of the total votes in the Company which the aggregate amount of the nominal value of the shares held by such member bears to the aggregate amount of the nominal value of all the shares issued by the Company. 3. Members registered in their own name are members who elected not to participate in the Issuer-Sponsored Nominee Programme and who appointed Computershare Limited as their Central Securities Depository Participant ( CSDP ) with the express instruction that their uncertificated shares are to be registered in the electronic subregister of members in their own names. Instructions on signing and lodging the form of proxy: 1. A member may insert the name of a proxy or the names of two alternative proxies of the member s choice in the space/s provided overleaf, with or without deleting the chairperson of the Annual General Meeting, but any such deletion must be initialled by the member. Should these spaces be left blank, the proxy will be exercised by the chairperson of the Annual General Meeting. The person whose name appears first on the form of proxy and who is present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those whose names follow. 2. A member s voting instructions to the proxy must be indicated by the insertion of an X, or the number of votes exercisable by that member, in the appropriate spaces provided overleaf. Failure to do so will be deemed to authorise the proxy to vote or to abstain from voting at the Annual General Meeting as he/she thinks fit in respect of all the member s exercisable votes. A member or his/her proxy is not obliged to use all the votes exercisable by him/her or by his/her proxy but the total number of votes cast, or those in respect of which abstention is recorded, may not exceed the total number of votes exercisable by the member or by his/her proxy. 3. To be valid, the completed forms of proxy must be lodged with the transfer secretaries of the Company, Computershare Investor Services (Proprietary) Limited, at 70 Marshall Street, Johannesburg, 2001, South Africa, or posted to the transfer secretaries at PO Box 61051, Marshalltown, 2107, South Africa, to be received by them not later than 12:00 on Thursday, 31 July Documentary evidence establishing the authority of a person signing this term of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the transfer secretaries or waived by the chairperson of the Annual General Meeting. 5. The completion and lodging of this form of proxy will not preclude the relevant member from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such member wish to do so. The completion of any blank spaces overleaf need not be initialled. Any alterations or corrections to this form of proxy must be initialled by the signatory/ies. The chairperson of the Annual General Meeting may accept any form of proxy which is completed other than in accordance with these instructions provided that he is satisfied as to the manner in which a member wishes to vote. Members who have dematerialised their shares must inform their CSDP or broker of their intention to attend the Annual General Meeting and request their CSDP or broker to issue them with the necessary authorisation to attend or provide their CSDP or broker with their voting instructions should they not wish to attend the general meeting in person.

160 Administration Datatec Annual Report Name Date of appointment Position held at 29 February 2008 Executive directors J P Montanana (British) 6 October 1994 Chief Executive Officer D B Pfaff 1 July 2001 Group Finance Director I P Dittrich 1 March 2008 ~ Non-executive directors L Boyd^ 6 December 2001 Chairman C M L Savage* 6 December 2001 Director C S Seabrooke*^ 6 October 1994 Director N Temple (British)^ 1 October 2002 Director L W Nkuhlu* 1 September 2006 Director S J Davidson (British)*^ 1 February Director J F McCartney (American) 16 July Director *Audit, Risk and Compliance Committee ^Remuneration Committee and Nomination Committee ~Appointed after the end of the financial year

161 160 Administration continued Registered office Ground Floor Sandown Chambers Sandown Village 16 Maude Street Sandown South Africa Telephone +27 (0) Telefax +27 (0) Registration number 1994/005004/06 Secretary Datatec Management Services (Pty) Ltd (Managing Director S P Morris) Office UK 110 Buckingham Avenue Slough Berkshire SL14PF Telephone +44 (0) Telefax +44 (0) Office US 520 White Plains Road Tarrytown New York Telephone Telefax Sponsors Rand Merchant Bank (a division of FirstRand Bank Limited) 1 Merchant Place Corner Fredman Drive and Rivonia Road Sandton, 2196 South Africa Dresdner Kleinwort Limited 30 Gresham Street London EC2V 7PG United Kingdom Investec Bank (UK) Limited 2 Gresham Street London EC2V 7QP United Kingdom Transfer secretaries Computershare Investor Services (Pty) Limited Ground Floor 70 Marshall Street Johannesburg, 2001 South Africa Computershare Investor Services (Channel Islands) Limited Ordnance House 31 Pier Road St Helier Jersey Channel Islands JE4 8PW United Kingdom Corporate law advisers and consultants Bowman Gilfillan (Pty) Limited 165 West Street Sandton, 2196 South Africa Auditors Deloitte & Touche The Woodlands Woodlands Drive Woodmead Sandton, 2148 South Africa Principal bankers SA The Standard Bank of South Africa Limited Commercial Banking Division 7th Floor, 3 Simmonds Street Johannesburg, 2000 Principal bankers UK Barclays Bank PLC P.O. Box Lombard Street London EC3V 9EX Principal bankers US HSBC Business Credit (USA) Inc 452 Fifth Avenue New York, NY GE Corporate Financial Services 201 Merritt 7 Norwalk, CT 06856

162 Datatec Limited 2008 annual report