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FINANCIAL HIGHLIGHTS
WESTCON SA
Westcon SA (formerly Westcon AME) is a value-added convergence distributor in South Africa and sub-Saharan Africa and its operations mirror those of the Westcon Group. In the year under review revenue increased by 44% to $69 million (2006: $48 million). EBITDA was $2 million (2006: $1 million). Gross margins remain steady at 12% indicative of initiatives relating to the development of the product set which Westcon SA implemented to supplement its traditional products.
The improvement in both revenue and EBITDA related to improved performance across almost all products in the Westcon, Comstor and Scantec divisions. As explained in more detail below, Datatec successfully concluded the sale of 45% of Westcon SA to its new Black Economic Empowerment ("BEE") partners, African Legend Technologies. This has resulted in particularly good BEE credentials for Westcon SA and this is seen as an important contributing factor to the continued growth of the business.
ONLINE DISTRIBUTION
OnLine Distribution ("OnLine") is a leading value-added distributor for data networking products and services, covering the Middle East, Western Asia and North Africa. OnLine helps to grow the business of its vendor partners in the region by giving access to the region's leading system integrators, and supporting them with value-added services to enhance their product offerings. To build confidence and deepen relationships, OnLine offers vendors support in rolling out and managing reseller programmes.
OnLine's revenue increased by 32% to $45 million (2006: $34 million). EBITDA improved by 50% to $3 million (2006: $2 million). The outlook for the next 12 months is positive as OnLine's revenue growth is driven by a strategy to widen the product portfolio and focus on new territories. The Enterprise Mobility business unit continued its strong performance while the Enterprise and Security business units exceeded expectations.
During the current year, the Middle East market continues to grow as oil revenue remains high. Spending remains buoyant and there has been, and continues to be, a particular emphasis on governments across the region investing in IT. This is experienced particularly in the education, fi nance and health sectors. Margins continue to come under pressure from "broad-line" distribution and vendor direct "go to market" strategies, however, OnLine's organic strategies and "value-add" approach will act as a buffer to maintain the acceptable operating margins that it has achieved to date.
AFRICAN LEGEND INDIGO (formerly Rangegate)
On 1 September 2006, Datatec merged its Rangegate operations with African Legend Indigo, part of African Legend Technologies, a black empowered ICT company. The newly merged entity was renamed African Legend Indigo ("AL Indigo") and Datatec retained a 55% shareholding. As part of the transaction, Datatec sold 45% of Westcon SA to African Legend Technologies. Westcon SA will continue to operate as a separate business.
AL Indigo is a provider of Enterprise Management Solutions including the supply of software, hardware and support to the telecommunications industry, financial services sector and the public and private sectors. Its vendor partners include Sun Microsystems, BEA Software, BMC Software, Remedy, Symantec (Veritas) and IBM. Other services include configuration support, software customisation, initial installation planning as well as professional services including implementation and project management, disaster recovery, maintenance, knowledge transfer and system integration. The Rangegate division provides mobile supply chain solutions to sectors such as retail, industrial, manufacturing, transport and logistics.
AL Indigo achieved revenue of $28 million and EBITDA amounted to $1 million. These results include the full year trading of the Rangegate business and six months of the AL Indigo business.
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