Support Build Plan - Dimension Data

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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
Page 1 and 2: annual report 2003
Page 3 and 4: Think straight. Talk straight. Exce
Page 5 and 6: We deliver value through a full lif
Page 7 and 8: ... in key verticals ▲ Allianz
Page 9: in over 30 countries across five co
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Page 19 and 20: operational review Regional Review
Page 21 and 22: Asia $'000 FY2003 FY2002 Turnover 3
Page 23 and 24: Continental Europe $'000 FY2003 FY2
Page 25: USA $'000 FY2003 FY2002 Turnover 34
Page 29 and 30: million, which was applied to elimi
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Page 33 and 34: directors’ report The Directors o
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Page 43 and 44: During 2003 DDSA made a further US$
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100 DIMENSION DATA
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