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annual report 2003


Contents

key points 2

chairman’s statement 9

board of directors and executives 12

operational review 17

regional review 17

protocol 24

financial review 25

segmental analysis and related information 28

directors’ report 31

corporate governance report 34

audit committee report 38

corporate social responsibility report 39

remuneration report 43

statement of directors’ responsibilities 50

seven-year review 51

shareholder information 55

independent auditors’ report 56

annual financial statements 57

glossary of technical terms 96

contacts and corporate information 98


Think straight.

Talk straight.

Exceed expectations.

ANNUAL REPORT 2003 1


Key points

▲ Good cash generation from operations, notwithstanding

the trading loss, utilised to further the evolution of

Dimension Data’s business model.

▲ Strong cash balance, a competitive advantage.

▲ Improved strategic focus and competitive position:

• Re-emphasis of strategic importance of core

Network Integration business and focus on

enhancing efficiencies

• Narrower focus on key business areas:

- Network Integration

- Application Integration

- Platform Solutions

- Customer Interactive Solutions

- Security Solutions.

▲ Good progress in building Dimension Data brand

evidenced by quality large multinational and global

customer wins.

▲ Progress in standardising offerings and execution

capabilities globally.

Financial results

2 DIMENSION DATA

▲ Results impacted by US dollar weakness – average SA

rand, Australian dollar and Euro strengthened by 42%,

21% and 20% respectively against the average US

dollar rate over the year.

▲ Total revenues declined by 16% year on year in

constant currency terms, and sequentially by 7% in the

second half of the year.

▲ Traction in demand for managed services and

increased contribution from higher value services.

▲ Further progress in realigning cost base to the lower

demand environment, with overheads down by 14%

year on year in constant currency terms.

▲ Strong improvement in profitability ratios in UK and

Australian businesses.

▲ Turnaround plans implemented in Asia and the US are

delivering results.

▲ Poor second half performance from African business,

which has been addressed.

▲ Evidence of stabilisation in demand and pricing

environment in the second half of the year.

2003 2002

$'000 $'000

Total turnover 2,100,259 2,187,331

Total operating (loss)/profit before goodwill amortisation and exceptional items (9,012) 45,426

(Loss)/profit for the year before goodwill amortisation and exceptional items

Basic (loss)/earnings per ordinary share before goodwill amortisation

(36,265) 30,100

and exceptional items (US cents) (2.7) 2.3

Weighted average number of ordinary shares ('000) 1,341,618 1,299,075

Loss for the year as presented in the consolidated profit and loss account (420,291) (2,583,890)

Total net assets 310,601 639,313

Cash on hand 357,785 372,566

Net cash inflow from operating activities 51,161 28,952

Average number of employees 8,524 10,145


We deliver value through a full

lifecycle of services...

Maintenance and Support Services

Performance Monitoring and Reporting

Managed Services and Out-tasking

Assess and select optimal IT architecture

and technology

Programme and Project Management

Risk Management

Plan

IT

Infrastructure

Support Build

Design effective solutions

Procure technology infrastructure

Configure, deploy and integrate

ANNUAL REPORT 2003 3


... for our target clients

4 DIMENSION DATA

Regional and national enterprises

▲ Fragmented regional and local buying

▲ Differentiate with the best people and the best

solutions

▲ Sell to CTO/CIO or CFO

Emphasis on

leveraging our IP across

regions to cross-sell

Global enterprises

▲ Centralised global procurement

▲ Want one-stop product and MS coverage

▲ Differentiate on global footprint and execution

▲ Often network infrastructure only

▲ Sell to the procurement head

Emphasis on

building relationships


... in key verticals

▲ Allianz

▲ Citibank

▲ Dresdner Bank

▲ HSBC

▲ JPMorganChase

▲ Nedbank

▲ Swiss Re

▲ Wellpoint

▲ Airbus

Financial services

▲ Black & Decker

▲ BMW

▲ GM

▲ Renault

▲ SAB Miller

▲ Toyota

▲ VW

Manufacturing

▲ MTN

▲ Radianz

▲ Telefónica Deutschland

▲ Telephone Organization of

Thailand

▲ Telstra

▲ Vodacom

▲ Vodafone

Service providers

▲ Adcorp Flexible Staffing

▲ Manchester United

▲ Marriott.com

▲ South African Airways

▲ Travel Planners Inc

▲ Virgin

Commercial

▲ Harvard

Public sector

▲ The City of Cape Town

▲ The City of New York

▲ The European Central Bank

▲ United Cricket Board (South

Africa)

▲ US Department of Education

ANNUAL REPORT 2003 5


Global delivery through more than 140 offices

number of employees: 2,950

Revenue: US$365 million

Delivery capability in:

▲ Botswana

▲ South Africa

▲ Zimbabwe

Africa

6 DIMENSION DATA

number of employees: 1,141

Revenue: US$329 million

Delivery capability in:

▲ China

▲ Hong Kong

▲ India

▲ Indonesia

▲ Japan

▲ Malaysia

▲ New Zealand

▲ Phillipines

▲ Singapore

▲ South Korea

▲ Taiwan

▲ Thailand

▲ Vietnam

Asia

number of employees: 964

Revenue: US$381 million

Delivery capability in:

▲ Australia

Australia


in over 30 countries across five continents.

number of employees: 999

Revenue: US$382 million

Delivery capability in:

▲ Algeria

▲ Belgium

▲ France

▲ Germany

▲ Italy

▲ Luxembourg

▲ Netherlands

▲ Spain

▲ Sweden

▲ Switzerland

Europe

United Kingdom

number of employees: 1,171

Revenue: US$206 million

Delivery capability in:

▲ United Kingdom

▲ Ireland

▲ Isle of Man

number of employees: 599

Revenue: US$346 million

Delivery capability in:

▲ USA

▲ Canada

USA

ANNUAL REPORT 2003 7


chairman’s statement

“A stable balance sheet, a drive to enhance efficiencies and a

successful focus on working capital management were highlights

of the period under review.”

Introduction

The year under review has been

characterised by continuing challenging

global trading conditions. Dimension Data

has responded by improving our strategic

and operational focus, enhancing the

management team and delivery

capabilities, and further cutting costs

whilst maintaining investment in the

evolution of our business model.

At the start of fiscal year 2003, Dimension

Data embarked on a programme of

standardising the way we operate across

the globe. The DD Way, our internal

change programme, forced us to examine

and better understand what drives our

organisation internally. It was also the

catalyst for a focus on transitioning the

Group into a more customer-centric,

outward-looking organisation. This has

resulted in a marked improvement in the

way in which Dimension Data engages

with customers, suppliers and staff.

This external focus on our customers,

combined with the standardisation of our

delivery capabilities globally, has

reinforced the Dimension Data brand as

a global provider of managed and

professional services. The growing

recognition of Dimension Data’s brand

and the Group’s capabilities are reflected

in the quality of our business wins over

the past year. These include new contracts

with several well-known global customers,

such as Allianz, Airbus and a leading

global courier company. Enhanced

offerings and strong customer

relationships have also enabled us to

penetrate our existing customer base

further, as evidenced by clients such as

HSBC and a global pharmaceutical

company, where we significantly extended

the scope of existing contracts.

Globalisation has seen many of our

customers evolve from decentralised

regional operations into centralised global

businesses. Customers increasingly prefer

dealing with IT partners who offer global

solutions and services that help maximise

return on their investments. This trend has

contributed to the consolidation we have

seen in the IT industry in the past year. In

this environment, our global footprint is

vital to our customer engagement strategy.

It allows us to service our global

customers locally and to understand and

capitalise on their IT strategies. In

addition, we are increasingly working with

key alliance partners such as Cisco and

EMC to understand the IT requirements of

their global customer base.

Period under review

Convergence of IT environments

continues to fuel our Application Network

vision. Further progress has been made in

improving the competitive position of the

business by refining our solution sets and

tightening our focus on five focused lines

of business – Network Integration,

ANNUAL REPORT 2003 9


chairman’s statement

Application Integration, Platform Solutions,

Customer Interactive Solutions and

Security Solutions. We forged closer

relationships with key vendors and

continued to invest in solution sales and

delivery capabilities.

The challenging economic environment

during the year forced us to take a critical

look at both our skills sets and

management capabilities. The significant

personnel changes that we have made

over the past 18 months, which have seen

key new appointments made in a number

of regions, have resulted in a broader and

stronger management team, an improved

skills base and a better ability to sell and

deliver services and solutions.

We have also focused on improving

efficiencies in our core Network

Integration business in recognition of the

fact that products will always form a key

part of our solutions offering. This being

said, we remain committed to our target to

grow our services offering to more than

50% of turnover in the medium term.

After a number of years of pressure on

product margins, some pricing stability

started to emerge in the second half of

the year. However, services margins, whilst

still significantly more attractive than

product margins, have come under

pressure, largely due to lower demand

and an oversupply of skills.

10 DIMENSION DATA

Given the highly competitive trading and

price environment, the process of

aggressively addressing our cost base

continued in the period under review. Over

the year we cut costs in constant currency

terms across all regions although due to

the fact that we report in US dollars, this

is not apparent in our financial results. The

SA rand, Australian dollar, Euro and

Sterling foreign exchange rates

strengthened against the average US

dollar rate by 42%, 21%, 20% and 8%

respectively over the year. The benefits of

the cost-cutting measures taken have

yielded very pleasing results in the UK

and Australia where profitability ratios

improved significantly year on year.

The South African business reported a

disappointing performance in the second

half of the year. Profitability was

negatively impacted by lower volumes in

the Application Integration and Service

Provider businesses as well as by the

strength of the SA rand which had the

effect of reducing margins in dollar-based

contracts. Management has addressed

key internal issues and is focused on

improving profitability in 2004.

The turnaround plans in both our Asian

and US businesses yielded satisfactory

results in the second half. With evidence

of a stronger business outlook in both of

these regions, we are confident that

profitability will continue to improve in the

new financial year. Although we have a

small share of the US market, we remain

committed to our presence there and see

it as vital to be able to service

multinational and global customers, many

of whom have head offices in the US.

A highlight of the year was the

improvement in the Group’s balance sheet

and cash position. Strong cash generation

in the second half of the year reversed

the cash consumed in the first half and for

the year as a whole, the Group generated

operating cash of US$51 million. Our cash

position of US$358 million at year end is a

competitive advantage for the Group.

Corporate governance

We are pleased to be able to report that

we have dealt with the majority of the

Corporate Governance recommendations

raised by the King II Code on Corporate

Governance in South Africa and the

Revised Combined Code in the UK. We

remain committed to addressing any

outstanding issues and will keep our

stakeholders informed of progress.

Dimension Data South Africa is committed

to Black Economic Empowerment as an

economic and business imperative. It is a

vital initiative that will benefit both the

South African economy and the Group

locally and substantial progress continues

to be made in achieving the targets set

out by the Group’s internal Black

Economic Empowerment programme. We

believe that by transforming our South

African business and meeting the Black


Empowerment Equity ownership criteria,

we will enhance business opportunities

and our competitive positioning going

forward.

Outlook

Following the realignments and

rationalisations of the past two years,

Dimension Data is now well positioned to

compete within the current economic

environment. Our key differentiator

remains our ability to provide costeffective

Application Network solutions to

our customers across a global footprint.

We have made good progress in building

the Dimension Data brand and in building

quality, long term customer relationships.

This is evidenced by the quality of new

business, particularly in the second half of

the year. Going forward we will maintain

our tight focus on financial management,

with a specific emphasis on working

capital management.

Whilst customers remain cautious about

committing to new IT spend and focused

on extracting returns from current IT

investments, there was evidence in all

regions that the demand cycle and

technology-pricing pressures have

stabilised. Whilst we are not factoring any

strong improvement in demand into our

2004 budgets, Dimension Data is now

better placed to win market share due to a

tighter strategic focus, improved sales and

delivery capabilities and strong vendor

relationships.

Thank you

We notified shareholders in a separate

announcement that Bob Mansfield

resigned from the Board with effect from

17 November 2003, due to work

commitments. I would like to take this

opportunity to thank Bob for his significant

contribution as a Director of Dimension

Data and Datacraft Asia over the last

three years.

I would also like to welcome Dillie

Malherbe, a director of VenFin Ltd, who

are the holders of the convertible bonds,

who has agreed to join our Board as a

non-executive director with immediate

effect.

Finally, I would like to thank all of our

customers, partners and friends for their

continued support. Everybody working at

Dimension Data has been through a tough

period and we all look forward to better

trading conditions. The Group has

emerged in a far healthier state as a result

of the direct input and performance of all

involved.

Jeremy Ord

Executive Chairman

ANNUAL REPORT 2003 11


oard of directors and executives

Directors

Jeremy John Ord (46)

Executive Chairman

Jeremy Ord was appointed as Chairman of Dimension Data

Holdings plc at the time of its listing in London and

Johannesburg in 2000. Prior to that appointment he served as

Chairman of Dimension Data Holdings Ltd from 1987.

He previously served as the Group’s Managing Director and in

other senior positions since the Group’s 1983 inception. Mr

Ord is a Council member and member of the Board of

Governors of the South African Foundation. He is also a

member of the Board of Governors of the University of the

Witwatersrand Foundation.

12 DIMENSION DATA

Malcolm Thomas Rutherford (42)

Chief Financial Officer

Malcolm Rutherford was appointed to the Board of Dimension

Data Holdings plc as Chief Financial Officer at the time of its

listing in London and Johannesburg in 2000. Prior to that

appointment he served as Financial Director of Dimension Data

Holdings Ltd from 1994, after joining the Group in 1991. He

previously worked for UAL Merchant Bank in South Africa, in

their corporate finance and investment divisions, and before

that, was an audit manager with Deloitte & Touche in their

London office. He graduated from the University of the

Witwatersrand and is a Chartered Accountant (SA). He is a nonexecutive

director of Coronation Investments and Trading Ltd.


Stephen Michael Joubert (45)

Group Director Global Solutions Groups

Stephen Joubert was appointed to the Board of Dimension

Data Holdings plc at the time of its listing in London and

Johannesburg in 2000. Prior to that appointment he served as

a director of Dimension Data Holdings Ltd from 1998.

He joined the Company in 1996 as a Group Financial Director

in Network Services. Before that, he was a partner at

PricewaterhouseCoopers for a number of years. He graduated

from the University of the Witwatersrand and is a Chartered

Accountant (SA).

Patrick Keith Quarmby (49)

Director: Corporate Finance

Patrick Quarmby was appointed to the Board of Dimension

Data Holdings plc at the time of its listing in London and

Johannesburg in 2000. Prior to that appointment he served on

the Board of Dimension Data Holdings Ltd from 1996.

Previously he worked as a tax partner at Ernst & Young South

Africa and was a director of Standard Bank in London. He was

appointed as Chairman of Datacraft Asia in July 2002. He

graduated from the University of Cape Town and is a

Chartered Accountant (SA). He is a non-executive director of

Unitrans Ltd.

ANNUAL REPORT 2003 13


oard of directors and executives

Non-Executive Directors

David Andrew Frankel (32)

David Frankel was appointed to the Board

of Dimension Data Holdings plc at the

time of its listing in London and

Johannesburg in 2000, as a non-executive

director. Prior to that appointment he

served as an executive director on the

Board of Dimension Data Holdings Ltd

from 1998. He was previously managing

director of Internet Solutions. He holds an

honours degree in electrical engineering

from the University of the Witwatersrand,

and an MBA with distinction from the

Harvard Business School. In 1999 he was

voted South African Technology Achiever

of the Century. Mr Frankel has nine years’

experience in the Internet and

e-commerce industry.

Josua (Dillie) Malherbe (47)

Josua Malherbe was appointed to the

Board on 17 November 2003. He is the

Deputy Chairman and Chief Executive

Officer of VenFin Ltd. He also serves on

the board of Vodacom Group (Pty) Ltd,

GenuOne Incorporated and MidiTV (Pty)

Ltd (e-tv). He graduated from the

Universities of Stellenbosch and Cape

Town and is a Chartered Accountant (SA).

14 DIMENSION DATA

Robert Cecil Mansfield, AO (52)

Robert Mansfield was appointed to the

Board of Dimension Data Holdings plc at

the time of its listing in London and

Johannesburg in 2000. He was formerly

chief executive officer of Optus

Communications Pty Ltd, and has been

non-executive chairman of Telstra

Corporation Ltd since January 2000. In

January 2000 he was awarded the Order

of Australia (AO) medal for his

contribution to Australian business and to

the telecommunications industry. He also

served as a non-executive director on the

board of the Group’s Asian subsidiary,

Datacraft Asia Ltd until August 2003. He

was a member of the Audit, Nomination

and Remuneration Committees. Robert

Mansfield resigned with effect from 17

November 2003.

Moses Modidima (Moss) Ngoasheng

(46

Moss Ngoasheng was appointed to the

Board in September 2002. He also serves

as a non-executive director on the board

of Dimension Data South Africa. He is

executive chairman of investment

company Safika Holdings (Pty) Ltd, and

was previously economic advisor to South

African President Thabo Mbeki. He also

serves as a non-executive director of The

Industrial Development Corporation, New

Africa Investment Ltd and New Africa

Capital Ltd. Mr Ngoasheng graduated

from the University of South Africa and

has an MPhil from Sussex University.

Roderick (Rory) Michael Scott (44)

Rory Scott was appointed to the Board of

Dimension Data Holdings plc as a nonexecutive

director at the time of its listing

in London and Johannesburg in 2000. He

had previously served as a non-executive

director on the Board of Dimension Data

Holdings Ltd, and before that served as

the Group Financial Director from 1987 to

1991. He is presently managing director of

the Scottish Knitwear Group SA (Pty) Ltd.

He is a qualified Chartered Accountant

(SA) and serves as chairman of the Audit

and Remuneration Committees. Given the

length of time that has elapsed since his

service as an executive director, the

Company considers him to be fully

independent.

Gordon Herbert Waddell (66)

Gordon Waddell was appointed to the

Board of Dimension Data Holdings plc as

a non-executive director at the time of its

listing in London and Johannesburg in

2000. Mr Waddell is the non-executive

chairman of Mersey Docks and Harbour

Company. He serves as a non-executive

director on the Group’s regional board for

Europe and the United Kingdom. He was

appointed senior non-executive director

and chairman of the Nomination

Committee in September 2002 and is a

member of the Audit Committee. Mr

Waddell graduated from Cambridge

University and has an MBA from Stanford

University.


Peter Dorian (Dorian) Wharton-Hood

(64)

Dorian Wharton-Hood was appointed to

the Board of Dimension Data Holdings plc

as a non-executive director at the time of

its listing in London and Johannesburg in

2000. He previously served as a nonexecutive

director of Dimension Data

Holdings Ltd from 1998. He was vicechairman

of Liberty Life for eight years.

He was chairman of the Life Office’s

Association of SA on three occasions and

president of the Insurance Institute of SA.

He was also a member of the Council of

the SA Foundation and a director of

Business Against Crime. In 1998 he was

chairman of the Governing Body of

Business SA and he is now a trustee. He

is a member of the Remuneration and

Nomination Committees. He also sits on

the Treasury Committee. He graduated

from Stellenbosch University.

Executive Committee

▲ ▲ ▲

Group Operations

Brett Dawson Group Chief Operating Officer

(Chairman of the Executive Committee)

Regional CEOs

Russell Bolan CEO UK

Bob Cagnazzi CEO USA

Bill Padfield CEO Asia

Allan Cawood CEO Africa

Steve Nola CEO Australia

Donovan Smyth CEO Europe

Functional Heads

Adam Craker Group Executive Sales and Marketing

Denis Hocking CEO Global Services

Steve Joubert Group Executive Global Solutions Groups

Bruce Watson Group Executive Cisco Alliance

Marilyn Chaplin Group Executive Human Resources

Ettienne Reinecke Chief Technology Officer

Alan Burgess Chief Information Officer

Scott Gibson Group Executive Finance

David Sherriffs Group Executive Operations

ANNUAL REPORT 2003 15


operational review

Regional Review

The year under review was characterised

by continuing tough market conditions.

Our customers continued to demonstrate

a preference for enhancing existing IT

systems rather than embarking on new

investments. Much of our focus has

therefore been directed to the area of

improving customer returns on existing

technology. The difficult trading

environment was exacerbated by little IT

innovation and the perception that both

technology and technical expertise have

been commoditised.

The Group’s revenue performance should

be seen in the context of US dollar

weakness against the currencies in which

we operate. US dollar revenues declined

by 4% year on year and increased

sequentially by 7% in the second half of

the year. In constant currency terms,

however, revenues declined by 16% year

on year and by 7% sequentially in H2

2003.

Gross margins improved slightly in the

second half of the year and a continued

focus on matching the cost base to the

current trading environment resulted in

further reductions in overheads of 14% in

constant currency terms over the year.

Overall, the Group reported a second half

operating loss of US$4.5 million, which is

in line with the loss reported in the first

half. With the exception of Africa, all other

regions reported improved operating

contributions in the second half of the year.

ANNUAL REPORT 2003 17


operational review

Good revenue growth of 25% in US

dollars masked difficult market conditions

particularly in the second half of the year.

The results should be seen in the context

of the 42% appreciation in the average SA

rand foreign exchange rate over the year.

In constant currency terms revenue

declined by 12% year on year and

sequentially by 17% in the second half of

the year.

After a solid first half, the performance of

the African business deteriorated in the

second half of the year due to lower

volumes, particularly in the Application

Integration and Service Provider

businesses. This was exacerbated by the

strong appreciation of the SA rand, which

impacted margins on dollar-denominated

contracts. Higher overheads also

contributed to the deterioration in

profitability in the second half of the year

although overheads in the second half did

include items of a non-recurring nature.

Overheads in constant currency terms

were cut by 7% year on year and

overcapacity in the services business

drove a 20% reduction in headcount.

Internet Solutions achieved a strong

performance and grew market share in the

corporate Internet services and virtual

private network space.

18 DIMENSION DATA

Africa

$'000 FY2003 FY2002

Turnover 365,428 292,866

Operating profit before goodwill amortisation, impairment and exceptional items 5,413 20,027

Operating margin 1.5% 6.8%

Net operating assets 160,793 78,617

Several major services-led deals were

won, many outside the core financial

services and telecommunications markets,

traditionally the stronghold of Dimension

Data South Africa, reflecting the

successful penetration into new vertical

markets. The outsourcing business, which

capitalises on Dimension Data’s GSOA

services framework, was significantly

extended in 2003. Notable wins included a

US$1.4 million managed services contract

with Sappi for the desktop, server and

LAN switching environments and a five

year US$6.4 million outsourcing and Insite

contract with Macsteel International to

provide a locally hosted SAP solution,

international VPN connectivity as well as a

hosted calldesk.

Significant deals were signed with Afrox

Healthcare to provide a range of product,

managed, hosting and security services,

and with AngloGold and Metal Industries

Benefit Funds Administrators where

Teamsource contracts were entered into.

A three year network migration and

managed services contract was signed

with Toyota South Africa. Major

telecommunications infrastructure rollouts

were won in conjunction with associate

Plessey from Sentech in South Africa and

MTN in Nigeria.

Notwithstanding the disappointing second

half result, the African region remains

Dimension Data’s flagship with good

solutions offerings, substantial market

presence and long term customer

relationships. Management changes have

been made and an aggressive plan to

return the business to profitability is in

place. Current forecasts indicate that the

trends established in the third quarter and

in the early part of the fourth quarter have

been reversed and Africa is likely to show

good profits in the current quarter. Market

share gains are being driven by focused

business units with dedicated sales forces.


Asia

$'000 FY2003 FY2002

Turnover 328,725 404,908

Operating profit before goodwill amortisation, impairment and exceptional items 2,187 16,961

Operating margin 0.7% 4.2%

Net operating assets 169,310 283,150

Trading conditions in most countries in

which Datacraft Asia (‘Datacraft’) operates

remained challenging. Demand from the

enterprise and telecom service provider

sectors was subdued in the face of

continuing economic uncertainties,

exacerbated by the SARS outbreak that

was at its height in the third quarter.

Revenues declined by 19% year on year.

Some stability started to emerge in the

fourth quarter resulting in a slowing in the

rate of revenue decline to 3% sequentially

in the second half of the year. Gross

margins came down to 15.7% from 18.3%

in 2002 due largely to a reduction in

business volumes. However, actions taken

to improve utilisation levels combined with

an easing of pricing pressure on product

margins saw margins improve in the

second half of the year.

The rationalisations and restructurings that

were a feature of the period are now

largely complete. Overheads were reduced

by 14% and headcount came down by

24%. Higher gross margins and a 10%

sequential decline in overheads resulted in

an improved operating contribution of

US$2.2 million in the second half of the

year compared to breakeven in the first

half. The year also saw the sale of

Datacraft’s Cabling business and the

rationalisation of the iCommerce

operations, which are now fully integrated

into the core Network Integration business.

An improved balance sheet, a successful

focus on working capital management and

strong cash generation are further

highlights of the period under review.

Operating performances across the region

were mixed. India continued to move from

strength to strength, benefiting from good

demand in the financial services sector

and for call centre integration services.

Japan returned to profitability in H2 2003

and China is showing signs of recovery

with narrowing losses over three straight

quarters. In Korea, the restructuring

exercise enabled the business to

substantially reduce losses year on year.

Customers responded well to Surveyor

Secure, a vendor-independent security

assessment and risk management service

that adds a consulting layer to Datacraft’s

security integration and outsourcing

offerings. During the year, over 30

Surveyor Secure deals were signed,

thanks to Datacraft's precise methodology

and partnerships that enable customers to

manage diverse network security and

liability exposure. There were pockets of

good demand for VoIP and OSS/BSS

solutions from the Service Provider

customers. A highlight of the year was

winning a 40 month, US$8 million

managed services annuity contract for

Citigroup, to provide Uptime maintenance

support services in 15 territories across

Asia Pacific on a 24 x 7 basis. A further

highlight was securing phase two of the

contract with State Bank of India (‘SBI’),

valued at US$29 million, to implement

SBI’s nationwide corporate backbone and

connect its associate banks, networking

branches, ATMs and other electronic

delivery channels.

Following the announcement of a strategic

relationship with EMC, Datacraft launched

a range of network storage solutions and

related services. The company also

launched a set of Customer Interactive

Solutions to capitalise on the customer

contact centre boom in India and

elsewhere in the region. A new

partnership with Microsoft was entered

into, as part of the Group initiative, to be

one of Microsoft’s global system

integration partners offering solutions built

around its .NET strategy.

The mood going into 2004 is more

optimistic than it was six months ago. The

rationalisations are now largely complete

and encouraging signs of improving

demand emerged in the fourth quarter

based on monthly order rates and a

growing backlog. In 2004, Datacraft will

remain focused on growing contributions

from Solutions and Services and on

building and leveraging off the Cisco

partnership and the newly established

relations with EMC and Microsoft.

ANNUAL REPORT 2003 19


operational review

20 DIMENSION DATA

Australia

$'000 FY2003 FY2002

Turnover 380,526 364,609

Operating profit before goodwill amortisation, impairment and exceptional items 12,431 10,188

Operating margin 3.3% 2.8%

Net operating assets 69,021 104,505

The Australian business achieved a

pleasing improvement in profitability in an

environment characterised by lower

corporate and government spending.

Reported US dollar revenues grew by 4%

supported by a strong Australian dollar. In

constant currency terms, revenues

declined by 14%, reflecting the overall

market decline as Dimension Data

Australia maintained its leading market

position.

In the second half of the year, which is

seasonally a better period than the first

half, constant currency revenues

increased sequentially by 13% on H1

2003. Good growth was achieved in the

Network Integration business where a

number of large new contracts were

closed and the Platform business

benefited from good demand for upgrades

to Microsoft 2003.

Continued focus on ‘leading with valueadd

services’ saw the gross margin

improve slightly on the prior year. A sharp

focus on cost containment, mainly through

headcount reductions, resulted in fixed

overheads coming down by 15% in

constant currency terms over the year.

The result was a pleasing improvement in

net operating margins to 3.3% from 2.8%

in FY2002. Cash generation improved

over the year due to improved profitability

and lower capital spending.

In a tough year a number of important

foundations for future success were

established. In response to changing

market demand and in support of our

Application Network Solutions vision,

focused investments were made in

Professional Services and in developing

services designed to ensure early

engagement in the customer planning and

deployment lifecycle. Increasingly strong

‘consultative customer relationships’ were

established through engagements with

WebCentral and Education Queensland.

The Security business, a new initiative,

was well received by the market and

benefited from a focus on risk and policy

advisory services that led to strong

downstream technology engagements,

including a major deployment with

Australia’s premier media group,

Publishing & Broadcasting Limited. New

strategic IT consulting initiatives created

good pull-through business across the

board.

Managed Services performed well in a

period of significant customer price

sensitivity and competitive pressure.

Managed Services contracts were signed

with Transaction Solutions and Coca-Cola

Amatil.

Strengthening local vendor relationships

with Microsoft and Cisco resulted in

improved market share. The impact of

global initiatives and more effective local

engagement with Microsoft and EMC

drove an improved performance from our

Application Integration business. The

distribution business, Express Data, was

appointed one of two strategic partners to

Cisco where previously there were three,

which is expected to translate into market

share gains in the new financial year.

Other customer highlights of the year

include a three year US$1.3 million IP

convergence contract with Lend Lease

Corporation and a three year US$1.6

million Uptime and professional services

contract with the Department of

Employment and Workplace Relations.

Despite market expectations for slowing

GDP growth in Australia in 2004,

Dimension Data Australia expects to grow

revenues in the new financial year through

increased solutions penetration of our

existing client base. The focus remains on

improving the contribution from

Professional and Managed Services

through more effective alignment of our

capability against changing customer

lifecycle requirements, and on trimming

the cost base.


Continental Europe

$'000 FY2003 FY2002

Turnover 382,123 360,774

Operating profit before goodwill amortisation, impairment and exceptional items 6,220 18,691

Operating margin 1.6% 5.2%

Net operating assets 68,445 162,112

The performance of the European

business was impacted by ongoing difficult

market conditions and pressure on IT

spending. Reported revenues increased

by 6% over the year, benefiting from the

weakness of the US dollar. In constant

currency terms revenues declined by 12%

year on year and sequentially by 9% in the

second half of the year.

Pressure on margins in the network

integration business was in part

compensated for by penetration into the

new growth sectors of security, customer

interactive solutions and managed

services, as well as good traction in

demand for professional services.

Further progress was made in

streamlining the European business,

particularly in the second half of the year

when overheads came down sequentially

by 12%. Comprehensive turnaround plans

were implemented during the year in both

Germany and France to drive revenue

growth, improve our value proposition and

reduce costs. A new CEO has been

appointed in Germany and a new French

management team drove increased sales

in H2 2003, reaping the benefits of a

better customer engagement strategy. The

Netherlands, Belgium, Luxembourg and

Italy were the strongest performers.

The business benefited from a strategy of

engaging key accounts with specific

solution offerings. Bids with a number of

large, multinational customers, were aided

by streamlined processes and international

sales efforts. A three year, multi million

dollar, multi country security and Uptime

contract was signed with Airbus. A

successful focus on the pharmaceuticals

industry resulted in a three year, US$4

million contract with Merck KG for product

procurement and related services, and a

multi year framework agreement with the

European Agency for the Evaluation of

Medicinal Products, for product

procurement, professional and support

services. In the aeronautical sector we

won a three year, US$1.2 million contract

with EADS Astrium to provide a VPN

managed solution across France, Germany

and the UK.

The economic outlook is improving and

some pricing stability is apparent as we

enter the new financial year. Whilst

visibility remains short and spending in the

German market is still on hold, elsewhere

the demand cycle appears to have

bottomed. We expect to capitalise on the

focused vertical sales engagement model

and enhanced ties with partners such as

Microsoft and EMC in the new financial

year. The business is operationally in

better shape and there is good scope to

improve the profitability of our biggest

revenue contributor, Germany.

ANNUAL REPORT 2003 21


operational review

22 DIMENSION DATA

United Kingdom

$'000 FY2003 FY2002

Turnover 205,918 193,652

Operating profit before goodwill amortisation, impairment and exceptional items 11,010 8,644

Operating margin 5.3% 4.5%

Net operating assets 39,303 111,291

The UK business made excellent progress

in a troubled integrator market in

transitioning to a more focused and

profitable business model. Demand for IT

services remained under pressure during

the period under review, and whilst US

dollar revenues increased by 6% year on

year, in constant currency terms they

declined by 2%.

The performance of the UK business

benefited from changes implemented in

the prior period. A new CEO and

management team improved focus and

succeeded in growing Managed and

Professional Services revenue by 24%

year on year. Dimension Data’s market

position and delivery capabilities were

enhanced following a realignment of the

skills base towards skills able to sell and

deliver solutions. Good progress was

made in building long term relationships

with blue chip customers, and experience

gained in winning and delivering on global

accounts proved invaluable in tendering

for further global contracts.

Significant progress was made in reducing

overheads, which came down by 21% in

constant currency terms over the year.

This resulted in a sharp improvement in

profitability over the prior year and

operating margins reaching 6.9% in the

second half of the year.

The UK’s market offerings were extended

over the year to include Content

Management, Voice Activated Solutions,

Storage and IPCC. We won new business

from a large UK mobile operator in the

Content Management and Voice Activated

Solutions space and won a US$7 million

Cisco product, services and IPCC solution

contract with Streamdoor. Improved

delivery capabilities resulted in better

profitability in the Advanced Infrastructure

business where building service solution

contracts were won from Lime Street

Development, Warwick University and

Swiss Re.

The Merchants Group, the UK’s managed

call centre business, was restructured

during the period under review and

continues to provide global outsourcing

solutions through call centres in Scotland,

Ireland, England and South Africa.

Significant success was achieved in

onshore, nearshore and offshore solutions

and several large contracts, including

deals with Unilever and Edexcel, that will

benefit 2004 revenues were awarded late

in the year.

Entering the new financial year there is

evidence of an increasing propensity for

customers to plan new projects but as yet,

this is not translating into orders. Whilst

we are not anticipating a strong pick up in

demand, geographic expansion into

Northern England and Scotland is

expected to drive revenue growth in 2004.

We also see opportunities in targeting

medium-sized enterprise customers and in

winning government business. Vendor

relationships are strong and opportunities

are emerging to target customers in joint

engagements. The investment made in

enhancing offerings in the areas of

Storage, Security, IPC/IPT and Call Centre

Integration is also expected to bear fruit.


USA

$'000 FY2003 FY2002

Turnover 346,051 503,753

Operating loss before goodwill amortisation, impairment and exceptional items (17,058) (9,021)

Operating margin (4.9)% (1.8)%

Net operating assets 32,153 120,309

Continuing difficult trading conditions for

most of the year in the US resulted in a

31% decline in revenue and an operating

loss for the period. The decline in

revenues reflected volume contractions in

both the Network Integration and

Application Integration businesses.

The performance of the Network

Integration business was affected in the

North East by a sharp decline in IT

spending from our primary financial

services customer base. A significant

contributing factor to the decline in

revenues was the loss of a technology

deployment contract, which contributed

US$80 million in the previous financial

year. Second half performances in our

businesses in the South East and mid

Atlantic improved, and both businesses

broke even.

Gross margins continued to come under

pressure over the year, particularly in the

Application Integration business due to the

structural degradation of this market, the

shift to offshore resources, and an

oversupply of technical resources.

Utilisation levels in Managed Services

improved following good demand and the

business was profitable from June onward.

An aggressive turnaround plan was

implemented during the year that focused

on reversing declining revenues, matching

costs to market conditions and returning

the business to profitability. Overheads

came down by 36% year on year and

headcount declined by 33%. The US

business exited the year profitable at the

operating profit level in the month of

September.

The US region benefited from the Group’s

global capabilities and was able to win

several new Fortune 500 customers. A

highlight of the year was the signing of a

three year, multi million dollar, global

contract with a leading global courier

company to supply technology and related

professional services in 231 countries.

The Network Integration business was

awarded a five year, US$10 million WAN

Management contract by the

Administrative Office of the United States

Courts under Dimension Data's contract

with the US General Services

Administration. In the Application

Integration business we won contracts

with the likes of Volkswagen to design the

next generation of VW.com and with

another global automotive company to

design, develop, host, deploy and maintain

a vehicle inspection website.

Our market offerings evolved to include

several key initiatives. Our leasing offering

provides clients with the opportunity to

lease software, services and maintenance

as a single solution. Dimension Data’s

Health Alert Network Solution is gaining

traction and five states, in addition to the

City of New York Department of Health

and Mental Hygiene, have selected the

portal solution to help combat bioterrorism

and the spread of infectious

diseases. We achieved further penetration

of the storage market along with closer

ties with EMC, and numerous wins in

IPT/IPCC made us one of Cisco’s top

service providers. Our digital publishing

offering, which was previously marketed to

the publishing industry and sold to such

organisations as Harvard Business School

Publishing, will be packaged and offered

across verticals in the new financial year.

The focus in the new financial year will be

on increasing revenues through driving

improved market penetration in our core

Network Integration business, increased

sales focus in growth areas such as

Storage, Security and IPCC, and

leveraging off enhanced vendor

relationships with Cisco, EMC and

Microsoft. Trading in the third quarter was

poor but there was an improvement in

demand in the fourth quarter. Technology

pricing appears to have bottomed in the

second half of the year and improved

scale and utilisation should underpin

services margins.

ANNUAL REPORT 2003 23


operational review

Protocol

Protocol Venture Capital, established in

2001 as Dimension Data’s Business

Development Fund, has as its objective

the establishment of strategic joint

ventures that enhance relationships with

suppliers and clients and foster new

entrepreneurial businesses

complementary to the Group’s existing

business.

Protocol had a quiet year from a portfolio

activity perspective, with efforts focused

primarily on the growth of existing

investments. In this regard there was

pleasing progress, with some strong

performances from a number of portfolio

companies. No new investments were

made, one investment was exited and two

others were written down to zero, with no

additional or contingent funding

commitments, bringing the total

investments under active management at

year end to 17. At year end Protocol’s

investments were valued at US$16.9

million, compared to US$17.7 million at 30

September 2002.

24 DIMENSION DATA


financial review

Dimension Data is listed on the London

Stock Exchange and the JSE Securities

Exchange and is required to comply with

UK reporting and corporate governance

requirements.

The accounting policies used in the

preparation of the September 2003

financial statements are consistent with

those applied in the previous year.

Group Operating Performance

The weakness of the US dollar against

the basket of other currencies in our

territories was significant. The average SA

rand, Australian dollar, Euro and Sterling

strengthened against the average US

dollar rate by 42%, 21%, 20% and 8%

respectively over the year.

There have been no material changes to

the Group structure compared to prior

periods.

Turnover

Total turnover including associates was

US$2,100.3 million (2002: US$2,187.3

million). There were no major changes in

the geographical mix of turnover. The

weakness of the US dollar masks a

decline in revenues of 16% in constant

currency terms over the prior year.

Pleasing progress was made in the

provision of Managed Services, which

increased by 41% to US$499.5 million

from US$353.2 million in 2002.

Notwithstanding a decline in professional

services revenues of US$92.2 million

(21%), the contribution of services in the

revenue mix increased to 42% from 38%

in 2002.

The balance of revenue is made up of the

sale of product, which at 58% still

represents the largest portion of Group

turnover, particularly in Australia, Europe

and the US. This particular aspect of the

business has encountered the greatest

pressure on margins as channels to

market have commoditised and integrators

have cut both their infrastructure and

services margins in order to retain and win

business. Nevertheless, the Group has

seen some stabilisation of product

margins.

Gross margin

The pressure that we have experienced

on product margins over the past few

years abated in the period under review

when there was an improvement in the

Group’s overall product gross margin.

Services margins declined due to lower

volumes, particularly in the South African

business.

Market pressures on pricing of product

and associated services make it

misleading to look at turnover as the only

measure of progress towards a solutionsbased

approach. Consideration has to be

given to the gross margin contribution in

each region with the greatest improvement

brought about by improved services

volumes in Australia and the UK.

Overheads

Fixed overheads excluding associates

were US$419.5 million compared to

US$415.6 million in 2002. The weakness

in the US dollar masks the progress that

was achieved in reducing overheads,

which, following significant rationalisations

implemented over the past 18 months,

came down by 14% in constant currency

terms year on year and sequentially by

9% in the second half of the year.

When compared to H1 2003, the H2 2003

overhead cost savings of US$14.3 million

and the reallocation of certain personnel

costs of US$3.6 million to cost of sales,

were partly offset by currency translation

differences of US$17.7 million.

Fixed overheads do not, however, reflect

the Group’s total cost base. Included in

cost of sales is a personnel cost of

US$227.0 million (headcount of 4,937)

and infrastructure costs of US$43.0

million. These have also been subject to

rationalisation programmes, where

headcount was reduced by 14% (815).

The Group continues to invest in the

execution of its strategy. In the current

year the Group expensed US$22.1 million

relating to Services and Solutions

development.

Taxation

Whilst the Group reported an overall loss

before goodwill amortisation and

exceptional items, certain territories in

which the Group operates reported profits.

This partly explains a Group overall tax

charge of US$27.7 million (excluding

exceptional items).

ANNUAL REPORT 2003 25


financial review

The other large contributor to the tax

charge was the reversal of certain

deferred tax assets raised in prior periods.

Prior years’ deferred tax assets were

considered to be fairly valued except in

the US and Germany, where

underperformance in the current year has

resulted in future profit expectations being

lower than those projected in previous

years. Given the uncertain economic

environment in these territories, it was

considered prudent to reverse these

assets in the current year. This contributed

US$7.3 million to the tax charge.

Furthermore, no new deferred tax assets

were raised on the potential tax relief

arising from current year losses.

The Group has significant deferred tax

assets, the majority of which are not

recognised within the Group financial

statements on the basis that their

recoverability cannot be forecast with

sufficient certainty to meet the recognition

criteria under FRS 19. Across the Group,

US$137.1 million of deferred tax assets

relating to losses have not been

recognised. Of this amount US$106.7

million relates to the US. However, the

Group has recognised deferred tax assets

with respect to tax losses on timing

differences where the Group considers

that it is more likely than not that these

assets can be recovered.

Goodwill

Goodwill has historically been amortised

over a maximum period of seven years.

Goodwill amortisation amounted to

US$344.4 million in 2003 compared to

US$719.9 million in 2002. In the light of

the changed economic environment, the

Directors have concluded that goodwill,

henceforth, should be amortised over a

period not exceeding five years and have

adopted this change in estimate in 2003.

26 DIMENSION DATA

This resulted in an accelerated

amortisation charge of US$48.8 million in

the current year. Goodwill has now been

fully amortised and has a nil carrying

value on the balance sheet.

Operating exceptional items

Costs incurred in restructuring and

downsizing resulting from deteriorating

economic conditions are treated as

operating exceptional items. Costs

incurred to improve efficiencies and to

accommodate the Group’s go-to-market

model are borne within normal trading

operations.

Operating exceptional costs of US$14.0

million relate to severance and other

associated costs across all regions.

Capital assets have been written off in

Africa and Management and largely relate

to an accelerated write-down of IT

infrastructural leasehold improvements.

These assets are not currently generating

a return and have been written down to

reflect their economic value.

Operating exceptional items also reflect a

release of US acquisition provisions no

longer required of US$13.5 million as well

as the write-down of the carrying value of

certain assets brought forward in the

Group of US$9.8 million.

Liquidity and Capital Resources

Working capital

There have been no material changes in

working capital year on year.

Debtors have been well controlled during

the year and reduced from US$565.2

million to US$503.9 million. Measured in

days’ sales outstanding, debtors have

decreased from 59 days at 30 September

2002 to 57 days at 30 September 2003.

Stock has also been well controlled and

has decreased to US$88.6 million (2002:

US$99.1 million).

Trade creditors’ days outstanding

decreased to 53 from 54 in 2002,

reflecting current market conditions and

the continued pressures that technology

vendors are placing on their partners.

Cash at bank and in hand was US$357.8

million at 30 September 2003 (2002:

US$372.6 million). There was also

US$27.9 million of near cash and short

term investments on the balance sheet at

30 September 2003 (2002: US$42.8

million). During the year US$43.7 million

was expended to settle outstanding

deferred consideration liabilities. Vendor

liabilities of US$7.9 million, most of which

will be expended in the coming year,

remain on the balance sheet.

There was a net cash inflow from

operating activities of US$51.2 million for

the year compared to US$29.0 million in

the previous year. This was driven by the

Group’s continued focus on working

capital management and the resulting

improvement in debtors and stock

balances.

In December 2002 US$100.0 million 2002

convertible debentures were redeemed

together with the outstanding conversion

premium of US$1.4 million and in the

same month US$100.0 million convertible

bonds bearing a coupon of 5.375% and

repayable in 2009 were issued.

Capital reduction

The capital reduction referred to in the

2002 Annual Report and Notice of Annual

General Meeting became effective on 20

March 2003. The share premium account

was reduced by an amount of US$4,334.1


million, which was applied to eliminate the

deficit on the Company’s profit and loss

account at 30 September 2002. The share

premium account was further reduced by

an amount of US$342.4 million to create a

special reserve. This amount is available

to be applied against any goodwill

amortisation and impairment charges

charged in the Group consolidated profit

and loss account. The full amount of

US$342.4 million has been applied

against the goodwill amortisation charge

for the year ended 30 September 2003.

The Company must also credit to the

special reserve any distribution from a

company which was a subsidiary at the

effective date of profits earned prior to

1 October 2002. The special reserve is

not available for distribution unless all

creditors whose debts or claims were

outstanding at the effective date, unless

such creditors have consented otherwise,

are adequately protected.

Interest Rate Risk

As the Group is in a net cash positive

position, it is exposed to the effects of

fluctuating deposit interest rates. Whilst it

is corporate policy to remain as liquid as

possible to take advantage of business

opportunities, certain funds have been

invested in short term deposits to

minimise the effects of fluctuating interest

rates and achieve a satisfactory return for

shareholders.

Currency Risk

The Group has operations in over 30

countries and receives revenues and incurs

costs in numerous currencies. As a

consequence, movements in exchange

rates affect the Group’s results differently

year on year. When Dimension Data

invoices in local currency, and has a

foreign currency exposure to suppliers, it

generally uses forward foreign exchange

contracts to hedge its foreign exchange

risk or adjusts the prices charged to clients

to take account of exchange rate

fluctuations. In addition, many of the selling

prices of the products supplied by the

Group are linked to the US dollar, and the

purchase of these products is often paid

for in US dollars. The Group also incurs

operating expenses in numerous other

currencies, the most significant of which

are the SA rand, the Australian dollar, the

Singapore dollar, sterling and the Euro.

The following table reflects the average

and year end rates against the US dollar

of SA rand, the Australian dollar, Sterling

and Euro:

Exchange Rates

Global Risk

The Group operates in over 30 countries

around the globe and is therefore

susceptible to different political, financial

and economic risks in each region.

Business practices differ from region to

region and this is most evident in the

collection of debt.

Operating globally may have increased the

exposure to political instability and

different business practices but we have

taken steps to mitigate this risk and

continue to monitor the regional

performances.

Year ended Year ended

30 September 30 September

2003 2002

Currency Average Period end Average Period end

South African rand 7.484 7.102 10.606 10.560

Australian dollar 1.526 1.476 1.850 1.841

Sterling 0.613 0.600 0.664 0.641

Euro 0.879 0.862 1.059 1.019

ANNUAL REPORT 2003 27


segmental analysis and related information

By Location

Average number of employees – by location

2003 2002

- Africa 3,204 3,900

- Asia 1,313 1,668

- Australia 996 1,191

- Continental Europe 1,031 1,026

- United Kingdom 1,274 1,205

- United States 706 1,155

Total 8,524 10,145

28 DIMENSION DATA

2003 2003 2003 2002 2002 2002

$'000 $'000 $'000 $'000 $'000 $'000

Operating Net operating Operating Net operating

Turnover profit/(loss) assets Turnover profit/(loss) assets

Continuing operations

- Africa 365,428 5,413 123,603 292,866 20,027 78,617

- Asia 328,725 2,187 169,310 404,908 16,961 283,150

- Australia 380,526 12,431 69,021 364,609 10,188 104,505

- Continental Europe 382,123 6,220 68,445 360,774 18,691 162,112

- United Kingdom 205,918 11,010 76,493 193,652 8,644 111,291

- United States 346,051 (17,058) 32,153 503,753 (9,021) 120,309

- Other* 6,024 (35,089) - - (24,528) -

Group 2,014,795 (14,886) 539,025 2,120,562 40,962 859,984

Associates 85,464 5,874 - 66,769 4,464 -

Total 2,100,259 (9,012) 539,025 2,187,331 45,426 859,984

* Comprises Investment holding and management and Protocol. The net operating assets of Investment holding and management and

Protocol have been included in the relevant geographical region.

Total operating profit is before goodwill amortisation, impairment and exceptional items.

Net operating assets are total net assets excluding convertible bonds, debentures, loans and minority interests.

Net operating assets by location in 2002 included the unamortised balance of goodwill.


Group Turnover Analysis by Service Offerings

Year ended 30 September 2003

United United

Africa Asia Australia Europe Kingdom States Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Product 123,062 202,268 282,109 234,001 65,558 252,546 1,159,544

Managed services* 175,815 67,035 44,173 93,450 93,252 25,781 499,506

Professional services 72,575 59,422 54,244 54,672 47,108 67,724 355,745

Group 371,452 328,725 380,526 382,123 205,918 346,051 2,014,795

Year ended 30 September 2002

United United

Africa Asia Australia Europe Kingdom States Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Product 101,654 250,148 284,166 236,229 80,060 367,049 1,319,306

Managed services* 95,107 54,739 48,603 71,902 70,134 12,749 353,234

Professional services 96,105 100,021 31,840 52,643 43,458 123,955 448,022

Group 292,866 404,908 364,609 360,774 193,652 503,753 2,120,562

* Being process-driven revenues of a recurring nature.

No operating profit has been disclosed on lines of business as the operations are managed regionally.

ANNUAL REPORT 2003 29


segmental analysis and related information

Percent

80

60

40

20

0

Percent

30

20

10

65.3

66.9

30 DIMENSION DATA

0

38.2

38.5

22.1

25.9

34.5

Africa Asia Australia EU UK USA Group

2002

18.2%

2003

Total Services Revenue as a % of Group Revenue

Share of Turnover by Location

16.4%

18.9%

19.0%

10.3%

38.8

17.2%

Africa Asia Australia EU UK USA

Cash Holdings (including short term investments)

US dollar (28.8%)

58.7

Australian dollar (24.9%)

SA rand (20.8%)

Euro (15.1%)

Sterling (8.4%)

Other (2.0%)

68.2

27.1

27.0

Percent

80

40

0

(40)

(80)

37.8

42.4

Share of Operating Profit by Location*

26.8%

10.8%

61.5%

30.8%

54.5%

Africa Asia Australia EU UK USA

(84.4%)

*Operating profit before goodwill amortisation, impairment and exceptional items


directors’ report

The Directors of Dimension Data present their annual report and audited

financial statements for the year ending 30 September 2003.

Principal Activities

Dimension Data Holdings plc and its

subsidiaries is a global technology

services Group. The Group has expertise

in networking, application integration and

global managed services enabling clients

to plan, build and support IT Infrastructure

based on Dimension Data’s proprietary

Application Network framework. The

solutions Dimension Data creates enable

businesses to operate seamlessly and

flexibly by connecting devices, information,

applications, business processes, people

and organisations.

The Directors’ Report should be read in

conjunction with the Chairman’s

Statement, the Operational Review and

the Financial Review, which provide

information about the Group’s businesses,

their financial performance during the year,

and likely future developments.

Results

For the year ended 30 September 2003,

total turnover (including associates) was

US$2,100 million, compared with

US$2,187 million for the previous year,

representing a decrease of 4%. Total

operating loss before goodwill

amortisation, impairment and exceptional

items was US$9 million compared with a

profit of US$45 million for the previous

year. Basic loss per share before goodwill

amortisation, impairment and exceptional

items amounted to 2.7 US cents (2002:

Earnings 2.3 US cents).

Dividends

The Board has reviewed and maintains its

policy that available cash generated by

the Group will be utilised to fund working

capital requirements and to continue the

rollout of strategy. They accordingly will

not declare a dividend for the current

financial period, but will continue to review

this policy on an annual basis, or as

necessary.

Research and Development

Dimension Data has continued to invest in

services and market offerings that are

consistent with our Application Network

vision. Continued engagement with key

partners and clients has resulted in

Dimension Data investing in a number of

consultative and advisory services. These

services assist Dimension Data in

implementing solutions for clients that

meet their specific objectives. We have

also invested in ongoing services that

support and continually refine our clients’

solutions and infrastructure. These

services combine to underpin the value

provided to clients, which is to plan, build

and support IT infrastructure that solves

their particular business problem.

In line with our focus on services and

solutions, the Global Strategic

Development Group has been disbanded,

and its component parts now fall under

the respective services or solution group.

Convergence continues to fuel our

Application Network vision and in the last

12 months we have worked with

enterprise clients and service providers to

create solutions that integrate networking,

telephony, video, data sources and

applications. We have invested in

assessment services that create a clientspecific

road map and a business plan

producing a measured return on a

convergence investment.

Dimension Data has invested in services

that assist our clients in assessing the

impact that networking, messaging and

the related regulations will have on

storage, data centres and Microsoft

services. We have proven that

convergence will allow clients to

consolidate platforms and facilities,

thereby driving a lower operational cost.

Acquisitions

Details of acquisitions completed during

the year are given in Note 25 to the

annual financial statements on page 82.

Directors

The current Directors are listed on pages

12 to 15.

During the period under review the Board

consisted of four executive and six nonexecutive

directors, including the

Chairman, Jeremy Ord. The executives

are Jeremy Ord, Stephen Joubert, Patrick

Quarmby and Malcolm Rutherford, and

the non-executives are David Frankel,

Moss Ngoasheng, Robert Mansfield, Rory

Scott, Gordon Waddell and Dorian

Wharton-Hood. Robert Mansfield resigned

as a non-executive director and Josua

Malherbe has been appointed to the

Board as a non-executive director with

effect from 17 November 2003.

ANNUAL REPORT 2003 31


directors’ report

At the forthcoming Annual General

Meeting, Stephen Joubert, Patrick

Quarmby and Dorian Wharton-Hood retire

by rotation and offer themselves for reelection

in accordance with the Articles of

Association. The Company’s Articles of

Association provide that every director

appointed to the Board during the year

shall automatically retire and seek election

at the next general meeting following

appointment. Accordingly, shareholders

will be asked to elect Josua Malherbe as a

non-executive director.

Biographical details of those directors

seeking re-election and election are set

out on pages 13 to 15.

Directors’ memberships of Board

Committees are set out in the Corporate

Governance Report. Details of Directors’

service contracts and remuneration are

set out in the Remuneration Report.

Details of the Directors' interests in any

Group company can also be found in the

Remuneration Report.

Corporate Governance

A report on Corporate Governance and

compliance with the Combined Code is

set out on pages 34 to 37.

Employee Involvement

The Dimension Data Group seeks to

engage all employees in a shared

commitment to the success of its

business, and keeps them informed

regarding the business environment and

matters of concern to them. The

Corporate Social Responsibility Report

32 DIMENSION DATA

contains details of communication and

consultation with employees.

Dimension Data operates a share option

scheme and offers performance-related

bonus payments in order to encourage the

participation of employees in the success

of the Group. Details of this scheme

appear in the Remuneration Report and

the outstanding options appear in Note

22 to the annual financial statements on

pages 78 to 80.

The Group has a policy that all employees

are entitled to equal opportunities within

its companies globally. Disabled persons

applying for employment are given fair

consideration. Employees who become

disabled whilst employed will be retrained

wherever possible so that they can remain

employed within the Group. Details of the

average number of employees are

contained in Note 6 to the annual financial

statements on page 67.

Authorised Share Capital

The authorised share capital of the

Company is made up of £50,000, divided

into 50,000 deferred shares of £1 each,

and US$30 million, divided into 3 billion

ordinary shares of 1 US cent each.

The holders of the deferred shares have

no right to receive notice of any general

meeting of the Company, nor the right to

attend, speak or vote at such general

meeting. The deferred shares have no

rights to dividends and on a return of

assets in a winding-up, entitle the holder

to the repayment of the amounts paid on

the deferred shares after repayment of the

capital paid up on the ordinary shares

plus the payment of US$10 million per

ordinary share.

Issued Share Capital

As at 30 September 2003, the Company’s

issued share capital was 50,000 deferred

shares of £1 each and 1,341,992,267

ordinary shares of 1 US cent each.

Details of interests of 3% or more in the

issued ordinary share capital of the

Company are shown in Shareholder

Information on page 55.

Reduction in Share Capital

The reduction of share capital detailed in

the 2002 Annual Report and the Notice of

Annual General Meeting became effective

on 20 March 2003. The Financial Review

contains details of the effect thereof in the

current year.

Creditor Payment Policy

Dimension Data Holdings plc is a holding

company and, as such, has no trade

creditors at the year end. It is therefore

not applicable to provide statistics for the

Company as required by the Companies

Act. Group operating companies have no

fixed payment policies but agree in

advance the best possible terms with their

suppliers and the Group is committed to

honouring those terms.

Going Concern

After making due enquiry, the Directors

consider that, as at the date of the

approval of the financial statements, the


Group has adequate resources to

continue to operate for the foreseeable

future. For this reason, they continue to

adopt the going concern basis in

preparing their financial statements.

Corporate Responsibility

Dimension Data’s position on the

environment and on charitable donations

is detailed in the Corporate Social

Responsibility Report. No direct charitable

donations were made to UK residents or

charities. Donations to overseas charities

are detailed in the Corporate Social

Responsibility Report. The Company

made no political donations in the year

under review (2002: nil).

Auditors

On 1 August 2003, Deloitte and Touche,

the Company’s auditors transferred their

business to Deloitte & Touche LLP, a

limited liability partnership incorporated

under the Limited Liability Partnerships

Act 2000. The Company’s consent has

been given to treating the appointment of

Deloitte & Touche as extending to Deloitte

and Touche LLP with effect from 1 August

2003 under the provisions of section 26(5)

of the Companies Act 1989. A resolution

to appoint Deloitte & Touche LLP as the

Group’s auditors and authorising the

Directors to determine their remuneration

will be proposed at the forthcoming

Annual General Meeting.

Company Secretary

The UK company secretary is Mrs JM

Duck and the South African company

secretary is Mrs ML Taylor (details on

page 98).

Annual General Meeting

The notice convening the Annual General

Meeting, together with the proxy form and

notes explaining the various resolutions,

will be mailed to shareholders in due

course.

By Order of the Board

Mrs JM Duck

Secretary

17 November 2003

ANNUAL REPORT 2003 33


corporate governance report

This report contains a summary of how the Board has complied with the

principles set out in the Combined Code.

As the Company has a September 2003

year end, it is required to report on

compliance relating to Section 1 of the

Combined Code issued in June 1998, and

the Company has been in compliance with

this edition of the code throughout the

year, except that Jeremy Ord has held the

combined role of chairman and chief

executive. The Company is working

towards compliance with the provisions of

the Combined Code issued by the

Financial Reporting Council in July 2003,

and this report contains a summary of

how the Board has applied the revised

principles. The Company has been in

compliance with the provisions of the

revised code except where stated below.

The Operational Review and the Financial

Review contain detailed reviews of the

Group’s performance and financial

position. The Board considers these

reports, along with the Chairman’s

Statement and the Directors’ Report, to

reflect accurately the Group’s position and

prospects. The Directors’ responsibility for

the financial statements is described on

page 50.

Board of Directors

During the period, the Board comprised

the executive chairman, three further

executive directors and six non-executive

directors, including Gordon Waddell as

senior independent non-executive director.

Effective 17 November 2003 Robert

Mansfield resigned from the Board and

Josua Malherbe was appointed to the

Board. Josua Malherbe will be standing for

election at the Annual General Meeting.

Gordon Waddell will be continuing as

senior independent non-executive director.

34 DIMENSION DATA

Biographical details for all the directors

can be found on pages 12 to 15.

The Board considers all its present nonexecutive

directors, except David Frankel

and Josua Malherbe, to be fully

independent in accordance with the

definitions under the new Combined Code.

The Board is aware of the guidance

contained in the Combined Code on

situations where the roles of chairman

and chief executive are combined, and is

seeking to separate the positions.

The Board has met five times during the

past year. A table indicating attendance by

directors at Board and Committee

meetings is given at the end of this report.

The non-executive directors have met

independently without executives present

twice during the year, and in addition

communicate telephonically and

electronically on a regular basis.

Board Training and Evaluation

The directors have received training, both

individually, and in facilitated sessions as

a board, on issues such as strategy and

development of the Group’s solutions, as

well as the leadership behaviour required

to support transformation. This initiative

involved an independent board evaluation

and a peer group evaluation of each

director. The independent board

evaluation was carried out by Ian Mycroft

of the UK-based consultancy,

Organisation and People Development

Limited. It is intended to conduct further

evaluations on board performance as a

whole on an annual basis. In addition,

during the period under review, Jeremy

Ord has evaluated the individual

performance of the executive directors

using the performance management and

performance review system which has

been implemented throughout the Group.

Board Operation

The Board is responsible to the

shareholders for the conduct of the

business of the Group, and decides upon

Group strategy. It also reviews operational

performance, approves the Group's

business plans, approves the interim and

annual financial statements, determines

the Group’s authority levels, treasury

policies and risk management policies,

ensures adequate funding, and approves

major investments and the remuneration

of the non-executive directors. A defined

schedule of matters reserved for decision

by the Board has been agreed, and this

schedule has been revised following

revisions to the terms of reference of the

various board committees.

Financial reporting is routinely performed

according to a strict schedule. The nonexecutive

directors are provided with

sufficient information to enable them to

reach independent conclusions on the

matters brought to their attention at board

meetings. In addition to the board

meetings, detailed briefings are given to

the non-executive directors by non-board

members, giving non-executives an

opportunity to question operational

executives directly. Gordon Waddell sits on

the Group’s regional board in Europe and

the UK and Moss Ngoasheng, Rory Scott

and Dorian Wharton-Hood sit on the

South African board, which further

enhances their depth of understanding of

the operations of the Group. Until August


2003 Robert Mansfield sat on the

Datacraft Asia Limited board.

The Board ensures that each director is

provided with appropriate and timely

information in order to exercise their

judgement. All the directors have the

facility to take independent professional

advice at company expense, following a

formal procedure that has been approved

by the Board. They also have access to

the services and advice of the Company

Secretaries in the UK and South Africa.

The Board has appointed five committees

to which it has delegated responsibilities

to allow it to control the activities of the

Company effectively. Each of these

committees operates within defined terms

of reference. The terms of reference of

the audit, remuneration and nomination

committees were revised during the year

under review in line with the

recommendations of the Combined Code.

Copies of the terms of reference for the

audit, nomination and remuneration

committees are available on the

Company’s website www.didata.com.

Executive Committee

The executive committee has

responsibility for the day-to-day running of

the business and the execution of the

Group's strategy. The members of the

executive committee are detailed on page

15. There is a clear division of

responsibilities between the executive

committee and the Board. The executive

directors and the Group Chief Operating

Officer (COO) meet on a weekly basis,

and the COO holds fortnightly meetings

with the other members of the committee.

In addition, quarterly meetings of the full

committee are held.

Audit Committee

Rory Scott (Chairman)

Robert Mansfield

Gordon Waddell

Derek Irish

The Audit Committee is comprised of

independent non-executive directors.

Derek Irish, a chartered accountant who

holds a higher diploma in Income Tax law

and is a senior partner in an independent

accounting practice, attends the meetings

in order to provide independent advice to

the committee. The Committee met four

times last year. The Group’s external and

internal auditors attend the meetings and

have direct access to the Committee to

report the results of work directed by the

Committee as well as any matters of

concern. The Chief Financial Officer and

Group Executive Finance attend the

meetings at the request of the Committee.

Robert Mansfield resigned from the

committee as at 17 November 2003 and a

replacement is being sought by the

Nomination Committee.

The report of the Audit Committee is

contained on page 38.

Remuneration Committee

Rory Scott (Chairman)

Robert Mansfield

Dorian Wharton-Hood

The Remuneration Committee met four

times in the past year. It operates within

defined terms of reference, and

recommends to the Board the

remuneration policies for the Group’s

directors and senior executives, having

considered relevant market norms and

independent advice where appropriate. No

director is involved in determining his own

remuneration. The Committee also grants

share options in terms of the Share

Option Scheme 2000.

Robert Mansfield resigned from the

committee as at 17 November 2003 and

a replacement is being sought by the

Nomination Committee.

The report of the Remuneration

Committee is contained on pages 43 to 49.

Nomination Committee

Gordon Waddell (Chairman)

Robert Mansfield

Jeremy Ord

Dorian Wharton-Hood

The committee meets as necessary, and

has met once during the year under

review. The terms of reference for the

nomination committee were revised during

the period under review. The nomination

committee is responsible for reviewing the

composition of the Board and identifies

and makes recommendations to the Board

regarding the appointment of new

directors. It also satisfies itself that

appropriate succession plans are in place

for the Board and senior management of

the Company, and reviews the

performance of non-executive directors to

ensure that they have devoted sufficient

time to their duties.

Robert Mansfield resigned from the

committee as at 17 November 2003 and a

replacement is being sought by the

Nomination Committee.

ANNUAL REPORT 2003 35


corporate governance report

Treasury Committee

Jeremy Ord

Malcolm Rutherford

Patrick Quarmby

Dorian Wharton-Hood

The Treasury Committee is responsible for

the control of a prudent framework

covering Board policies, best practice,

internal controls and reporting systems for

the management of treasury risks within

the Group’s operation. Scott Gibson, the

Group Executive Finance, and John

Cookson, the Group Treasurer, also sit on

this committee.

Communication with Shareholders

The Group is committed to honest, open

and regular communication to all

stakeholders on both financial and nonfinancial

matters.

The Group reports formally to

shareholders when half and full year

results are announced and issued to the

relevant stock exchanges, shareholders

and media. Executive and senior

management also give presentations to

institutional investors, analysts and the

media over the results period.

Regular stakeholder meetings are held to

update the market on the Group’s

strategies, operations and performance.

Executive and senior management attend

these meetings on a regular basis. All

briefings and meetings are conducted in

line with the Group’s written guidelines to

ensure control over price-sensitive

information and equality of disclosure. In

addition, directors are kept informed of the

views of all stakeholders through regular

briefings from the investor relations team

and Executive Chairman.

36 DIMENSION DATA

Shareholders are invited to attend the

Annual General Meeting and to pose

questions to the Board. All executive and

non-executive directors are expected to

attend this meeting.

Financial and other information about the

Group is contained on its website,

www.didata.com. A copy of the Group’s

annual report is sent to stakeholders and

is posted on a dedicated website,

www.ddar.com.

Internal Control

The Board has overall responsibility for the

Group’s internal controls and for reviewing

their effectiveness. The system of internal

control is designed to manage rather than

eliminate risk to which the Group is

exposed and provides reasonable rather

than absolute assurance against material

misstatement or loss. The main features of

the Group’s system of internal control are

described below.

External audit, internal audit, a value-add

audit function and risk management report

to the Audit Committee. The aim of the

value-add audit is to identify specific areas

where systems can be put in place to

improve controls and enhance

performance and productivity. The reports

provided by these functions assist the

Audit Committee in evaluating and

reporting to the Board on the strategic,

operational and financial controls which

the Group has in place. The Board has

conducted a review of the effectiveness of

the Group’s system of internal controls for

the year and up to the date of approval of

the annual report and accounts.

Risk management

There is in place an ongoing risk

management process for evaluation of the

Group’s business risks and the

identification of controls to manage them.

Risk is assessed with reference to the

business objectives of the Group. Risks

identified by the global risk identification

and assessment programme are reviewed

and monitored, and emerging risks are

reported.

Management in each region are

responsible for monitoring and controlling

risk on an ongoing basis, and for reporting

to the Board any factors which will impact

on the achievement of their business

objectives. A Group Risk Manager has

been appointed from November 2003 to

coordinate and monitor regional activity.

The key business, financial, operational

and compliance risks facing the Group are

reported to the Audit Committee, and

reviewed by the Board. The Board has

formally reviewed this process twice

during the year.

Financial reporting

A comprehensive budgeting process takes

place annually throughout the Group,

culminating in regional budgets that are

reviewed and approved by the Board. The

Chief Financial Officer is responsible for

determining financial policy within the

Group and the Group Chief Operating

Officer is responsible for executing these

financial policies and ensuring compliance

with Group strategy. The Group Chief

Operating Officer is also responsible for

establishing the integrity of forecast data

upon which executive decisions are

based.

Each Group operation reports its activity,

turnover, cash position and forecasts

weekly to the Group executive. Actual

results and cashflows are reviewed

monthly, compared with budget, and


eported to the Group executive. The

Executive Committee considers these

against agreed quarterly and annual

forecasts and the annual budget, and

reports to the Board quarterly. In addition

the Chief Financial Officer gives a detailed

monthly presentation of results to nonexecutives

serving on the Board.

Key controls over business unit risks

include reviews against performance

indicators and exception reporting. Each

business unit’s senior management is

responsible for identifying, evaluating and

managing business risks. There are

channels of communication available to

report significant risks to the Board if

necessary.

Internal audit

The internal audit function is a structured

review process based on risk assessment.

The Audit Committee regularly reviews the

work plan and key findings of the internal

audit process and monitors to ensure that

areas of weakness are addressed. It

assesses compliance with financial and

operational controls and the Group’s

Attendance at meetings

policies and procedures, at a business

unit level in each of the regions where the

Group operates. It also provides

assistance to management in complying

with their risk management

responsibilities.

Quality and integrity of personnel

The Group is committed to aligning its

employees with its interests and values. It

has a published ethical code to which

employees are expected to adhere, and

transgressions are strictly dealt with. The

Group has revised its ethical code, and an

ethical conduct declaration exercise has

been carried out by Datacraft Asia and will

shortly be conducted with the senior

management of all other Group

subsidiaries. The Directors’ Report and

the Corporate Social Responsibility Report

contain information regarding the Group’s

commitment to employees and ethical

practices.

IT systems

The Group’s IT systems continue to be

consolidated, with a focus on globalisation

of common systems. This benefits our

customers and our internal

communication, reporting and knowledge

management. The security of data held on

IT systems remains a priority, as does the

continuous improvement of disaster

recovery systems.

Controls over central functions

Treasury and Corporate Finance are

controlled centrally. Treasury policies are

recorded in writing and reviewed as

necessary by the Treasury Committee.

Both functions report directly to the Board,

and whilst not visited by internal audit in

the period under review, both these

functions will be subject to visits by

internal audit.

Authority and review

The Group has clearly defined levels of

authority for the subsidiary boards and

their directors in making financial and

operational decisions including major

investments, capital expenditure and

contractual engagements with customers

and suppliers. The Group’s internal audit

processes monitor compliance with these

authority levels.

Name Board Audit Committee Remuneration Committee Nomination Committee

JJ Ord 5 n/a n/a 1

MT Rutherford 5 n/a n/a n/a

SM Joubert 5 n/a n/a n/a

PK Quarmby 5 n/a n/a n/a

DA Frankel 4 n/a n/a n/a

RC Mansfield 5 2 3 n/a

MM Ngoasheng 4 n/a n/a n/a

RM Scott 5 3 4 n/a

GH Waddell 5 2 4 1

PD Wharton-Hood 5 n/a n/a 1

D Irish n/a 3 n/a n/a

ANNUAL REPORT 2003 37


audit committee report

The Audit Committee presents a report on its activities during the period.

The Audit Committee

The members of the audit committee for

the period under review were as follows:

Rory Scott (Chairman)

Gordon Waddell

Robert Mansfield

Derek Irish

The audit committee is comprised of

independent non-executives and Derek

Irish who is a senior partner in an

independent accounting practice. The

Committee met four times during the

period under review, once without

management and auditors present. A

table showing attendance at committee

meetings is available on page 37. Of the

committee members, three are qualified

chartered accountants. Biographical

details for all directors can be found on

pages 12 to 15.

The Board of Directors has approved

written terms of reference for the Audit

Committee, and a copy of the terms of

reference are available on the Company’s

website www.didata.com.

The main duties and activities of the

Committee in the period under review can

be summarised as follows:

Internal control

The Committee has reviewed the

effectiveness of the Group’s internal

controls and procedures for identification,

assessment and reporting of risks and

has reported to the Board on the outcome

of this review.

38 DIMENSION DATA

Internal audit

The Committee has appointed

PricewaterhouseCoopers to undertake the

internal audit function for the Group. The

Committee confirms their programme of

work, and reviews their reports. The head

of the internal audit function has direct

access to both the chairman of the Audit

Committee and the Chairman of the

Board. The Committee has met with the

internal auditors twice during the period

under review.

External audit

The Committee reviews performance of

the auditors, and the level of audit service

provided. In the period under review the

Committee has reviewed the scope of the

interim review and year end audit

including the Group materiality level.

Auditor independence is discussed and

confirmed at each meeting. Within the

terms of reference the Committee has

agreed that all types and levels of nonaudit

work must be approved by the

Committee. Details of the split between

audit and non-audit work can be found in

Note 5 of the annual financial statements.

The Committee considers that this policy,

together with the other controls in place

within the Group, are sufficient to ensure

the objectivity and independence of the

auditors. Non-audit work during the period

has comprised tax compliance work,

forensic work and a treasury review.

The Committee has reviewed the auditors’

management letters and the responses by

management, and has met with the

external auditors three times during the

period under review.

Financial statements

The Committee has reviewed the financial

statements for the period, and has

considered matters such as the

consistency of accounting policies,

decisions requiring a major element of

judgement, compliance with accounting

standards, the going concern assumption

and the statement on internal control

systems.

Other matters

A revised ethical code, whistleblowing

policy, and procedures for whistleblowers

will be reviewed by the Committee,

recommended to the Board and

implemented. This policy is intended to

assist individuals who believe they have

discovered serious malpractice or

impropriety to take the appropriate action.

A copy of the revised ethical code and

whistleblowing policy will be made

available on the Company’s website.


corporate social responsibility report

Dimension Data recognises its responsibility toward its employees, society and the environment, and is

committed to conducting its business and reporting according to the highest ethical standards. Dimension Data

has evaluated the key risks related to Corporate Social Responsibility, and considers that the ability to attract

and retain appropriately skilled and motivated staff is key to the Group’s success, and that a shortage of such

talent would be a material risk to the business. The Group acknowledges that its efforts with its employees and

local communities add to its sustainability as a Group, as well as to the sustainability of the communities within

which it operates.

Employees

The Group remains committed to

attracting, retaining, and developing the

highest calibre of employees, to ensure a

culture of high performance. During the

year the Group continued the development

of the ‘DD Way’, a global performancebased

transformation programme which

aligns the Group behind a common vision.

A key element of the programme is to

utilise best practice people management

processes for a global organisation. The

‘DD Way’ will continue as the context

through which the Group drives and

accelerates the alignment of people and

operations as well as the execution of

change.

During 2003 the communication

infrastructure has been consolidated on a

global basis, with all employees receiving

consistent and focused communications.

On-line information including policies and

procedures and other employee-related

information is now available to all

employees. This is enhanced by the

regular production of @Didata, an

employee magazine. The Executive

Chairman and regional CEOs regularly

communicate with employees on matters

of relevance to them, with staff and

branch meetings being held regularly.

The global, web-based employee selfservice

system, internally known as the

People Dimension System, has allowed

for the consistent implementation of a

formal performance management system

across Dimension Data. The performance

management process also includes a

personal development plan to ensure that

performance is effectively managed.

Employees can earn bonuses based on

performance, and many are also offered

target-based options in the Share Option

Scheme. Currently 5,080 employees hold

options in the scheme.

Group companies aim to maintain health

and safety policies in accordance with

best practice and adhere to the regulatory

requirements of the regions in which they

operate. Local labour standards are

adhered to, with most employees working

40 hour weeks unless contractually

agreed otherwise because of the nature

of their employment.

It is Group policy to adhere to local labour

standards and globally accepted human

rights practices. It is Group policy not to

employ underage staff. Freedom of

association is also Group policy on a

global basis, with works councils existing

in some countries where appropriate to

local law and practice.

Skills Development and Training

The Group relies on highly skilled staff to

enable us to deliver a superior standard of

service to our customers. It has an

ongoing commitment to provide high

quality training for staff to ensure they

have up-to-date product/solution

knowledge and strong management and

leadership competencies, as well as to

provide training for continual career

development.

In 2003, US$410 per employee was spent

throughout the Group on training.

The People Dimension System has been

used during 2003 to capture, track and

report on skills across the globe. Having

an on-line system allows the Group to

report accurately on our skills and

certifications, provide timely and accurate

information on skills for tenders/bids,

locate specific skills required for projects,

and allows the identification of any skills

gaps that need to be addressed with

further training and/or certifications. The

Executive Chairman has also initiated a

Talent Management Strategy, which

includes identifying key employees on a

global basis, and fostering their talent for

the benefit of the Group.

During 2003 Dimension Data established

a global corporate university, DDU, with

the aim of accelerating the execution of

our strategy through training and

development of our staff. DDU will ensure

that training and development initiatives

remain focused on the strategic priorities

of the Group. In line with this, four DDU

Centres of Excellence were established

namely: ANS, Sales, Services and

Leadership and Management, under

which all training and development

initiatives fit.

The Sales Centre of Excellence has

focused on two main areas: the building of

our sales management capability and the

development of our customer-facing

employees to enable us to sell our

solutions/services more effectively.

ANNUAL REPORT 2003 39


corporate social responsibility report

Training was preceded by the completion

of a sales skills assessment across all our

regions. This was followed by the rollout of

customised Sales Management, Account

Planning and Solutions Selling training.

The Leadership and Management Centre

of Excellence has developed the Hi-

Performance Leadership (‘HPL’)

programme. This programme was custom

designed for Dimension Data and aims at

developing senior leadership’s

effectiveness in thinking strategically and

acting decisively. The HPL programme will

be delivered by world-class experts in the

fields of leadership and strategy

execution, and has commenced in the UK

and Australian territories.

Strong middle management is seen as

critical to the execution of the strategy

within the business. As a result, a

Management Development Programme

(‘MDP’) has been custom built for

Dimension Data and is being delivered in

partnership with the Manchester Business

School.

Investment was also made in the

development of short, customised

e-learning modules to enable all

employees to better understand the

Group’s vision. These self-paced learning

modules are highly effective and efficient,

allowing for a wide audience to be

reached and for the user to learn in

his/her own time.

Communities

Dimension Data is committed to the

principle of corporate citizenship. As a

Group, Dimension Data supports

educational initiatives, including

development in sport, with a particular

40 DIMENSION DATA

focus on information and communication

technology (‘ICT’) skills development.

Group companies also participate in a

broad range of activities in the

communities in which they operate,

primarily using their ICT expertise to

leverage the assistance they provide.

In South Africa, skills development

remains the primary focus of community

and charitable initiatives. During 2003

these initiatives have been consolidated

into the DD Bridge programme: a multifaceted,

carefully structured programme.

The programme reaches into previously

disadvantaged communities at the earliest

possible age, and, through a tiered

approach called the ‘Ladder of Learning’,

seeks to make individuals from those

communities eligible to lead the ICT

industry at the highest level. The Ladder

of Learning is divided into two parts:

projects affecting employees and

prospective employees, and those external

to Dimension Data. It starts at school

level, and moves through to tertiary

education, internal learnership

programmes and then to skills

development within Dimension Data.

Dimension Data (South Africa) (Pty) Ltd

(‘DDSA’) supports the Ndzululwazi Senior

Secondary School in the Eastern Cape,

and the Diepsloot Combined School in the

Diepsloot township north of

Johannesburg. It contributed over

US$20,000 to providing and upgrading

sporting and library facilities at the

Diepsloot school, and more than 100

Dimension Data volunteers have been

involved in activities at the school, ranging

from catalogue services in the library to

provision of manual labour for the

upgrading of sporting facilities.

Our Saturday School is run from our

offices in Midrand, South Africa. It was

opened in 1995 in an attempt to expose

youngsters from disadvantaged

backgrounds to computing. The

curriculum has now been extended to

include other subjects, with an emphasis

on preparing promising pupils for

university or college. The School has a

100% pass rate and has seen several

students earn bursaries and go on to

perform well at tertiary level. Once they

have completed their education, students

are encouraged to return to Dimension

Data for employment. DDSA has

contributed over US$10,000 in cash to the

Saturday School. Dimension Data also

provides the venue, administration

functions and other facilities for the

Saturday School free of charge. The

principal of the School and many lecturers

are Dimension Data volunteers.

At a tertiary level Dimension Data

continued its involvement as the IT

Strategic Partner for CIDA City Campus,

as detailed in last year’s Report.

Dimension Data has contributed

US$127,000 in cash and a further

US$350,000 in kind to CIDA during the

2003 financial year. Contributions in cash

have been used mainly to provide

information technology infrastructure and

services, enabling Internet and personal

computer access for CIDA students and

staff. Contributions in kind are related to

developing the information technology

curriculum and providing lecturers in this

area, which is a core subject for CIDA

students throughout each of their four

years of study. Dimension Data also

provides IT training for CIDA staff to

ensure that they can sustain their own

environment.


During 2003 DDSA made a further

US$70,000 contribution to the South

African Paralympic Organisation to enable

them to assist disabled athletes to

compete at a national and international

level. DDSA also made a donation of

US$7,000 to the St. Raphael AIDS

Orphanage in the Eastern Cape, to enable

them to extend their services to orphans

with or affected by AIDS in one of the

poorest areas in South Africa. This

contribution is part of a three year

commitment to supporting the AIDS

orphanage and coordinates with an

internal communication programme

related to HIV/AIDS within DDSA.

As part of Dimension Data’s relationship

with Manchester United, three Manchester

United Soccer School coaches recently

visited South Africa, giving three days of

their time in order to coach players from

four township schools, including Diepsloot

Combined School, a development team

from a local club sponsored by DDSA, and

a provincial team which is coached by a

Dimension Data staff member.

Dimension Data also supported a

University of Sussex initiative by making

video conferencing facilities available to

schools in the UK and South Africa for a

video conference between pupils in those

countries on the subject of citizenship and

sustainable development.

Dimension Data Australia has remained

committed to the charities it regularly

supports, donating about US$55,000 in

2003. It has provided an upgrade of the IT

infrastructure throughout Australia for the

‘Starlight Foundation’, a non-profit

organisation which is dedicated to

brightening the lives of seriously ill and

hospitalised children and their families. In

addition, it raised US$27,000 for ‘Putting

IT Back’. It is also currently supporting

‘Social Ventures’, an organisation that

provides mentoring and financing for

Australian-based social ventures.

Environment

Dimension Data recognises that its

business activities have both direct and

indirect environmental impacts. The

Group’s environmental policy is as follows:

‘Being office-based by nature, Dimension

Data has very low primary and direct

impacts on the environment. The Group is

mindful of the necessity to be efficient in

its consumption of energy and strives to

exceed wherever possible the statutory

requirements which apply to the Group in

the countries of operation. The recycling

of waste materials and the reduction of

non-renewable resources, as well as the

environmentally friendly disposal of any

hazardous resources employed by the

Group, is encouraged. When developing

systems, the environmental concerns and

statutory obligations of customers are

reflected in the solutions we provide.

Dimension Data’s Group companies

recycle paper, boxes, toner cartridges,

save electricity, and dispose of old

computer equipment to charities or in an

ecologically sound fashion. Dimension

Data Australia annually donates the

provision of IT services and support to

‘Clean Up Australia Day’, the largest

community participation event in the

country.

Given the current industry pressures in

the IT sector in which the Group operates,

and its low environmental impact, the

development of further environmental

initiatives has not been a priority in 2003.

However, management intends authorising

a benchmarking exercise at its main

centres, in order to establish what key

areas should be included within the scope

of future environmental initiatives.

Ethical

The Dimension Data Group embraces the

highest standards in its business activities.

The Group operates in accordance with

an ethical code which is distributed to

employees via the corporate intranet.

During the period under review the ethical

policy has been revised further and an

ethical conduct declaration exercise has

been carried out in the Datacraft Asia

subsidiary, and will be carried out within

the other subsidiaries shortly. A copy of

the revised code is available on the

Company’s website www.didata.com.

The Group is non-political. It does not

make contributions to political parties or

allow its assets and services to be used in

any way which favours any particular

political grouping, other than in the

provision of its normal products and

services, under its usual terms and

conditions of sale.

ANNUAL REPORT 2003 41


corporate social responsibility report

South African Employment Equity

Report

DDSA believes that like many other South

African companies it has a moral

imperative to address the inequalities of

the past through a concerted and ongoing

public-private sector partnership. DDSA is

addressing Black Economic

Empowerment (‘BEE’) by means of a

multifaceted strategy in a manner that is

consistent with the South African

government’s vision. This also addresses

the needs of our shareholders to invest in

a company that provides sustainable

superior returns, thereby achieving a

better strategic positioning for DDSA, and

enabling it to deliver improved returns to

its shareholders.

Shareholding at equity level

DDSA has invested in black majority

owned companies, having a 49% stake in

both Plessey and Choice Technologies,

and a further 39% investment in blackowned

M-IT through their subsidiary

Protocol. In addition US$560,000 in

shareholder loans has enabled the

establishment and growth of their

business. In all cases, DDSA has provided

shareholder funding, managerial and

operational assistance, skills transfer and

access to clients. Additionally, a significant

stake in DDSA has been made available

and a task team is actively seeking

suitable equity partners.

42 DIMENSION DATA

Operational and management control

Operational management participation is

at the heart of DDSA’s BEE strategy. The

company is already working towards

attaining a set target of 40% previously

disadvantaged executive directors by

2006. Vusi Dlamini, HR director at DDSA,

has been tasked with accelerating the

skills level of previously disadvantaged

employees at DDSA.

Affirmative procurement

DDSA supports a government policy to

establish and support a competitive,

sustainable and viable base of suppliers

from previously disadvantaged

communities. Office supplies, print bureau,

recycling, pest control, waste disposal and

security services as well as building, plant

and vehicle maintenance have been

subcontracted to BEE companies. DDSA

has put in place SME development

through affirmative procurement and

subcontracting to 15 black-owned SMEs,

including the recent appointment of

Seekers Lesedi to handle the Group’s

substantial travel requirements. The

company has furthermore committed itself

to at least 30% of non-stock purchases

through black-owned companies by the

2004 financial year.

Entrepreneurship formation

DDSA encourages entrepreneurship

formation by leveraging its skills and

contacts within the industry, to the

advantage of an empowerment partner, as

well as offering employees an opportunity

to run their own businesses. It has formed

an empowerment deal with call centre

specialist Kwezi, in terms of which DDSA

will provide skills transfer and the two

companies will source business together.

A process is underway to identify and

promote similar partnerships with other

black-owned companies. It has also

initiated an owner-driver programme which

sees DDSA arranging everything drivers

need to manage their own outputs and

gains, and thus learning to run their own

businesses.

Employment equity

DDSA has to date met its transformation

targets at all levels within the organisation

as submitted to the Department of Labour

every year since 1998. It has formed an

Empowerment Equity Committee to drive

empowerment, with the mandate to

implement transformation at every level,

and has provided the executive

sponsorship to back up this commitment.

Skills development

In 2003 previously disadvantaged

managers made up 45% of our

management development programme

candidates. Executive commitment to the

MDP ensures that the programme goes

beyond affirmative action to real

empowerment and meaningful

advancement.


emuneration report

The Remuneration Committee presents its Remuneration Report, which

was approved by the Board of Directors on 17 November 2003.

Introduction

This report has been prepared in

accordance with the Directors'

Remuneration Report Regulations 2002.

The report also meets the relevant

requirements of the Listing Rules of the

Financial Services Authority and describes

how the Board has applied the Principles

of Good Governance relating to Directors'

remuneration. As required by the

Regulations, a resolution to approve the

report will be proposed at the Annual

General Meeting of the Company at which

the financial statements will be approved.

The Regulations require the auditors to

report to the Company's members on

certain parts of the Directors'

Remuneration Report and to state

whether in their opinion those parts of the

report have been properly prepared in

accordance with the Companies Act 1985

(as amended by the Regulations). The

report has therefore been divided into

separate sections for audited and

unaudited information.

Unaudited Information

The Remuneration Committee

The Remuneration Committee members

for the period under review were as

follows:

Rory Scott (Chairman)

Robert Mansfield

Dorian Wharton-Hood

All the members of the Remuneration

Committee are considered by the

Company to be independent nonexecutives

and have no conflicts of

interest in considering matters relating to

remuneration of executives. The

Committee met four times during the

period under review. A table showing

attendance at committee meetings is

available on page 37.

A copy of the full terms of reference is

available on the Company’s website

www.didata.com.

The remuneration of non-executive

directors is a matter for the executive

members of the Board. No director or

manager is involved in any decisions as to

his or her own remuneration.

During the period under review the

Committee took independent advice from

New Bridge Street Consultants in relation

to the market practice on executive

compensation to help it achieve its

objectives. New Bridge Street Consultants

were appointed by the Committee and

have no other contracts or connections

with the Group. Details of the relationship

with New Bridge Street Consultants are

available on the Company’s website

www.didata.com.

The Group Executive Human Resources

and the Executive Chairman provide

information on current remuneration and

performance of directors and senior

management, and are available to the

committee to answer any questions that

may arise. The Committee consults with

the Group Executive Human Resources

and the Executive Chairman on the

Committee’s proposals for remuneration.

The Company Secretary’s office provides

assistance and advice to the Remuneration

Committee with respect to governance, the

operation of the Share Option Scheme

and regulatory compliance.

Statement of Policy on Directors’

Remuneration

The Committee aims to provide

remuneration packages that meet the

needs of a global IT services business.

Such a business depends on the

attraction, retention and motivation of high

calibre executives who can be entrusted

with growing and enhancing the value of

the Group.

In formulating the policy for the period

ending 30 September 2004 the

Remuneration Committee has considered

the following principles:

▲ All remuneration arrangements will be

designed to support the Group’s

business strategy in line with best

practice standards;

▲ Setting levels of total reward that will be

competitive within the relevant market

and location;

▲ Incentive schemes will reward the

achievement of predetermined Group

targets and individual performance

against specific key performance

indicators; and

▲ At an on-target level, the proportion of

executive remuneration that is

performance linked will be not less than

45% of total remuneration, including

grants under any long term incentive

schemes valued according to the

‘Black-Scholes’ model.

The policy relating to each component of

remuneration is summarised below:

Base Salary

The base salary of the executive directors

is subject to annual review and is set with

reference to external market data, relating

to similar companies based in South

ANNUAL REPORT 2003 43


emuneration report

Africa and the UK and taking into account

the primary location of the directors

concerned. Consideration is given to the

size, market sector, business complexity

and international reach of the comparator

companies. Individual performance and

increased responsibilities following on

from the restructuring of the management

of the Group are also taken into

consideration.

Annual Bonus Plan

Each of the executive directors is entitled

to participate in an annual bonus scheme.

For 2003/04, the bonus payable is divided

into two sections; an amount determined

by common Group financial performance

targets related to net profit, earnings per

share and generation of cash, together

with an amount related to the achievement

of personal key performance indicators as

set in accordance with the Group’s

performance management system. In

addition to the above criteria no

performance bonus is payable to directors

unless the Group as a whole achieves

profitability at a level determined by the

Committee. The upper limit for the annual

bonus plan for directors is 100% of their

basic salary.

For the financial year 2002/03, the

Remuneration Committee has received

assessments of the performance of each

executive director relative to their agreed

target. However, as the Group as a whole

did not meet the overall profitability

criteria, the Remuneration Committee

determined that regardless of individual

performance no bonuses were due to be

paid. (2002 Bonus: nil).

Long Term Incentives

All the executive directors are entitled to

44 DIMENSION DATA

participate in the Share Option Scheme

2000, subject to the approval of grants by

the Remuneration Committee. Any future

grants to executive directors under this

scheme would be subject to challenging

performance conditions. In order for any

options granted to be exercisable the

executive directors would have to satisfy

personal and business performance

criteria. The performance criteria would

relate to the personal key performance

indicators set according to the Group’s

performance management system. The

business performance criteria would be

cash generation, earnings per share and

net profit before tax targets which would

be required to be achieved.

These criteria have been chosen to

ensure that potential awards to executives

are linked to the performance, profitability

and sustainability of the business.

The Committee is currently reviewing long

term incentives. Following this review, it is

proposed that shareholder approval will be

sought for new long term incentives in

general meeting. Any such incentives will

also be subject to stringent performance

criteria, details of which have not yet been

determined, but which will be presented to

shareholders when any scheme is

submitted for approval.

Pensions and Other Benefits

Pensions and other benefits such as life

insurance benefits for executive directors

reflect the practice in the countries in

which they are primarily resident. The

executive directors each received life

insurance benefit, disability insurance

benefit and medical cover. The cost to the

company is shown in the table on page

45. Contributions are also made for the

executive directors in the Group’s

provident fund, which is a defined

contribution pension scheme, in the

amounts as set out on page 45. No other

benefits are payable to the executive

directors.

Non-Executive Directors Fees

The executive directors determine the

remuneration of the non-executive

directors annually. Consideration is given

to fees payable to non-executive directors

for comparable companies. Additional fees

are paid to committee members and

chairmen of Board committees to take

account of the additional work involved.

Non-executive directors are not eligible to

participate in the Company’s Share Option

Scheme. It is not proposed to review the

non-executive directors fees in 2004.

Service Contracts and External

Appointments

All the executive directors have identical

service contracts. They were all entered

into on 19 July 2000 and were amended

on 4 December 2001. All executive

contracts are rolling contracts, and contain

a three month notice period. On

termination, the executive director will be

entitled to payments equal to 12 months’

salary plus on-target bonus.

All of the non-executive directors currently

operate under letters of appointment

which can be terminated upon agreement

with no notice period required.

Executive directors are not permitted to

retain fees paid to them in relation to

external appointments.


Audited Information

Directors’ Remuneration

Provident Life Disability

Directors’ Basic (Pension) insurance insurance Medical 2003 2002

fees salary fund benefit benefit aid Total Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

DA Frankel 10 - - - - - 10 10

SM Joubert - 292 8 3 2 5 310 266

RC Mansfield 56 - - - - - 56 49

MM Ngoasheng 10 - - - - - 10 -

JJ Ord - 645 30 8 3 5 691 660

PK Quarmby - 340* 10 3 2 5 360 286

MT Rutherford - 375 25 4 2 5 411 359

RM Scott 81 - - - - - 81 78

GH Waddell 64 - - - - - 64 45

PD Wharton-Hood 60 - - - - - 60 60

281 1,652 73 18 9 20 2,053 1,813

*An increase of US$25,000 is included in this amount for the additional responsibility as Chairman of Datacraft Asia following his

appointment to this role.

No performance bonuses were paid to Directors in the 2003 or 2002 financial years.

ANNUAL REPORT 2003 45


emuneration report

Details of Directors’ Share Options in the Relevant Financial Year

SA rand options (the market price of all SA rand denominated options at the year end was below the option exercise price)

46 DIMENSION DATA

Opening Closing

Balance Balance Performance

Date Option 30 September 30 September Share Price conditions

Offered 2002 2003 (SA rand) Expiry Date met

JJ Ord 10/01/1998 1,625,000 1,625,000 22.00 10/01/2008 Yes

17/05/1999 1,360,000 1,360,000 24.00 17/05/2009 Yes

10/01/1999 2,222,222 2,222,222 24.30 10/01/2009 Yes

MT Rutherford 10/01/1998 636,363 636,363 22.00 10/01/2008 Yes

17/05/1999 760,000 760,000 24.00 17/05/2009 Yes

10/01/1999 864,198 864,198 24.30 10/01/2009 Yes

PK Quarmby 10/01/1998 604,545 604,545 22.00 10/01/2008 Yes

17/05/1999 725,000 725,000 24.00 17/05/2009 Yes

10/01/1999 766,255 766,255 24.30 10/01/2009 Yes

SM Joubert 10/01/1998 811,363 811,363 22.00 10/01/2008 Yes

17/05/1999 625,000 625,000 24.00 17/05/2009 Yes

10/01/1999 662,551 662,551 24.30 10/01/2009 Yes


Sterling options (the market price of all Sterling denominated options at the year end was above the option exercise price)

Opening Closing

Balance Balance Performance

Date Option 30 September 30 September Share Price conditions

Offered 2002 2003 (Sterling) Expiry Date met

JJ Ord 21/11/2002 - 1,700,000 0.25 21/11/2012 No

MT Rutherford 21/11/2002 - 700,000 0.25 21/11/2012 No

PK Quarmby 21/11/2002 - 700,000 0.25 21/11/2012 No

SM Joubert 21/11/2002 - 700,000 0.25 21/11/2012 No

No share options were exercised during the year.

For the options granted on 21 November 2002 to be exercisable each of the executive directors must satisfy personal and business

performance criteria. The personal performance criteria relate to the personal key performance indicators set according to the Group’s

performance management system. Payment is dependent on 100% achievement of the business criteria and a minimum of 18 out of 25

score on the personal key performance criteria. The business performance criteria are cash generation, earnings per share and net profit

before interest and tax targets which are to be achieved over the financial year to 30 September 2004. All targets are challenging and

stretching and will ensure that potential rewards to executives are linked to performance of the business and not simply an inflationary

stock market environment.

The Company’s share price at 30 September 2003 was 26 UK pence and 301 SA cents. The high and low market prices of the

Company’s shares during the year are shown below. Further details of share prices are shown on page 54.

Sterling SA rand

High 27 UK pence 311 SA cents

Low 24.25 UK pence 298 SA cents

ANNUAL REPORT 2003 47


emuneration report

Directors’ Interests in Ordinary Shares

Details of the Directors’ beneficial and non-beneficial shareholdings in the Company are shown below.

Directors shareholdings are unchanged as at 17 November 2003.

Other than the shareholdings listed above, the Directors hold no interests in other Group companies.

48 DIMENSION DATA

Non-Beneficial Beneficial Total 2003 Total 2002

DA Frankel 1,412,817 634,507 2,047,324 2,047,324

SM Joubert - 163,155 163,155 163,155

RC Mansfield - 727 727 727

MM Ngoasheng - - - -

JJ Ord - 10,281,858 10,281,858 10,281,858

PK Quarmby - 394,625 394,625 394,625

MT Rutherford - 4,384,028 4,384,028 4,384,028

RM Scott 481,830 - 481,830 481,830

GH Waddell 7,581 75,000 82,581 82,581

PD Wharton-Hood - 58,188 58,188 33,188


Long Term Performance

In line with the Directors’ Remuneration Report Regulations 2002 the graph below shows Dimension Data’s total shareholder return

between listing on the London Stock Exchange on 19 July 2000 and 30 September 2003, together with a comparator index.

120

100

80

60

40

20

Dimension Data Holdings

This index was chosen as the Company has been a constituent since listing.

By order of the Board

RM Scott

Chairman of the Remuneration Committee

17 November 2003

Total shareholder return

0

30 Sep 99 30 Sep 00 30 Sep 01 30 Sep 02 30 Sep 03

FTSE Software & Computer Services Index

This graph shows the value, by 30 September 2003, of £100 invested in Dimension Data Holdings plc on 31 July 2000 compared

with the value of £100 invested in the FTSE Software and Computer Services Index. The other values plotted are the values at

intervening financial year ends.

ANNUAL REPORT 2003 49


statement of directors’ responsibilities

United Kingdom company law requires the

Directors to prepare financial statements

for each financial year which give a true

and fair view of the state of affairs of the

Company and the Group as at the end of

the financial year and of the profit or loss

of the Group for that period. In preparing

those financial statements, the Directors

are required to:

▲ select suitable accounting policies and

then apply them consistently;

▲ make judgements and estimates that

are reasonable and prudent; and

▲ state whether applicable accounting

standards have been followed.

The Directors are responsible for keeping

proper accounting records which disclose

with reasonable accuracy at any time the

financial position of the Company and the

Group and to enable them to ensure that

the financial statements comply with the

Companies Act 1985. They are also

responsible for the system of internal

control and for safeguarding the assets of

the Company and the Group and hence

for taking reasonable steps for the

prevention and detection of fraud and

other irregularities.

50 DIMENSION DATA


seven-year review

for the year ended 30 September

2003 2002 2001 2000 1999 1998 1997

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Turnover

- Continuing operations 2,014,795 2,120,562 2,123,282 1,594,190 960,378 260,906 204,158

- Acquisitions - - 278,221 348,386 176,885 465,264 64,165

Group turnover 2,014,795 2,120,562 2,401,503 1,942,576 1,137,263 726,170 268,323

- Joint ventures - - - - 31,584 61,939 42,384

- Associates 85,464 66,769 58,755 33,922 38,280 3,050 71,390

Total turnover 2,100,259 2,187,331 2,460,258 1,976,498 1,207,127 791,159 382,097

Operating (loss)/profit before goodwill amortisation, impairment and exceptional items

- Continuing operations (14,886) 40,962 170,011 182,460 100,651 41,537 24,952

- Acquisitions - - 5,959 27,890 28,366 29,402 7,253

Group operating (loss)/profit (14,886) 40,962 175,970 210,350 129,017 70,939 32,205

- Share of operating profit in joint ventures - - - - 492 5,523 4,901

- Share of operating (loss)/profit in associates 5,874 4,464 4,889 1,999 3,854 (1,315) 1,695

Total (9,012) 45,426 180,859 212,349 133,363 75,147 38,801

(Loss)/earnings attributable to shareholders

before goodwill amortisation, impairment

and exceptional items (36,265) 30,100 163,804 143,838 80,482 49,072 29,889

Basic (loss)/earnings per share before

goodwill amortisation and

exceptional items (US cents) (2.7) 2.3 13.0 16.1 11.9 8.7 6.4

Weighted average number of

ordinary shares ('000) 1,341,618 1,299,075 1,255,235 895,008 675,369 561,681 465,793

Cash on hand (including short term

investments) 385,691 415,352 920,080 1,711,426 313,376 135,910 58,294

ANNUAL REPORT 2003 51


seven-year review

Percent

Percent

Percent

Percent

30

20

10

52 DIMENSION DATA

0

30

20

10

0

30

20

10

0

30

20

10

0

Share of Turnover by Location – 2003

18.2%

17.8%

16.4%

22.8%

18.9%

17.0%

19.0%

15.1%

10.3%

Share of Turnover by Location – 2001

10.2%

17.2%

Africa Asia Australia EU UK USA

Share of Turnover by Location – 2002

13.8%

19.1%

17.2%

17.0%

9.1%

23.8%

Africa Asia Australia EU UK USA

17.1%

Africa Asia Australia EU UK USA

Share of Turnover by Location – 2000

21.6%

24.4%

21.2%

10.3%

16.1%

6.4%

Africa Asia Australia EU UK USA

Percent

Percent

Percent

Percent

Share of Operating Profit by Location* – 2003

80

40

0

(40)

(80)

Share of Operating Profit by Location* – 2002

40

20

0

(20)

Share of Operating Profit by Location* – 2001

40

30

20

10

0

50

40

30

20

10

0

26.8%

30.6%

34.0%

25.9%

24.5%

15.6%

8.6%

28.5%

12.9%

13.2%

Africa Asia Australia EU UK USA

13.6%

(13.8%)

6.4%

Africa Asia Australia EU UK USA

Share of Operating Profit by Location* – 2000

40.7%

10.8%

22.1%

61.5%

10.7%

30.8%

7.8%

54.5%

Africa Asia Australia EU UK USA

14.3%

(84.4%)

4.4%

Africa Asia Australia EU UK USA


Percent

Percent

Percent

40

30

20

10

0

40

30

20

10

0

100

80

60

40

20

0

Share of Turnover by Location – 1999

32.8%

0

Africa Asia Australia UK Africa Asia Australia UK

35.7%

Share of Turnover by Location – 1997

87.6%

24.1%

28.0%

28.6%

Share of Turnover by Location – 1998

30.1%

12.4%

Africa UK

14.5%

6.2%

Africa Asia Australia UK

Percent

Percent

Percent

Share of Operating Profit by Location* – 1999

60

40

20

Share of Operating Profit by Location* – 1998

80

60

40

20

0

Share of Operating Profit by Location* – 1997

100

80

60

40

20

0

52.2%

62.6%

86.4%

21.7%

16.2%

11.4%

11.8%

13.6%

Africa UK

14.7%

9.4%

Africa Asia Australia UK

*Operating profit before goodwill amortisation, impairment and exceptional items.

ANNUAL REPORT 2003 53


seven-year review

Share price statistics

54 DIMENSION DATA

2003 2002 2001 2000 1999 1998 1997

JSE Securities Exchange (SA cents per share)

- Closing 301 280 930 6 680 2 385 2 390 1 950

- High 311 1 665 6 950 7 000 3 140 4 100 2 050

- Low 298 252 794 2 430 1 990 1 800 904

Number of shares in issue ('000) 1,341,992 1,299,477 1,298,812 1,158,090 686,862 567,532 474,272

London Stock Exchange (UK pence per share)*

- Closing 26 16 70 627 N/A N/A N/A

- High 27 118 663 1 000 N/A N/A N/A

- Low 24.25 13.75 67 542 N/A N/A N/A

Number of shares in issue ('000) 1,341,992 1,299,477 1,298,812 1,158,090 N/A N/A N/A

Market capitalisation at year end

JSE Securities Exchange (R m) 4,039 3,639 12,079 77,360 16,381 13,564 9,248

London Stock Exchange (£ m) 349 208 909 7,261 N/A N/A N/A

($ m) 582 324 1,335 10,631 N/A N/A N/A

* As conditional trading in ordinary shares commenced on 19 July 2000, the high and low prices for the year 2000 were measured over the

period from 19 July 2000 to year end.

The statistics above relate to Dimension Data Holdings Ltd until 28 July 2000 and thereafter relate to Dimension Data Holdings plc.


shareholder information

Shareholders’ Diary

Financial year end 30 September

Profit announcement November 2003

Annual Report

Interim profit

Published

December 2003

announcement May 2004

Dividend Policy

As stated in the Directors’ Report, the

Directors currently anticipate that all the

available cash generated by the Group’s

business will be invested in the continued

growth of the Group, and will not declare

a dividend for the financial year ended 30

September 2003.

Analysis of Ordinary Shareholders at 30 September 2003

Size of shareholding Number of Number of Percentage of

shareholders shares issued capital

1 - 1,000 6,120 1,219,695 0.09

1,001 - 5,000 1,142 2,627,695 0.19

5,001 - 10,000 243 1,829,603 0.14

10,001 - 25,000 175 2,824,473 0.21

25,001 - 50,000 84 3,050,153 0.23

50,001 - 100,000 56 4,137,266 0.31

100,001 - 250,000 91 14,695,276 1.09

250,001 - 500,000 85 30,817,601 2.30

500,001 - 1,000,000 67 46,947,316 3.50

Over 1,000,000 127 1,233,843,189 91.94

Total 8,190 1,341,992,267 100.00%

Substantial Interests

Corporate Website

This report and other information on the

Group’s activities and financial information

is available on the website at

www.didata.com.

As at 30 September 2003 the Directors are aware of the following interests in 3% or more of the issued ordinary share capital of the

Company:

Shareholder Number of Percentage of

shares issued capital

UBS Global Asset Management 102,432,411 7.63

Sanlam Investment Managers 83,490,852 6.22

Fidelity Investment Services Ltd 74,059,806 5.52

Coronation Asset Management 70,859,878 5.28

Barclays Global Investors 63,137,685 4.70

Stanlib Ltd 48,186,816 3.59

Legal and General Investment Management Ltd 46,968,615 3.50

Allan Gray Ltd 43,356,489 3.23

Genesis Investment Management Ltd 42,395,917 3.16

J P Morgan Fleming Asset Management 40,720,143 3.03

ANNUAL REPORT 2003 55


annual financial statements


annual financial statements

for the year ended 30 September 2003

58 DIMENSION DATA

Consolidated Profit and Loss Account

Note 2003 2003 2003 2002

$'000 $'000 $'000 $'000

Pre- Exceptional Total

exceptional items

(Note 7)

Turnover

Group turnover 3,4 2,014,795 - 2,014,795 2,120,562

Associates 85,464 - 85,464 66,769

Total turnover 3 2,100,259 - 2,100,259 2,187,331

Operating (loss)/profit before goodwill amortisation,

impairment and exceptional items 3 (14,886) - (14,886) 40,962

Exceptional operating costs - (23,166) (23,166) (60,251)

(14,886) (23,166) (38,052) (19,289)

Goodwill amortisation (344,415) - (344,415) (719,949)

Goodwill and investment impairment - (15,297) (15,297) (1,805,705)

Group operating loss 4,5 (359,301) (38,463) (397,764) (2,544,943)

Share of operating profit in associates 5,874 - 5,874 4,464

Goodwill amortisation, impairment and provisions - associates (1,724) - (1,724) (43,142)

Total operating loss 3 (355,151) (38,463) (393,614) (2,583,621)

(Loss)/profit on sale of fixed assets and investments - (7,297) (7,297) 366

Loss on ordinary activities before interest (355,151) (45,760) (400,911) (2,583,255)

Investment income 8 3,634 - 3,634 1,340

Net interest (payable)/receivable 9 (1,369) - (1,369) 2,604

Loss on ordinary activities before taxation (352,886) (45,760) (398,646) (2,579,311)

Tax on loss on ordinary activities 10 (27,737) 2,317 (25,420) (11,111)

Loss on ordinary activities after taxation (380,623) (43,443) (424,066) (2,590,422)

Equity minority interests (1,781) 5,556 3,775 6,532

Loss for the year (382,404) (37,887) (420,291) (2,583,890)

(Loss)/earnings per ordinary share US cents US cents

Basic before goodwill amortisation and exceptional items 11 (2.7) 2.3

Basic and diluted 11 (31.3) (198.9)

All amounts included above relate to continuing operations.


as at 30 September 2003

Consolidated Balance Sheet

Note 2003 2002

$'000 $'000

Fixed assets

Intangible assets 12 - 342,439

Tangible assets 13 99,924 105,380

Investments in associates 14 39,067 26,016

Other investments 14 33,355 30,343

Current assets

172,346 504,178

Stock 15 88,581 99,100

Debtors 16 503,890 565,236

Short term investments 17, 24 27,906 42,786

Cash at bank and in hand 24 357,785 372,566

978,162 1,079,688

Creditors: amounts falling due within one year 18 (583,128) (737,026)

Net current assets 395,034 342,662

Total assets less current liabilities 567,380 846,840

Creditors: amounts falling due after more than one year 19 (129,372) (17,045)

Provisions for liabilities and charges 21 (28,355) (88,223)

Equity minority interests (99,052) (102,259)

Total net assets 310,601 639,313

Capital and reserves

Called up share capital 22 13,495 13,070

Share premium account 100,278 4,766,332

Other reserves 258,249 202,996

Profit and loss account (61,421) (4,343,085)

Equity shareholders’ funds 310,601 639,313

The financial statements were approved by the Board of Directors on 17 November 2003.

Jeremy Ord Malcolm Rutherford

Executive Chairman Chief Financial Officer

ANNUAL REPORT 2003 59


annual financial statements

for the year ended 30 September 2003

60 DIMENSION DATA

Consolidated Cash Flow Statement

Note 2003 2002

$'000 $'000

Group operating loss (397,764) (2,544,943)

Depreciation 48,351 48,277

Goodwill amortisation and impairment and investment impairment 359,712 2,525,654

Loss on sale of tangible fixed assets 7,702 8,956

Decrease in stock 9,087 3,411

Decrease in debtors 64,499 169,754

Decrease in creditors (48,930) (184,483)

Other non-cash items - asset impairments 8,504 2,326

Net cash inflow from operating activities 51,161 28,952

Returns on investments and servicing of finance 23 8,843 5,156

Taxation 23 (13,401) (34,134)

Capital expenditure and financial investment 23 (45,067) (68,948)

Acquisitions and disposals 23 (76,371) (173,516)

Cash outflow before use of liquid resources and financing (74,835) (242,490)

Management of liquid resources 23 15,475 (20,884)

Financing 23 (5,178) (217,358)

Decrease in cash in the year (64,538) (480,732)

Reconciliation of net cash flow to movement in net cash (Note 24)

Decrease in cash in the year (64,538) (480,732)

Cash inflow from increase in debt (100,000) (17,045)

Cash outflow from decrease in debt 101,367 234,480

Cash (inflow)/outflow from (decrease)/increase in liquid resources (15,475) 20,884

Change in net cash resulting from cash flows (78,646) (242,413)

Non-cash movement in debt - interest accrued on convertible bonds (4,028) (1,498)

Translation differences 43,645 (25,336)

Movement in net cash for the year (39,029) (269,247)

Net cash at beginning of the year 294,772 564,019

Net cash at end of the year 255,743 294,772

Analysis of net cash (Note 24)

Cash at bank and in hand 357,785 372,566

Bank overdraft (576) (2,168)

Debt due within one year - (101,367)

Debt due within two to five years (25,344) -

Debt due more than five years (104,028) (17,045)

Short term investments 27,906 42,786

Total 255,743 294,772


for the year ended 30 September 2003

Issued Share

share premium Special Other Profit and

capital account reserve reserves loss account Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 October 2002 13,070 4,766,332 - 202,996 (4,343,085) 639,313

Capital reduction - (4,676,575) 342,439 - 4,334,136 -

Goodwill amortisation applied - - (342,439) - 342,439 -

Loss retained for the year - - - - (420,291) (420,291)

Currency adjustments - - - 80,492 - 80,492

Shares issued 425 10,662 - - - 11,087

Share issue expenses - (141) - - 141 -

Transfers - - - (25,239) 25,239 -

Balance at 30 September 2003 13,495 100,278 - 258,249 (61,421) 310,601

for the year ended 30 September 2003

Consolidated Statement of Movement of Reserves and Shareholders’ Funds

The capital reduction became effective on 20 March 2003. The share premium account was reduced by an amount of US$4,334.1 million,

which was applied to eliminate the deficit on the Company’s profit and loss account at 30 September 2002. The share premium account

was further reduced by an amount of US$342.4 million to create a special reserve. This amount is available to be applied against any

goodwill amortisation and impairment charges charged in the Group consolidated profit and loss account. The full amount of US$342.4

million has been applied against the goodwill amortisation charge for the year ended 30 September 2003.

Consolidated Statement of Total Recognised Gains and Losses

2003 2002

$'000 $'000

Loss for the year (420,291) (2,583,890)

Currency translation differences on foreign currency net investments 80,492 (20,700)

Total recognised losses relating to the year (339,799) (2,604,590)

ANNUAL REPORT 2003 61


notes to the financial statements

1. Basis of Preparation

The Dimension Data Group (‘the Group’) comprises Dimension Data Holdings plc (‘the Company’) and its subsidiaries.

The financial statements are prepared according to the historical cost convention and in accordance with accounting standards applicable

in the United Kingdom.

2. Accounting Policies

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries and its share of associates.

The results of subsidiaries are included from the effective dates of acquisition until the effective dates of disposal. All significant intergroup

transactions and balances have been eliminated on consolidation.

Turnover

Turnover comprises the aggregate amounts receivable for the sale of goods and installation, maintenance and service.

Maintenance revenue and licence fees

Maintenance revenue and licence fees are brought to account over the relevant contract periods.

Research and development

Research and development costs are recognised as an expense in the period in which they are incurred.

Goodwill

Where an investment in a subsidiary, joint venture or associated company is made, any difference between the purchase price and the fair

value of the attributable net assets is recognised as goodwill.

Goodwill arising on acquisitions prior to 1 October 1998 was set off against reserves in the year of acquisition. Goodwill arising on

acquisitions after 1 October 1998 is recognised within intangible fixed assets in the year of acquisition.

Amortisation is calculated on a straight line basis so as to write off the goodwill over its economic life, depending on the nature of the

acquisition, for a period not exceeding five years.

The unamortised balance is reviewed on a regular basis and, if an impairment in value has occurred, it is written off in the period in which

the circumstances have been determined.

Tangible fixed assets

Tangible fixed assets are stated at historical cost less accumulated depreciation.

Depreciation is provided on a straight line basis at rates considered appropriate to reduce their book values to estimated residual values

over the useful lives of the assets.

The following rates are applied:

Leasehold land, buildings and improvements over the lease term.

Computer and workshop equipment 20-33.33% per annum.

Motor vehicles 25% per annum.

Office furniture and equipment 10% per annum.

62 DIMENSION DATA


Associated companies

Associated companies are those companies, other than subsidiaries, over which the Group exercises significant influence and in which it

holds a long term equity interest. The results of these companies are accounted for by means of the equity method, from the date they

became investees, whereby the Group’s share of the associated companies’ retained income for the year is included in the consolidated

profit and loss account. Attributable earnings or losses, less dividends received, are included with the book value of the investment in the

consolidated balance sheet.

Provision is made where there has been an impairment in the carrying value of the investment.

Investments

Investments other than investments in associates and joint ventures are reflected at the lower of cost and fair value in the balance sheet.

Fair value for unquoted investments represents the Directors’ valuation after taking into account any impairment. Fair value of quoted

investments represents market value.

Investments held by Protocol are stated at valuation in terms of the standards endorsed by the British Venture Capital Association.

Valuations are based on arm’s length transactions which took place and valuation surpluses or losses included in operating income.

Where no such transaction took place, the investment is assessed for impairment and any valuation losses written off to operating income.

No account is taken of valuation surpluses indicated by the impairment review. In the case of listed investments, the quoted share price at

year end is used to value the investment. All subsidiaries of Protocol are consolidated in accordance with Group accounting policies.

Investments in subsidiaries are carried in the parent company balance sheet at cost less provisions for permanent impairment in value.

Accounting for foreign investments

The balance sheets of consolidated foreign subsidiaries, together with investments in overseas associated undertakings, are translated

into US dollars at the rates of exchange ruling at the balance sheet date.

The results of overseas subsidiaries and associated undertakings are translated at the weighted average rates of exchange for the year.

The exchange differences arising on the retranslation of the opening net investment and profit for the financial year at the closing rate, are

taken to reserves.

Stock

Stock is valued at the lower of the weighted average cost and net realisable value. Redundant and slow-moving stocks are identified and

written down with regard to their estimated economic or realisable values.

Deferred taxation

Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay

less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise

from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included

in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be

recovered. Deferred tax assets and liabilities are not discounted.

ANNUAL REPORT 2003 63


notes to the financial statements

Foreign currency transactions

Transactions denominated in foreign currencies are translated into the functional currencies at the rates of exchange on the dates of the

transactions or, if hedged, at the rates of exchange under the related forward exchange contracts.

Assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the end of the financial year, or if

hedged, at the forward contract rates.

The exchange differences are taken to the profit and loss account.

Operating leases

Rentals are charged to the profit and loss account over the lease term.

Pensions

Pension costs in the profit and loss account comprise contributions payable to the Group’s various defined contribution schemes.

Reporting currency

As permitted by UK Company law, the Group reports in US dollars, the currency in which a significant amount of its business is conducted

and which is regarded as its functional currency.

64 DIMENSION DATA


annual financial statements

3. Segmental Analysis

2003 2003 2003 2002 2002 2002

$'000 $'000 $'000 $'000 $'000 $'000

Operating Net operating Operating Net operating

Turnover profit/(loss) assets Turnover profit/(loss) assets

Continuing operations

- Africa 365,428 5,413 123,603 292,866 20,027 78,617

- Asia 328,725 2,187 169,310 404,908 16,961 283,150

- Australia 380,526 12,431 69,021 364,609 10,188 104,505

- Continental Europe 382,123 6,220 68,445 360,774 18,691 162,112

- United Kingdom 205,918 11,010 76,493 193,652 8,644 111,291

- United States 346,051 (17,058) 32,153 503,753 (9,021) 120,309

- Other* 6,024 (35,089) - - (24,528) -

Group 2,014,795 (14,886) 539,025 2,120,562 40,962 859,984

Associates 85,464 5,874 - 66,769 4,464 -

2,100,259 (9,012) 539,025 2,187,331 45,426 859,984

Goodwill amortisation (346,139) (724,280)

Operating exceptional items (38,463) (1,904,767)

Total 2,100,259 (393,614) 539,025 2,187,331 (2,583,621) 859,984

* Comprises Investment holding and management and Protocol. The net operating assets of Investment holding and management and

Protocol have been included in the relevant geographical region.

Net operating assets are total net assets excluding convertible bonds, debentures, loans and minority interests.

Net operating assets by location in 2002 included the unamortised balance of goodwill.

The Directors consider that they operate one generic class of business and that business is primarily managed regionally.

ANNUAL REPORT 2003 65


annual financial statements

4. Analysis of Continuing Operations

66 DIMENSION DATA

2003 2002

$'000 $'000

Group turnover 2,014,795 2,120,562

Cost of sales (1,610,146) (1,663,964)

Gross profit 404,649 456,598

Administrative expenses (802,413) (3,001,541)

Goodwill amortisation (344,415) (719,949)

Goodwill and investment impairment (15,297) (1,805,705)

Other operating expenses (442,701) (475,887)

Group operating loss (397,764) (2,544,943)

5. Group Operating Loss

Group operating loss is after charging

2003 2002

$'000 $'000

Depreciation 48,351 48,277

Goodwill amortisation 344,415 719,949

Goodwill and investment impairment 15,297 1,805,705

Loss on sale of tangible fixed assets

Rentals under operating leases

7,702 8,956

Hire of plant and machinery 4,050 4,451

Other operating leases

Auditors’ remuneration

34,656 25,322

Audit fees 2,240 2,292

Other assurance services 221 204

Taxation 1,565 764

Control reviews 176 200

Other 11 24


6. Information Regarding Directors and Employees

Information Regarding Employees

Average number of persons employed by the Group:

2003 2002

Location:

Africa 3,204 3,900

Asia 1,313 1,668

Australia 996 1,191

Continental Europe 1,031 1,026

United Kingdom 1,274 1,205

United States 706 1,155

Staff costs incurred during the year in

respect of these employees were:

8,524 10,145

2003 2002

$'000 $'000

Wages and salaries 344,406 354,424

Social security costs 24,266 27,512

Pension costs 12,712 14,572

381,384 396,508

Disclosures on Directors’ remuneration, pension entitlements, shareholdings and share options required by the Companies Act 1985, the

Directors’ Remuneration Report Regulations 2002 and those specified for audit by the Financial Services Authority, are set out in the

Remuneration Report on pages 43 to 49.

ANNUAL REPORT 2003 67


annual financial statements

7. Exceptional Items

68 DIMENSION DATA

Note 2003 2002

$'000 $'000

Exceptional operating costs

Severance and other associated costs (a) (13,961) (30,374)

Write-off of capital assets (b) (12,946) (4,976)

Provisions released (c) 13,529 -

Asset carrying value adjustments (d) (9,788) -

Other (e) - (24,901)

(23,166) (60,251)

Investments written down and impairment of goodwill (including associates) (f) (15,297) (1,844,516)

Total exceptional operating costs (38,463) (1,904,767)

Other exceptional items

(Loss)/profit on sale of fixed assets and investments (g) (7,297) 366

Total other exceptional items (7,297) 366

Total exceptional items before taxation and equity minority interests (45,760) (1,904,401)

(a) Costs incurred on restructuring and downsizing the businesses in all regions.

(b) Includes accelerated depreciation of leasehold improvement assets in Africa and Management to bring these in line with their

economic value.

(c) Release of US acquisition provisions no longer required.

(d) Adjustments to the carrying value brought forward of certain assets.

(e) In the year ended 30 September 2002 ‘Other’ related to Datacraft provisions of US$17.9 million, onerous lease expenses of US$5.9

million and impairment of own shares of US$1.1 million.

(f) Includes asset impairment losses arising from the rationalisation of Datacraft’s Cabling and i-commerce businesses of US$7.8 million

and Protocol investments of US$5.3 million.

(g) Includes losses on disposal of Colorado Computer Training Institute of US$6.6 million and Dimension Data Learning Solutions of

US$2.1 million and a profit on disposal of x-Plor of US$1.2 million.


7. Exceptional Items (Continued)

2003 2002

$’000 $’000

Regional analysis of exceptional operating costs

Africa 7,730 10,726

Asia 4,113 25,619

Australia 991 1,348

Continental Europe 4,666 4,952

United Kingdom 292 7,456

United States 2,608 8,490

Investment holding and management 2,766 1,660

Total exceptional operating costs 23,166 60,251

8. Investment Income

Investment income includes the revaluation of an endowment policy to reflect the current market value.

9. Net Interest (Payable)/Receivable

2003 2002

$'000 $'000

Interest receivable 11,541 14,917

Interest payable (12,910) (12,313)

Convertible bonds (3,994) -

Debentures (2,200) (9,241)

Bank overdraft and other borrowings (6,716) (3,072)

Net interest (payable)/receivable (1,369) 2,604

ANNUAL REPORT 2003 69


annual financial statements

10. Tax on Loss on Ordinary Activities

Reconciliation of expected tax charge using the standard tax rate to the actual current tax charge

The differences between the Group’s expected tax charge, using the Group’s standard corporation tax rate of 30% in 2003 (2002: 30%),

and the Group’s current tax charge, were as follows:

70 DIMENSION DATA

2003 2003 2003 2002

$'000 $'000 $'000 $'000

Pre- Exceptional Total Total

exceptional items

Payable in respect of the current year

- UK corporation tax 636 (88) 548 903

- Foreign 17,033 (2,229) 14,804 21,375

Share of associates’ taxation 1,951 - 1,951 1,747

Withholding taxes 995 - 995 1,586

Adjustments to prior years’ tax provision

20,615 (2,317) 18,298 25,611

- UK corporation tax (3,298) - (3,298) -

- Foreign 12,211 - 12,211 (10)

Total current tax

Deferred taxation

29,528 (2,317) 27,211 25,601

- Current 7,272 - 7,272 (14,490)

- Adjustments to prior years (9,063) - (9,063) -

Total tax charge 27,737 (2,317) 25,420 11,111

2003 2002

$'000 $'000

Total loss before taxation (398,646) (2,579,311)

Goodwill amortisation and impairment and investment impairment 361,436 2,568,796

Other exceptional items 7,297 (366)

Loss before goodwill amortisation and non-operating exceptional items (29,913) (10,881)

Expected tax credit at standard tax rate on loss before

goodwill and non-operating exceptional items (8,974) (3,264)

Expenses not deductible/income not taxable 6,307 (18,892)

Depreciation in excess of capital allowances 18,490 33,985

Tax losses created/utilised 26,092 5,128

Adjustments with respect to prior years (150) (1,471)

Non-taxable profits/non-deductible losses (12,183) (1,590)

International corporate tax rate differentials and other (2,371) 11,705

Actual current tax charge 27,211 25,601


11. (Loss)/Earnings per Ordinary Share

2003 2002

$'000 $'000

(Loss)/earnings before goodwill amortisation and exceptional items (36,265) 30,100

Exceptional items (net of tax and minorities) (37,887) (1,889,710)

Goodwill amortisation (346,139) (724,280)

Loss for the year (420,291) (2,583,890)

2003 2002

'000 '000

Weighted average number of ordinary shares in issue 1,341,618 1,299,075

2003 2002

US Cents US Cents

Basic (loss)/earnings per ordinary share before goodwill amortisation and

exceptional items* (2.7) 2.3

Basic loss per ordinary share on exceptional items (2.8) (145.5)

Basic loss per ordinary share on goodwill amortisation (25.8) (55.7)

Basic and diluted loss per ordinary share (31.3) (198.9)

* Basic (loss)/earnings per ordinary share before goodwill amortisation and exceptional items is shown to reflect continuing trading

results.

Basic loss per share represents the net loss attributable to ordinary shareholders, being the loss on ordinary activities after taxation and

minority interests. Diluted loss per share is the same as basic loss per share as it is considered that there are no dilutive potential

ordinary shares.

ANNUAL REPORT 2003 71


annual financial statements

12. Intangible Fixed Assets: Goodwill

2003 2002

$'000 $'000

Cost

At beginning of the year 5,065,512 5,015,611

Acquisitions during the year 2,833 9,350

Fair value adjustments 8,012 39,434

Other movements (579) 1,117

Disposals (18,663) -

Cost at end of the year

Accumulated amortisation

5,057,115 5,065,512

At beginning of the year (4,723,073) (2,210,057)

Charge for the year (295,654) (719,949)

Additional charge due to change in estimate (48,761) -

Impairment - (1,793,067)

Disposals 10,373 -

At end of the year (5,057,115) (4,723,073)

Net carrying value at end of the year - 342,439

In the light of the changed economic environment the Directors have concluded that goodwill, henceforth, should be amortised over a period

not exceeding five years and have adopted this change in estimate in 2003. This has resulted in an accelerated amortisation charge of

US$48.8 million in the current year. The US$2.8 million of goodwill acquired in the current period arose through an acquisition in the

European region. As the European goodwill has all previously been amortised or impaired, this amount was written off in the current year.

13. Tangible Fixed Assets

Leasehold land, Computer Office

buildings and andworkshop Motor furniture and

improvements equipment vehicles equipment Total

$'000 $'000 $'000 $'000 $'000

Cost

At 1 October 2002 25,966 167,575 1,723 61,687 256,951

Foreign exchange translation differences 6,504 39,384 175 9,969 56,032

Additions 5,823 29,040 172 4,439 39,474

Subsidiaries acquired - 152 - - 152

Disposals (398) (38,172) (675) (4,976) (44,221)

At 30 September 2003

Accumulated depreciation

37,895 197,979 1,395 71,119 308,388

At 1 October 2002 (9,548) (105,164) (1,182) (35,677) (151,571)

Foreign exchange translation differences (671) (25,979) (98) (5,451) (32,199)

Charge for the year (1,849) (36,030) (200) (10,272) (48,351)

Asset impairments (4,611) (2,795) (130) (968) (8,504)

Disposals 347 27,829 548 3,437 32,161

At 30 September 2003 (16,332) (142,139) (1,062) (48,931) (208,464)

Net book value

30 September 2002 16,418 62,411 541 26,010 105,380

30 September 2003 21,563 55,840 333 22,188 99,924

72 DIMENSION DATA


14. Investments Held as Fixed Assets

Investments in associates

2003 2002

$'000 $'000

The carrying value consists of:

Unquoted - share of net assets 19,503 11,573

Loans, less provisions 11,768 7,826

31,271 19,399

Quoted - share of net assets 7,796 5,105

- goodwill - 1,512

Total 39,067 26,016

Directors’ values

Unquoted 19,503 11,573

Loans, less provisions 11,768 7,826

Market value

31,271 19,399

Quoted 7,980 6,038

The Directors consider there to be no permanent diminution in the value of the quoted associates.

Analysis of movements in investments in associates:

Balance at beginning of the year 26,016 27,122

Acquired net of utilisation of Plessey provision (Note 21) 682 4,706

Share of balance of undistributed earnings 3,764 2,450

Amortisation and impairment of goodwill (1,724) (12,331)

Reversal of prior impairment of goodwill - 7,506

Disposals and transfers to investments in subsidiaries (569) (5,073)

Currency movements 12,671 (4,311)

Movement in loans to associates (1,773) 5,947

Balance at end of the year 39,067 26,016

Further details of associates are included in Note 33.

ANNUAL REPORT 2003 73


annual financial statements

14. Investments Held as Fixed Assets (Continued)

Other investments

2003 2002

$'000 $'000

Quoted - investment in own shares 219 128

- other 177 41

Unquoted 32,959 30,174

74 DIMENSION DATA

33,355 30,343

Market value of quoted investments 396 169

Analysis of movements in other investments:

Balance at beginning of the year 30,343 19,697

Acquired 9,545 22,003

Impairment (16,264) -

Revaluation/(impairment) of own shares 91 (1,136)

Disposals (162) (8,711)

Transfer to investments in subsidiaries - (957)

Currency movements 9,802 (553)

Balance at end of the year 33,355 30,343

The investment in own shares stated above amounts to 516,422 shares held by the Dimension Data Employee Share Ownership Trust.

15. Stock

2003 2002

$'000 $'000

Resale and demonstration 53,577 62,083

Work-in-progress 8,942 14,174

Maintenance 26,062 22,843

16. Debtors

88,581 99,100

2003 2002

$'000 $'000

Amounts falling due within one year:

Trade debtors 372,024 399,720

Other debtors 42,276 104,345

Prepayments and accrued income 65,480 40,257

Deferred taxation (Note 21) 24,110 20,914

503,890 565,236


17. Short Term Investments

2003 2002

$'000 $'000

Deposits 20,960 32,917

Short term loan 6,946 9,869

The deposits are short term cash deposits and loans earning interest at interbank linked rates.

27,906 42,786

The short term loan is to Dimension Data FMT UK Ltd and is repayable through client billings. The interest is at an interbank linked rate.

18. Creditors: Amounts Falling Due Within One Year

2003 2002

$'000 $'000

Bank loans and overdrafts 576 2,168

Trade creditors 248,424 250,217

Taxation and social security 72,699 60,854

Other creditors 67,922 117,209

Accruals 100,306 99,422

Deferred income 85,295 59,378

Trading current liabilities 575,222 589,248

Debentures - 101,367

Deferred consideration 7,906 46,411

Acquisitions - USA 1,991 33,002

Acquisitions - Asia 2,318 7,200

Acquisitions - other 3,597 6,209

Other current liabilities 7,906 147,778

Total creditors 583,128 737,026

Deferred consideration is the purchase consideration which in terms of certain purchase agreements may be paid in cash or shares at the

discretion of the purchaser. These amounts are interest free and the majority will be settled in the next financial year.

ANNUAL REPORT 2003 75


annual financial statements

19. Creditors: Amounts Falling Due After More Than One Year

The terms of the convertible bonds are set out in Note 20.

The loan, which has been used to purchase equipment, is unsecured and is repayable on 31 May 2008. Interest is payable semi-annually

in arrears and is linked to South African interbank rates.

20. Terms of Convertible Bonds

On 31 December 2002 ten seven year unsecured convertible bonds (‘the bonds’) of US$10 million each were issued to provide working

capital for the Group in a favourable interest rate environment. The bonds were issued by Howper 266 Ltd (a wholly owned subsidiary of

Dimension Data) and unconditionally and irrevocably guaranteed by the Company. The bonds were purchased by R&V Technology

Holdings Ltd (‘R&V’), an associate of VenFin Ltd, a quoted investment holding company incorporated in South Africa and listed on the JSE

Securities Exchange South Africa. If converted, the bonds will provide R&V with an equity holding equivalent to about 12.3% of the

enlarged fully diluted share capital of the Company. The maximum number of Dimension Data shares to be issued on conversion is

188,121,978 ordinary shares.

The bonds’ principal amount is US$100 million with a coupon rate of 5.375% per annum payable annually in arrears and a yield to

maturity of 5.750%. The bonds will be unlisted and, if not previously redeemed or converted into ordinary shares of the Company, will be

redeemed at 103.12% of the principal amount on 31 December 2009. The conversion price is fixed at 34.075 UK pence using a fixed

exchange rate of £1 equal to U$1.56.

The issuer has no call option in the first three years and thereafter, at the accreted value of the bonds subject to the share price,

translated into US dollars at the ruling exchange rate exceeding 150% of the conversion price translated into US dollars at the fixed

exchange rate, for each of not less than 20 trading days, within a period of 30 consecutive trading days. The investor has a put option

after five years and quarterly thereafter, at the accreted value of the bonds.

76 DIMENSION DATA

2003 2002

$'000 $'000

Convertible bonds 104,028 -

Loan 25,344 17,045

129,372 17,045


21. Provisions for Liabilities and Charges

Restructuring and Deferred

redundancy taxation Other Total

$'000 $'000 $'000 $'000

Balance at 1 October 2002 40,994 1,997 45,232 88,223

Created 4,788 - - 4,788

Released to the profit and loss account (13,529) (1,258) - (14,787)

Utilised (12,869) - (40,242) (53,111)

Currency movements 2,722 - 520 3,242

Balance at 30 September 2003 22,106 739 5,510 28,355

Restructuring and redundancy provisions relate to onerous lease commitments in the US and Africa. Restructuring provisions have also

been created in Europe for the rationalisation projects in Germany and France. These provisions are expected to be utilised in the next

financial year.

Certain provisions created on the acquisition of the Proxicom business were no longer required and were released in the current year.

US$38.3 million was utilised from Other provisions in respect of the Plessey onerous contract.

The amounts of deferred taxation and timing differences provided and unprovided in the accounts are as follows:

Provided Unprovided Provided Unprovided

2003 2003 2002 2002

$'000 $'000 $'000 $'000

Provisions (4,043) (8,038) (1,252) (2,433)

Prepayments - - 336 -

Assets - (36,598) 1,177 (33,138)

Losses (16,453) (137,112) (17,126) (125,045)

Other (2,875) (21,317) (2,052) (11,182)

(23,371) (203,065) (18,917) (171,798)

Analysed as:

Deferred tax asset (Note 16) (24,110) (20,914)

Deferred tax provision 739 1,997

(23,371) (18,917)

ANNUAL REPORT 2003 77


annual financial statements

22. Called Up Share Capital

Number of Number of

shares $'000 shares $'000

2003 2003 2002 2002

Authorised:

Deferred shares of £1 each 50,000 75 50,000 75

Ordinary shares of 1 US cent each 3,000,000,000 30,000 2,000,000,000 20,000

Called up, allotted and fully paid:

30,075 20,075

Deferred shares of £1 each 50,000 75 50,000 75

Ordinary shares of 1 US cent each 1,341,992,267 13,420 1,299,477,238 12,995

13,495 13,070

Ordinary shares issued during the year Nominal value

ended 30 September 2003 Number $'000

Opening balance 1,299,477,238 12,995

Acquisitions 42,469,574 425

Employee share option scheme 45,455 -

1,341,992,267 13,420

42,400,000 ordinary shares were issued to Worldwide African Investment Holdings (Pty) Ltd in settlement of their exercise of the put

option relating to Plessey (Pty) Ltd. 69,574 ordinary shares were issued for various prior acquisitions for a total consideration of US$10.7

million.

In terms of the agreement for the acquisition of the outstanding interests in Dimension Data Australia Pty Ltd (formerly Com Tech

Communications Pty Ltd) (‘DD Australia’) in 2000, DD Australia option holders are now entitled to Dimension Data shares, on an agreed

ratio, when their options vest. The maximum number of Dimension Data shares that will be issued is 776,425 and the latest date is July

2005. During the year 45,455 ordinary shares were issued in terms thereof.

The terms of the deferred shares appear in the Directors’ Report on page 32.

Employee Share Schemes

2003 2002

Number of options outstanding

Opening balance 122,204,517 103,243,599

Granted 58,601,227 61,745,004

Exercised and paid (55,600) (65,500)

Lapsed (39,849,654) (42,718,586)

Closing balance 140,900,490 122,204,517

Prior to the Company’s listing on the LSE, options related to shares in Dimension Data Holdings Ltd. Subsequent to the listing the options

were varied to enable participants to acquire shares in the Company in place of Dimension Data Holdings Ltd.

78 DIMENSION DATA


22. Called Up Share Capital (Continued)

Options Number of

outstanding Latest share options

at year end expiry date 2003 2002

At R2.60 23/09/2012 50,000 -

At R14.00 01/04/2007 - 20,000

At R17.95 29/07/2007 22,500 15,000

At R18.00 11/08/2007 1,000 1,000

At R18.65 12/01/2008 - 10,000

At R19.50 08/09/2008 47,000 76,500

At R19.60 01/10/2007 52,800 1,200,000

At R20.50 01/01/2008 - 10,000

At R20.75 05/01/2008 98,000 364,000

At R22.00 01/10/2008 17,759,048 20,002,972

At R22.70 01/09/2008 120,000 120,000

At R22.80 12/08/2009 - 60,000

At R23.35 08/08/2009 300,000 300,000

At R23.70 20/08/2009 150,000 150,000

At R24.00 17/05/2009 7,410,000 7,410,000

At R24.10 12/10/2008 316,283 381,183

At R24.30 01/10/2009 21,618,875 24,626,401

At R25.05 01/03/2009 55,000 55,000

At R25.20 13/02/2008 9,500 19,000

At R25.30 05/01/2009 6,500 6,500

At R25.50 05/11/2008 - 85,000

At R25.90 07/05/2009 40,000 40,000

At R26.00 20/02/2008 20,000 20,000

At R27.00 12/02/2009 45,000 45,000

At R27.40 31/03/2009 115,200 115,200

At R27.80 01/04/2009 30,000 30,000

At R28.10 20/04/2009 10,000 10,000

At R29.20 01/11/2009 30,000 30,000

At R29.80 03/11/2009 70,000 70,000

At R32.10 03/12/2009 20,000 20,000

At R32.80 01/07/2008 98,750 98,750

At R33.75 07/12/2009 - 30,000

At R35.10 03/04/2008 52,000 52,000

At R38.00 15/12/2009 43,960 48,107

At R38.50 17/04/2010 467,500 497,500

At R39.00 14/12/2009 5,000 5,000

At R41.80 31/01/2010 29,000 29,000

At R43.50 03/05/2010 284,105 296,778

At R44.00 14/04/2010 37,293 38,643

At R44.80 01/02/2010 91,225 101,225

At R44.95 25/04/2010 55,000 55,000

At R45.20 19/04/2010 25,000 25,000

At R46.00 10/05/2010 30,000 30,000

At R46.10 23/02/2010 60,000 60,000

At R46.20 11/05/2010 5,000 5,000

At R47.00 29/05/2010 40,000 40,000

At R48.35 01/06/2010 330,164 396,666

At R48.70 18/02/2010 5,000 5,000

At R51.20 06/04/2010 - 2,000

At R51.80 05/06/2010 20,000 20,000

At R55.40 14/07/2010 115,000 115,000

At R56.60 04/07/2010 - 5,000

At R58.10 31/03/2010 5,000 15,000

At R60.10 01/03/2010 - 6,000

ANNUAL REPORT 2003 79


annual financial statements

22. Called Up Share Capital (Continued)

Options Number of

outstanding Latest share options

at year end expiry date 2003 2002

At R62.00 28/02/2010 10,000 10,000

At R63.30 08/03/2010 15,000 15,000

At R65.50 11/09/2010 - 5,000

At R68.00 31/08/2010 5,000 5,000

At GBP0.16 01/04/2013 500,000 -

At GBP0.24 16/06/2013 17,500 -

At GBP0.25 21/11/2012 48,016,200 -

At GBP0.26 20/08/2013 7,531,000 -

At GBP0.27 01/08/2012 1,200,000 1,200,000

At GBP0.34 12/07/2012 80,000 80,000

At GBP0.39 08/07/2012 - 5,000

At GBP0.41 01/07/2012 40,000 40,000

At GBP0.51 11/06/2012 100,000 100,000

At GBP0.55 04/04/2012 150,000 150,000

At GBP0.61 03/05/2012 120,000 120,000

At GBP0.63 18/03/2012 25,000 25,000

At GBP0.67 06/03/2012 1,000 1,000

At GBP0.69 14/05/2012 - 100,000

At GBP0.70 28/09/2011 19,349,962 32,872,093

At GBP0.70 01/10/2011 3,116,673 3,397,189

At GBP0.72 03/10/2011 100,000 100,000

At GBP0.74 08/10/2011 40,000 60,000

At GBP0.79 22/10/2011 - 1,000

At GBP0.80 02/01/2012 429,881 429,881

At GBP0.88 17/09/2011 10,000 10,000

At GBP1.02 06/09/2011 - 10,000

At GBP1.09 22/08/2011 1,745,206 2,892,695

At GBP1.10 05/09/2011 5,000 5,000

At GBP1.27 20/07/2011 5,010,312 19,680,129

At GBP2.60 23/09/2012 - 50,000

At GBP2.93 22/06/2011 - 1,000

At GBP2.95 25/06/2011 1,000 1,000

At GBP3.14 07/05/2011 1,500 6,500

At GBP3.27 11/06/2011 5,000 5,000

At GBP3.31 30/04/2011 1,500 1,500

At GBP3.32 01/05/2011 52,000 65,000

At GBP3.60 23/05/2011 2,000 2,000

At GBP4.03 05/03/2011 - 5,000

At GBP4.10 02/01/2011 208,770 208,770

At GBP4.24 02/01/2011 17,500 17,500

At GBP4.31 02/02/2011 2,000 2,000

At GBP4.58 22/01/2011 - 5,000

At GBP5.05 22/11/2010 2,683,343 3,129,395

At GBP5.25 01/03/2011 85,940 85,940

At GBP5.25 18/12/2010 500 500

At GBP5.54 20/11/2010 1,000 1,000

At GBP6.00 30/10/2010 - 1,000

At GBP6.09 10/10/2010 1,500 1,500

At GBP6.33 02/10/2010 23,500 31,500

140,900,490 122,204,517

80 DIMENSION DATA


23. Analysis of Cash Flows for Headings Netted in the Cash Flow Statement

Returns on investments and servicing of finance

2003 2002

Note $'000 $'000

Interest and other investment income received 17,731 15,874

Interest paid (8,890) (10,811)

Dividends received 2 93

Taxation

Reconciliation to taxation paid:

8,843 5,156

Taxation charge (25,260) (23,852)

Movement in taxation payable 11,859 (10,944)

Taxation acquired with subsidiaries - 662

Capital expenditure and financial investment

(13,401) (34,134)

Payments to acquire tangible fixed assets (39,474) (48,155)

Receipts from sales of fixed assets 3,790 4,138

Purchase of fixed asset investments (9,383) (24,931)

Acquisitions and disposals

(45,067) (68,948)

Purchase of subsidiary undertakings - current acquisitions 25 (2,571) (7,320)

- prior acquisitions (3,524) (10,637)

Deferred consideration paid (43,659) (145,971)

Net cash acquired with subsidiaries - 294

Purchase of associates (26,617) (9,994)

Sale of associates - 112

Management of liquid resources

(76,371) (173,516)

Purchase of current asset investments (20,617) (20,884)

Sale of current asset investments 36,092 -

Financing

15,475 (20,884)

Issue of ordinary share capital net of expenses (141) 77

Net repayment of borrowings 24 (1,367) (217,435)

Change in minority shareholders (3,670) -

(5,178) (217,358)

ANNUAL REPORT 2003 81


annual financial statements

24. Analysis of Net Cash

Net assets/(liabilities) acquired:

Tangible fixed assets 152

Debtors 1,129

Creditors (1,543)

(262)

Goodwill 2,833

2,571

Satisfied by:

- Cash 2,571

82 DIMENSION DATA

At 1 Other At 30

October Cash non-cash Exchange September

2002 flow changes movements 2003

$'000 $'000 $'000 $'000 $'000

Cash at bank and in hand 372,566 (66,130) - 51,349 357,785

Bank overdraft (2,168) 1,592 - - (576)

370,398 (64,538) - 51,349 357,209

Debt due within one year (101,367) 101,367 - - -

Debt due within two to five years - - (17,045) (8,299) (25,344)

Debt due more than five years (17,045) (100,000) 13,017 - (104,028)

Short term investments 42,786 (15,475) - 595 27,906

Total 294,772 (78,646) (4,028) 43,645 255,743

25. Acquisitions

The acquisition is a 100% interest in the business of Deimos in Italy.

The above acquisition was accounted for on the acquisition basis. No provisional fair value adjustments were made for this acquisition but any

necessary adjustments to fair value will be made in the next financial year.

Total

$'000


26. Operating Lease Commitments

At the end of the year the Group was committed to making operating lease payments over the following periods:

2003 2002

$'000 $'000

Within one year 43,329 22,250

Within two to five years 137,342 92,184

After five years 336,702 279,544

517,373 393,978

ANNUAL REPORT 2003 83


annual financial statements

27. Financial Instruments

The Group’s funding, liquidity and exposure to interest rate and foreign exchange rate risks are managed by the Group’s treasury

operations. Treasury operations are conducted within a framework of policies and guidelines authorised by the Board. The Group uses

derivative instruments for risk management purposes only, and these are transacted by specialist treasury personnel. The internal control

environment is reviewed regularly.

The Group hedges its transactional foreign exchange rate risk, using forward exchange contracts. The gain or loss on the hedge is

recognised at the same time as the underlying transaction.

Credit risk: a large number of major international financial institutions are counterparties to the foreign exchange contracts and deposits

transacted by the Group. The Group continually monitors its position and the credit ratings of its counterparties and credit exposure to

each counterparty.

Speculative use of financial instruments or derivatives is not permitted and none has occurred during any period presented.

The Group has transactional currency exposures arising from sales or purchases by an operating unit in currencies other than the unit’s

functional currency. Under the Group’s foreign exchange policy, such transaction exposures are hedged once they are known mainly through

the use of forward foreign exchange contracts.

Short term debtors and creditors have been omitted from all disclosures.

27(a) Maturity profile of financial liabilities

30 September 2003

84 DIMENSION DATA

Bank borrowings,

convertible bonds and loans Other Total

$'000 $'000 $'000

Within one year or less or on demand 576 7,906 8,482

Within two to five years 25,344 - 25,344

More than five years 104,028 - 104,028

Gross financial liabilities 129,948 7,906 137,854

30 September 2002

Bank borrowings,

debentures and loans Other Total

$'000 $'000 $'000

Within one year or less or on demand 103,535 46,411 149,946

More than five years 17,045 - 17,045

Gross financial liabilities 120,580 46,411 166,991

Included in the US$129.9 million are guaranteed convertible bonds of US$104.0 million (2002: debentures of US$101.4 million), the terms

of which are detailed in Note 20 and a US$25.3 million loan (2002: US$17.0 million) (Note 19).

The amount in Other relates to deferred consideration in respect of acquisitions where the Company has the option of paying cash or

shares and is disclosed in Note 18.


27. Financial Instruments (Continued)

27(b) Interest rate profile

The interest rate and currency profiles of the Group’s financial liabilities are as follows:

Financial liabilities

Fixed rate Floating rate Non-interest bearing

financial liabilities financial liabilities financial liabilities Total

Currency $'000 $'000 $'000 $'000

At 30 September 2003

US dollars 104,028 - 4,309 108,337

South African rand - 25,673 2,556 28,229

Euro - 247 1,041 1,288

Gross financial liabilities 104,028 25,920 7,906 137,854

At 30 September 2002

US dollars 101,367 - 40,202 141,569

South African rand - 17,115 - 17,115

Sterling - 2,098 - 2,098

Euro - - 6,209 6,209

Gross financial liabilities 101,367 19,213 46,411 166,991

The fixed rate financial liability in 2003 relates to the convertible bonds, which bear interest at 5.375%, as detailed in Note 20, and the

guaranteed convertible debentures in 2002, which bore interest at 7.75%. The non-interest bearing financial liabilities relate to deferred

consideration in respect of acquisitions which will be paid in either cash or shares at the discretion of the purchaser. Such amounts are

mainly due for settlement on demand or within one year of the balance sheet date. Floating rate balances relate to bank loans, overdrafts

and loans. Interest is based on the relevant interbank rate.

ANNUAL REPORT 2003 85


annual financial statements

27. Financial Instruments (Continued)

27(b) Interest rate profile (continued)

Financial assets

86 DIMENSION DATA

Floating rate Equity

financial assets investments Total

Currency $'000 $'000 $'000

At 30 September 2003

US dollars 111,180 1,220 112,400

South African rand 80,315 25,691 106,006

Australian dollars 96,212 - 96,212

Euro 58,118 4,546 62,664

Sterling 32,262 1,898 34,160

Swiss francs 5,025 - 5,025

Other 2,579 - 2,579

Gross financial assets 385,691 33,355 419,046

At 30 September 2002

US dollars 141,516 3,895 145,411

South African rand 112,391 16,356 128,747

Australian dollars 68,891 - 68,891

Euro 54,990 9,005 63,995

Sterling 30,851 1,087 31,938

Swiss francs 5,330 - 5,330

Other 1,383 - 1,383

Gross financial assets 415,352 30,343 445,695

Floating rate financial assets comprise cash at bank and in hand and deposits. Interest on floating rate bank deposits is based on the

relevant interbank rate.

The equity investments are both quoted and unquoted equities, as detailed in Note 14.


27. Financial Instruments (Continued)

27(c) Fair values of financial assets and liabilities

Carrying amount

Primary financial instruments held or 2003 2002

issued to finance the Group’s operations $'000 $'000

Short term investments 27,906 42,786

Other investments 33,355 30,343

Cash resources 357,785 372,566

Gross financial assets 419,046 445,695

Estimated fair value

Primary financial instruments held or 2003 2002

issued to finance the Group’s operations $'000 $'000

Short term investments 27,906 42,786

Other investments 33,355 30,343

Cash resources 357,785 372,566

Gross financial assets 419,046 445,695

ANNUAL REPORT 2003 87


annual financial statements

27. Financial Instruments (Continued)

27(c) Fair values of financial assets and liabilities (continued)

Carrying amount

Primary financial instruments held or 2003 2002

issued to finance the Group’s operations $'000 $'000

Overdrafts 576 2,168

Loans 25,344 17,045

Deferred consideration 7,906 46,411

Convertible bonds 104,028 -

Guaranteed convertible debentures - 101,367

Gross financial liabilities 137,854 166,991

Estimated fair value

Primary financial instruments held or 2003 2002

issued to finance the Group’s operations $'000 $'000

Overdrafts 576 2,168

Loans 26,998 17,837

Deferred consideration 7,906 46,411

Convertible bonds 104,028 -

Guaranteed convertible debentures - 101,367

Gross financial liabilities 139,508 167,783

The fair value of the convertible bonds is deemed to be the same as the carrying value as it is not practical to estimate the fair value

with sufficient reliability due to the uncertainty of the future cash flows of the various options contained in the terms of the convertible

bonds (Note 20).

Unrealised losses Estimated face value

Derivative financial instruments held 2003 2002 2003 2002

to manage the Group’s currency profile $'000 $'000 $'000 $'000

US dollars (1,076) (481) 45,158 41,503

South African rand (2,191) (2,012) 11,691 14,789

Australian dollars (356) - 19,483 -

Euro (14) - 2,830 10,515

Forward exchange contracts (3,637) (2,493) 79,162 66,807

The carrying value of derivative financial instruments at each year end is nil.

The Group has entered into certain forward exchange contracts which do not relate to specific items appearing in the balance sheet.

These contracts were entered into to cover foreign commitments not yet due. Market values have been used to determine the fair values of

these forward exchange contracts.

88 DIMENSION DATA


27. Financial Instruments (Continued)

27(d) Hedging

The Group’s policy is to hedge all material transactional currency exposure and currency exposure on future expected purchases using

forward currency contracts.

Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised.

There were no speculative positions in foreign currencies at the year ends, and there were no material gains or losses from such positions

for any period presented.

The Group enters into forward exchange contracts to eliminate the currency exposure arising on sales and purchases denominated in foreign

currencies as soon as there is a firm contractual commitment. It also uses interest rate swaps to manage its interest rate profile.

An analysis of the unrecognised gains and losses is as follows:

Gains Losses

Total net

gains/(losses)

$'000 $'000 $'000

Unrecognised gains and losses on hedges at 1 October 2002 23 (2,516) (2,493)

Gains and losses arising in previous years that were recognised this year

Gains and losses arising before 1 October 2002 that

(23) 2,516 2,493

were not recognised in the year - - -

Gains and losses arising in the year to 30 September 2003

that were not recognised in that year

Unrecognised gains and losses on hedges at 30 September 2003

26 (3,663) (3,637)

expected to be recognised in the year to 30 September 2004 26 (3,663) (3,637)

27(e) Currency profile

The main functional currency of the Group is the US dollar, being the currency in which the majority of purchases are denominated and to

which most of the selling prices are linked. Other major currencies are the South African rand, Sterling, Australian dollar, Singapore dollar

and the Euro. Monetary assets and liabilities are hedged and therefore there are no transactional exposures which would give rise to net

currency gains or losses in the profit and loss account.

28. Pension Schemes

In most countries, the employing company provides either defined contribution or insured retirement plans to their employees. The relevant

company, and in some cases the employees, pay regular contributions to the plans. Once contributions are made, the relevant company

has no liability in respect of these plans.

Employees in France, Japan and Korea are entitled to lump-sum termination indemnity payments upon leaving. Provisions have been

established in respect of these liabilities.

ANNUAL REPORT 2003 89


annual financial statements

29. Related Party Transactions

Related parties are entities with common direct or indirect shareholders and/or directors. The principal shareholders of the Group are

listed on page 55. The Group and its subsidiaries, in the ordinary course of business, enter into various sale, purchase, service and

investment transactions with associates and others in which the Group has an interest. These transactions are under terms that are no

less favourable than those arranged with third parties.

There were no significant related party transactions during the current year which require disclosure.

30. Contingencies

90 DIMENSION DATA

2003 2002

$'000 $'000

Guarantees 7,608 20,111

Other 163 161

31. Capital Commitments

7,771 20,272

Dimension Data (South Africa) (Pty) Ltd (‘DDSA’) has a 15 year lease commitment for the Campus office premises located in Sandton,

South Africa. In terms of the Call Option Agreement DDSA has the right to exercise the call option from early 2003 either in full or in

tranches up to 49% for the shares in Aconcagna 34 Investments (Pty) Ltd (‘Aconcagna’). Aconcagna is the holder of the Bare Dominium

over the Campus property. The option would have cost R20 million (US$2.8million) to exercise in 2002 and this escalates by 25% per

annum until the end of the lease at which time it will expire.

Under UK GAAP, ifDDSA exercises any part of the option up to a 49% shareholding in Aconcagna, the amount paid for the shares will be

treated as an investment/associate. Once the remaining option is exercised, the company will be consolidated and the building and finance

lease liability will appear in the Group accounts.

2003 2002

$'000 $'000

Authorised, contracted for 2,690 12,761

Authorised but not yet contracted 15,140 4,972

17,830 17,733


32. Financial Statements of Dimension Data Holdings plc

Profit of parent

As permitted by section 230 of the Companies Act 1985, the profit and loss account is not presented as part of these accounts.

Balance sheet as at 30 September 2003

2003 2002

Note $'000 $'000

Fixed assets

Investment in subsidiaries (a) 247,952 230,152

Investment in own shares (a) 219 128

248,171 230,280

Debtors (b) 167,304 145,906

Cash at bank and in hand 7,541 8,721

Creditors: amounts falling due within one year (c) (1,956) (1,809)

Net current assets 172,889 152,818

Total net assets 421,060 383,098

Capital and reserves

Called up share capital (d),(e) 13,495 13,070

Share premium account (e) 100,278 4,766,332

Special reserve (e) 342,439 -

Other reserves (e) (29,234) (62,168)

Profit and loss account (e) (5,918) (4,334,136)

Equity shareholders’ funds 421,060 383,098

The financial statements were approved by the Board of Directors on 17 November 2003.

Jeremy Ord Malcolm Rutherford

Executive Chairman Chief Financial Officer

ANNUAL REPORT 2003 91


annual financial statements

32. Financial Statements of Dimension Data Holdings plc (Continued)

Note

(a) Investment in subsidiaries represents the investments in Spectrum Holdings Inc, Dimension Data (South Africa) (Pty) Ltd, Dimension

Data Network Services Ltd, Dimension Data Global Management Services (Pty) Ltd and the preference share in Dimension Data

Commerce Centre Ltd. Movements in the investment in own shares are disclosed in Note 14.

92 DIMENSION DATA

2003 2002

$'000 $'000

Analysis of movements in investments in subsidiaries:

Balance at beginning of the year 230,152 4,264,734

Net acquisitions and transfers 17,800 (1,209)

Disposal - (1,034,179)

Impairment - (2,999,194)

Balance at end of the year 247,952 230,152

(b) Debtors

2003 2002

$'000 $'000

Amounts due from subsidiary undertakings 163,674 143,553

Dividends receivable 2,112 1,420

Other debtors 1,518 933

(c) Creditors: Amounts falling due within one year

167,304 145,906

2003 2002

$'000 $'000

Other creditors 673 1,399

Accruals 1,283 410

1,956 1,809


32. Financial Statements of Dimension Data Holdings plc (Continued)

(d) Called up share capital

Number of Number of

shares $'000 shares $'000

2003 2003 2002 2002

Authorised:

Deferred shares of £1 each 50,000 75 50,000 75

Ordinary shares of 1 US cent each 3,000,000,000 30,000 2,000,000,000 20,000

30,075 20,075

Called up, allotted and fully paid:

Deferred shares of £1 each 50,000 75 50,000 75

Ordinary shares of 1 US cent each 1,341,992,267 13,420 1,299,477,238 12,995

13,495 13,070

Details of ordinary shares issued during the year appear in Note 22.

The terms of the deferred shares appear in the Directors’ Report on page 32.

(e) Statement of movement in shareholders’ funds and movement of reserves

Issued Share Profit

share premium Special Other and loss

capital account reserve reserves account Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 October 2002 13,070 4,766,332 - (62,168) (4,334,136) 383,098

Capital reduction - (4,676,575) 342,439 - 4,334,136 -

Loss for the financial year - - - - (6,059) (6,059)

Currency adjustments - - - 32,934 - 32,934

Shares issued 425 10,662 - - - 11,087

Share issue expenses - (141) - - 141 -

Balance at 30 September 2003 13,495 100,278 342,439 (29,234) (5,918) 421,060

Other reserves comprise translation reserves.

The capital reduction became effective on 20 March 2003. The details thereof appear in the Consolidated Statement of Movement of

Reserves and Shareholders’ Funds on page 61 and the Financial Review on pages 26 and 27.

ANNUAL REPORT 2003 93


annual financial statements

33. Principal Subsidiaries and Associates

Subsidiary undertakings

Country of Effective Effective

incorporation/ interest interest

registration 2003 2002

Name and operation Activity % %

Comtech Holdings SA Belgium Investment Holding

and Management

100 100

Colorado Computer Training Institute Inc United States

of America

Application Networks - 100

Conscripti (Pty) Ltd South Africa Application Networks 80 80

Datacraft Asia Limited Singapore Application Networks 51.83 51.83

Didata Inc United States

of America

Application Networks 100 100

Didata (DC) Inc United States

of America

Application Networks 100 100

Didata (NY) Inc United States

of America

Application Networks 100 100

Diginet AG Switzerland Application Networks 100 100

Dimension Data (Pty) Ltd South Africa Application Networks 100 100

Dimension Data Advanced Infrastructure Ltd Great Britain Application Networks 100 100

Dimension Data Algeria Spa Algeria Application Networks 70 70

Dimension Data Australia Pty Ltd Australia Application Networks 100 100

Dimension Data Australian Holdings SA Belgium Investment Holding

and Management

100 100

Dimension Data Belgium SA Belgium Application Networks 100 100

Dimension Data Botswana (Pty) Ltd Botswana Application Networks 100 100

Dimension Data Commerce Centre Ltd Isle of Man Application Networks 100 100

Dimension Data Deutschland Holdings GmbH Germany Investment Holding

and Management

100 100

Dimension Data España SL Spain Application Networks 100 100

Dimension Data Facilities (Pty) Ltd South Africa Application Networks 100 100

Dimension Data Finance Ltd Isle of Man Investment Holding

and Management

100 -

Dimension Data France SA France Application Networks 100 100

Dimension Data Germany AG & Co Germany Application Networks 100 100

Dimension Data Global Management Services (Pty) Ltd Isle of Man Investment Holding

and Management

100 -

Dimension Data Holdings France SA France Investment Holding

and Management

100 100

Dimension Data Holdings Nederland BV Netherlands Investment Holding

and Management

100 100

Dimension Data International Ltd Malta Investment Holding

and Management

100 100

Dimension Data Italia SRL Italy Application Networks 100 100

Dimension Data Learning Solutions South Africa (Pty) Ltd South Africa Application Networks - 100

Dimension Data Luxembourg SA Luxembourg Application Networks 100 100

Dimension Data Management Services (Pty) Ltd South Africa Investment Holding

and Management

100 100

Dimension Data Network Services Ltd Great Britain Application Networks 100 100

Dimension Data Nederland BV Netherlands Application Networks 100 100

94 DIMENSION DATA


33. Principal Subsidiaries and Associates (Continued)

Subsidiary undertakings

Country of Effective Effective

incorporation/ interest interest

registration 2003 2002

Name and operation Activity % %

Dimension Data North Africa Holdings Ltd Belgium Investment Holding

and Management

70 70

Dimension Data Protocol BV Netherlands Protocol 100 100

Dimension Data (South Africa) (Pty) Ltd South Africa Investment Holding

and Management

100 100

Dimension Data Sverige AB Sweden Application Networks 100 100

Dimension Data Switzerland SA Switzerland Application Networks 100 100

Dimension Data (US) Inc United States Investment Holding 100 100

of America and Management

Dimension Data (US) II Inc United States Investment Holding 100 100

of America and Management

Dimension Data (Zurich) AG (formerly Netpartner AG) Switzerland Application Networks 100 100

GK Communications Group Ltd Great Britain Investment Holding

and Management

100 100

Howper 266 Ltd Great Britain Investment Holding

and Management

100 100

Internet Solutions (Pty) Ltd South Africa Application Networks 60 60

Linx Holdings (Pty) Ltd South Africa Application Networks 60 60

Merchants SA (Pty) Ltd South Africa Application Networks 100 100

Planet CTI Belgium Application Networks 100 100

Plessey Corporation Ltd South Africa Investment Holding

and Management

100 100

Plessey South Africa Ltd South Africa Investment Holding

and Management

100 100

Premier Systems Integrators LLC United States

of America

Application Networks 100 100

Protocol (A&NZ) Pty Ltd Netherlands Protocol 100 100

Protocol Venture Capital (Pty) Ltd South Africa Protocol 100 100

Proxicom Inc United States

of America

Application Networks 100 100

Spectrum Holdings Inc British Virgin Islands Investment Holding

and Management

100 100

The Merchants Group Ltd Great Britain Application Networks 100 100

Associated undertakings

Choice Technologies (Pty) Ltd

Dimension Data Messaging (Pty) Ltd

South Africa Application Networks 49 49

(trading as Automate) South Africa Application Networks 45 45

Paracon Holdings Ltd South Africa IT contracting and

e-business solutions

27.4 31.2

Plessey (Pty) Ltd South Africa Application Networks 49 49

Plessey Solutions (Pty) Ltd South Africa Application Networks 70 70

Stratagem (Pty) Ltd South Africa Training 30 -

ANNUAL REPORT 2003 95


glossary of technical terms

Application Network Framework

Dimension Data’s approach to planning, building and supporting IT infrastructure solutions exploits an IT architecture called the

Application Network Framework This framework uses six ‘abstraction layers’ to define scalable and reliable IT infrastructure solutions for

our clients.

Application Integration

Our offerings and competencies associated with the integration and configuration of software packages as well as bespoke development

across all of our solution areas, which allows for the seamless operation of business systems – both internal and external. Application

Integration incorporates the convergence of traditional middleware, application servers and portal technologies while considering new

standards such as web services. It also includes data management.

Customer Interactive Solutions (CIS)

Our Customer Interactive Solutions enable organisations to interact with their customers through multiple communications channels and so

retain and increase the value of their customer base.

DD Way

A focused, planned and resourced programme for accelerating the implementation of the Group’s strategy across the global organisation.

GSOA

Global Services Operating Architecture is a services operating architecture that enables Dimension Data to support and manage global

networks and applications on line and in real time. The GSOA comprises Dimension Data’s global services systems and a combination of

third-party software and proprietary software.

Insite

Insite is a comprehensive real-time, remote information technology monitoring service. It is available around the clock through Dimension

Data’s Operations Centres across the globe.

IP Contact Centre Solutions (IPCC)

Dimension Data’s IP Contact Centre solutions enable organisations to achieve productivity enhancements, support mobility and realise

infrastructure efficiencies by creating customised business applications that integrate into and take advantage of consolidated voice, fax,

video and data IP networks.

Managed Services

Managed Services is Dimension Data’s operational business unit that delivers Insite and Uptime services. These services allow

organisations to manage their IT Infrastructures in a transparent and effective manner resulting in greater reliability at a reduced cost.

Network Integration

Our offerings and competencies associated with the design, configuration, deployment and integration of converged network infrastructure.

OSS/BOSS

Operational Support Services/Business and Operations Support Systems.

Platform Solutions

Our Platform solutions and services enable organisations to provide efficient, reliable and scalable computing infrastructure, including

operating systems, server and storage architectures. The related business solutions include offerings such as high availability computing

systems, back up and recovery, archiving and storage ready networks.

96 DIMENSION DATA


Professional Services

Professional Services is the operational business unit within Dimension Data which delivers the technical and business consulting skills

required by our client engagements. Professional Services include consulting, systems integration, application development and project

management services.

Security Solutions

Our Security solutions and services enable organisations to realise the true value of their information currency, by ensuring it flows in a

secure, trusted, and controlled environment without contamination. Bringing together best-of-breed technologies and extensive expertise,

we provide clients with the highest level of security through our plan, build and support services.

Uptime

Uptime is Dimension Data’s support, maintenance and troubleshooting service. Clients may select from basic response services through

to proactive advanced services for mission-critical IT infrastructure.

VoIP

Voice Over Internet Protocol.

ANNUAL REPORT 2003 97


contacts and corporate information

Dimension Data Holdings plc

(Incorporated in Great Britain under the Companies Act 1985 with registered number 3704278)

UK Company Secretary

JM Duck

judy.duck@uk.didata.com

Registered Office

Fleet Place House

2 Fleet Place

London EC4M 7RT

United Kingdom

Auditors

Deloitte & Touche LLP

Hill House, 1 Little New Street

London EC4A 3TR

United Kingdom

UK Transfer Secretaries

Computershare Investor Services PLC

P O Box 82, The Pavilions

Bridgwater Road

Bristol BS99 7NH

United Kingdom

UK Legal Advisers

Linklaters & Alliance

One Silk Street

London EC2Y 8HQ

United Kingdom

UK Investor Relations

Karen Cramér

karen.cramer@uk.didata.com

+44 20 7651 7000

Dimension Data Website

www.didata.com

98 DIMENSION DATA

South African Company Secretary

ML Taylor

michelle.taylor@za.didata.com

Head Office

The Wanderers

The Campus

57 Sloane Street, Bryanston

Sandton, 2194, South Africa

Telephone: +27 11 575 0000

Postal Address

Private Bag X127

Bryanston, 2021, South Africa

South African Transfer Secretaries

Computershare Investor Services Ltd

70 Marshall Street

Johannesburg, 2001, South Africa

(P O Box 61051, Marshalltown, 2107)

South African Legal Advisers

Routledge-Modise

2 Pybus Road (Cnr Rivonia Road)

Sandton, South Africa

South African Investor Relations

Bronwyn Nielsen

bronwyn.nielsen@za.didata.com

+27 11 575 0000

On-line annual report

www.ddar.com


ANNUAL REPORT 2003 99


100 DIMENSION DATA


Regional Head Office Contact Details

United Kingdom

Fleet Place House

2 Fleet Place

London EC4M 7RT

United Kingdom

Tel +44 (0) 20 7651 7000

Fax +44 (0) 20 7651 7001

Africa

The Campus

57 Sloane Street

Bryanston, Sandton, 2194

South Africa

Tel +27 (0)11 575 0000

Fax +27 (0)11 576 0000

Asia*

6 Shenton Way #24-11

DBS Building, Tower Two

Singapore 068809

Tel +65 6323 7988

Fax +65 6323 7933

Australia

121-127 Harrington Street

The Rocks, NSW 2000

Australia

Tel +61 (0) 2 8249 5000

Fax +61 (0) 2 8249 5369

Europe

1st Floor

In den Schwarzwiesen 8

D-61440 Oberursel

Germany

Tel +49 (0) 6171 977-0

Fax +49 (0) 6171 977-150

United States

11600 Sunrise Valley Drive

Reston, Virginia 20191

United States

Tel +1 703 262 3200

Fax +1 703 262 3201

*trading as Datacraft Asia Ltd

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