Logicalis Annual Review 2011

Annual Review 2011

newopportunities

Embracing

Contents

01 Introduction

02 Relevant in a changing marketplace

04 Transforming technologies

06 Strengthening our integrated offer

08 Delivering innovative solutions

10 Case studies

13 Financial highlights

14 Chairman’s statement

16 Chief Executive Officer’s review

18 Logicalis today

20 International operations

22 Corporate social responsibility

24 Board of Directors

26 Financial overview

28 Financial results

29 Our subsidiaries

LogicalisAnnual Review 201101


Today’s business world is in transition. There are rapid technological and market changes which are having a profound effect on business. As we emerge from the downturn we are faced with a set of completely new demands from customers.

With the proliferation of new technologies, businesses are under increasing pressure to continually adapt to changing environments. Yesterday’s investments in technology are not always meeting current business needs, so organisations need to rethink.

At Logicalis, we no longer talk to businesses about technology alone. We talk to them about what it does for their organisation’s future.

Because it’s not business as usual!

Marketplace relevanceHow can we help your business today? At Logicalis, we know that the post-financial- crisis world brings new opportunities and new challenges, too. For many businesses, success in this volatile environment demands new strategies, new models and new technologies, because yesterday’s tools won’t help you grab the attention of today’s customers. That’s why we focus on helping business and IT work together in a ‘joined-up’ approach that aims to create shared, sustainable and personal value – comprehensive value. When CEOs and CIOs speak the same language, the effects can be powerful, creating businesses that are more agile, more responsive and more competitive. We see it every day.

Be here, nowThe Internet has changed everything. Whether business leaders embrace it or not, every organisation today is operating in a Web 2.0 world. Some trends, after all, are impossible to ignore. The pressure to use less power and cooling, reduce IT costs and meet environmental goals is spurring the uptake of virtualisation. The trend towards the provision of IT as a scalable, pay-per-use service to users is prompting businesses to move IT assets to the cloud. The need to reach better business decisions faster is triggering investment in advanced communication and collaboration technologies. And the value of establishing more meaningful, two-way conversations with customers is seeing companies flock to social networking sites. The landscape is shifting. At Logicalis, we can help you confidently navigate your own path, at your own pace.


Strategic objectives• Make the most of opportunities offered by

economic recovery

• Invest in innovation for competitive advantage

• Get IT and the business working as one

• Embrace the latest technology trends with confidence

relevantAs a business

we have to be

in a changing marketplace

LogicalisAnnual Review 201104 Strategic objectives

• Give employees the tools they need to get work done

• Transform corporate IT resources into always-on services

• Address data security issues with confidence

Transfor ming


Data centreVirtualisation is the first step to turning corporate IT resources into always-on services for employees to use regardless of location or the device they’re using.

Public cloudScalable computing services available on a pay-per- use basis transform IT costs from upfront capital expenditure to predictable operating expenses.

Private cloudAll of cloud’s advantages of reduced cost and elastic scalability, but from within your own data centre and according to your own rules on information governance. There is an emerging view that a combination of the two, i.e. a hybrid cloud, is the way forward for many organisations.

Software-as-a-ServiceHosted applications that provide up-to-the-minute functionality on a subscription basis, but place the burden of ongoing management in the hands of third-party specialists.

Security issuesOne of the biggest concerns about both mobile devices and cloud computing, but one that your organisation can confidently address with expert help.

Consumer-driven technology platforms for instant informationToday’s employees like to shop around. The tools they use to get their jobs done are increasingly a matter of personal choice – so they’re bringing their own smartphones, laptops and tablets to work and using them to access cloud-based services. Today’s forward-thinking employer doesn’t stand in their way. By supporting these devices and placing corporate data and applications in public and private cloud infrastructures, bosses know that employees will get more done – whether they’re in the office, at home or meeting with customers. This consumerisation of corporate computing transforms IT from a support function to a value creator. We’re here to help your business make that step.

Transfor mingtechnologies fortomorrow’s organisations


Expanding our offer to meet changing expectationsThe world doesn’t stand still and neither does a business’s ICT needs. At many companies, yesterday’s technology investments have created a legacy of technology silos that are costly to maintain, burdensome to manage and hard to integrate – when what businesses really need is a stable, streamlined and seamless IT environment that brings together new and existing technologies in exciting, value-creating combinations.

Some of the most exciting new technologies – from sophisticated business analytics to advanced communication and collaboration solutions and slick multimedia delivery on demand – rely on multi-vendor, multi-technology stacks, which is why Logicalis’ clients worldwide rely on our passion for convergence and our long-established data centre skills to get these solutions working together on their behalf.

Working together with youAt Logicalis, we can support customers’ ICT solutions with full life-cycle management – from planning, design, implementation and integration to support, management and optimisation.

In particular, our extensive portfolio of managed and hosted managed services includes intelligent remote monitoring, operational management, co-location and full or partial outsourced partnering. This allows our clients to take advantage of the latest technologies in the way that suits them best, picking and choosing from a menu of service options, to create the right blend of internal and external resources.

Strategic objectives• Move away from yesterday’s technology silos

• Embrace the sophistication provided by multi-vendor, multi-technology stacks

• Rely on the help of proven experts to create and support new integrated solutions

integratedStrengthening our

offer


Delivering innovative

Dare to imagine, dare to innovate Leading companies do things differently. They think differently. They implement technology differently. In other words, they innovate. Without innovation, your business can never be a leader – just a follower. At Logicalis, we believe that the precursor to innovation is creative thinking. That’s why we’re here to help you stretch your imagination. What constraints does your business currently face? How could it serve its customers better? What new products and services would you like to launch? Today’s technologies can do remarkable things. More importantly, they can enable businesses like yours to achieve remarkable results. Go on. Dare to imagine!

Breaking down the barriers Logicalis has built its business on helping its customers use technology to find creative new ways to address their challenges. If storing vital business records and data is a struggle, we can help. If geographical distances between colleagues slow down decision times, we can help. If your IT team could be better deployed on strategic tasks that add real value, we can help. If your data centre space is costly and cramped, we can help. We measure our success by our customers’ success.


solutionsDelivering innovative

across public and private sectors

LogicalisAnnual Review 201110 Case studies

Logicalis is delivering ICT solutions and services to over 5,000 customers around the globe.

A new hybrid cloud solution implemented at Loughborough University mitigates massive cost of data centre rebuild, and connects the university to Logicalis UK’s hosted cloud service, the first of its kind connected to JANET (the UK’s education and research network).

Loughborough University, one of the UK’s leading universities, and its premier university for sport, needed to replace its 40-year-old data centre which was running with limited capacity and was badly in need of replacement. Logicalis was chosen for its Managed Private Cloud (MPC), cooperative cloud offering and for its direct connection from its Cloud Service to JANET. The university now has a data centre service that is modular, economical, green, and fully resilient at the local level, with the option of hosting services remotely at Logicalis’ data centre, and this has enabled Loughborough to avoid the need for a multi-million pound refurbishment project. ‘MPC, the cooperative cloud and Logicalis’ unique virtual container capability lets you move services from local to remote and back again without buying in more infrastructure’, says Dr Phil Richards, Loughborough’s IT Director.

PowerON is SingTel’s end-to-end suite of cloud-based services covering PowerON Connectivity, PowerON Infrastructure, PowerON Applications and PowerON Managed Services.

It provides businesses with an ‘Intelligent Utility’, providing instant, low-cost, scalable and secure IT resources on demand.

SingTel PowerON Compute, enabled by VMware vCloud Datacentre Service and part of PowerON Infrastructure, is an Enterprise-Class Cloud that provides all businesses with virtual computing needs on demand. With networking by Cisco and storage by EMC, it is the most reliable and secure cloud platform built for enterprises.

Logicalis Singapore was chosen as SingTel’s Master Service Agreement (MSA) partner for PowerON Compute Go-To-Market (GTM) strategy. The Cloud GTM will add an additional services portfolio to Logicalis’ current partnership with SingTel as the MSA for Customer Premise Equipment (CPE) and Managed Services.

‘We can always trust Logicalis to go the extra mile to deliver the services. Also, we are able to leverage on their skill set and networking resources to complement our cloud services and applications which will bring greater value to all end users,’ said Alvin Kok, Head of Infocomm Services, SingTel.

Loughborough University Singapore Telecommunications Ltd


Logicalis delivers Managed Services to Watts Water Technologies, Inc., a world leader in the manufacture of innovative products to control the efficiency, safety and quality of water within residential, commercial and institutional applications.

With demands from users increasing and budgets tightening, Watts’ Director of Global IT Shared Services, Ty Muscat, turned to Logicalis for managed services. This was the catalyst for a new dimension in the relationship between Watts and Logicalis which has increasingly shifted system management responsibilities to Logicalis and freed the Watts IT team to focus on core competencies that support and advance its business objectives.

Through the years, Watts has worked on many projects with Logicalis. Muscat says, ‘Logicalis has consistently distinguished itself by its willingness to work with my team to develop solutions that add value and fit our needs as a customer. Each project has been a joint effort that we implement together as a team and support as a team – with Logicalis taking on some responsibility and Watts taking on some responsibility. There is tremendous flexibility in the range of services Logicalis can offer.’

The client – one of the biggest private banks in Brazil – needed to reduce the time and expenditure for executives’ travel within and outside the country to visit its subsidiaries and customers.

For that, it needed to improve and expand its video conferencing rooms. PromonLogicalis’ collaboration solution was chosen to update and add realism to the meetings. PromonLogicalis has since deployed 23 telepresence rooms, more than 5,000 IP phones, network and data centre equipment and consulting services for the Itaú Group in Brazil. Itaú has nearly 5,000 offices across the Americas, Europe and Asia. It intends to acquire this solution for all international sites, and believes that unified communications is strategic to national and international expansion. The communication solution, which combines audio and video on the Internet network (IP), provides a realistic experience to virtual meetings, and thus, leads to greater productivity, reduced travel costs and only minor disruption to executives.

Outside Brazil, Logicalis has also recently implemented a project in Buenos Aires to upgrade its Cisco Call Manager and Unified Computing System (UCS) and to provide virtualised support, as well as in the US.

Watts Water Technologies, Inc. Itaú Bank


Excellent operational management and increasing business and geographical diversification has pushed revenues and EBITDA up by 25% and 26% respectively. EBITDA and operating profit margins remained steady as expected, and are planned to expand next year.

LogicalisAnnual Review 201113 Financial highlights

FY 2011 Achievements Increased sales, EBITDA and

operating profit

Invested in three data centres and cloud-based services

Three acquisitions (Europe, US and Asia Pacific)

FY 2012 Objectives Increase revenues and profitability

Increase services portfolio, including cloud-based services

Seek further suitable acquisition targets

+25%

+21%

+26%

+26%

Total sales$1.05 billion2010: $840 million

Annuity service revenues $142.2 million2010: $117.5 million

EBITDA $53.3 million2010: $42.2 million

Operating profit $31.6 million2010: $25.0 million


I am delighted to report on a year in which Logicalis delivered a strong performance, accounting for 22% of the Datatec Group’s revenues and 34% of EBITDA. The marked improvement in demand in the first half of the financial year continued into the second half, with all regions enjoying revenue growth. In particular, the strong recovery in the US reported in the first half continued during the year, with the US region enjoying double-digit growth in the second half.

Growth for the year was particularly strong in the South America region, driven by increased capital investment by telecommunication service providers, with Brazil once again the stand-out market. The performance of the Asia Pacific region was also very encouraging with good margins from an enhanced services mix. Despite a weak recovery and difficult trading conditions in the UK, Logicalis’ operations are performing well.

During the financial year, Logicalis completed three acquisitions. In September 2010, it acquired the business of Touchbase Singapore from Touchbase Group. Touchbase Singapore has annualised revenues of approximately $6 million and is a unified communications (UC) solutions provider focusing in the areas of UC and customer contact centre solutions for enterprise and multinational corporations.

“ As our services initiatives develop around our data centre operations, this, coupled with a sustained market recovery, should accelerate our profit growth.”

Chairman’s statement


In December 2010, Logicalis acquired Network Infrastructure Corporation (NIC), a Phoenix, Arizona-based Cisco Gold Partner with annualised revenues of approximately $20 million. NIC provides network consulting and IT services to the education, state and local government, gaming and hospitality markets across the Southwest United States. This acquisition expands Logicalis’ presence in this region, reinforces its strategic relationship with Cisco and extends its expertise into educational markets within which Logicalis previously had limited exposure.

In February 2011, Logicalis acquired Direct Visual, a UK-based Tandberg (now part of Cisco) Platinum Partner with annualised revenues of approximately $15 million. Direct Visual is one of the UK’s leading independent suppliers of video communications solutions and video managed services and is being integrated into Logicalis’ Unified Communications and Collaboration (UCC) operation to strengthen its video offering and further broaden its managed services and cloud computing expertise.

Market backdropWe remain positive on current trading and more optimistic about the longer term, despite the many unsettling events in the world so far this year. Corporate earnings, especially in the technology sector which tends to benefit from dollar weakness, have remained strong.

The US is continuing its slow broad-based recovery, albeit the consumer is still struggling, and there have also been some fragile global indicators of late. While Latin America and Asia remain the most vibrant markets, we detect that global growth is becoming more aligned.

We see our industry continuing to benefit from advances in computing that require continuous networked communications.

The Logicalis Group is a division of Datatec Limited, listed on the Johannesburg and London AIM Stock Exchanges, with annualised revenues of approximately $5 billion.

Market prospectsThe gradual recovery in global markets and the growth in networking-dependent cloud computing is providing a strong underpin to our industry. We expect all our operations to deliver good profitable growth this year and contribute towards overall margin expansion through operational leverage.

The US may still provide the best relative upside as businesses continue to invest and industries such as manufacturing go through something of a renaissance assisted by the weak dollar, even if consumer demand remains weak. As our services initiatives develop around our data centre operations, this, coupled with a sustained market recovery, should accelerate our profit growth.

Jens MontananaChairman

LogicalisAnnual Review 201116 Chief Executive Officer’s review

I am pleased to report that Logicalis had a strong fiscal year with increased revenues and improved margins. Following one of the toughest downturns in recent time, our focus on customer needs and remaining vigilant to economic changes placed us in an ideal position to move forward quickly as market environments improved.

Our markets are different; one size does not fit all. We operate in 19 countries with different growth rates, cultures, and ethnic and linguistic contrasts. Our corporate philosophy of empowering local management teams to create innovative solutions for their own markets, under a single Logicalis banner, and then replicating those solutions in other markets has proved successful.

I would like to thank all of our employees in all countries for their hard work and commitment in achieving these results. I would also like to extend a special thank you to all our customers, partners and stakeholders whose support we greatly value.

“ Logicalis is a new breed of business-enabling technology solutions provider.”


Group highlights• Revenues up 25% to $1.05 billion with organic

growth of 15%• Product revenues up 26%, service revenues

up 20%• Annuity service revenues up 21%• Gross margins improved to 23%• EBITDA up 26% to $53.3 million

(FY 2010: $42.2 million)• Asia Pacific region contributed 8% of revenues• Invested in three data centres and cloud-based

services• Acquisitions completed during FY 2011: Touchbase (Singapore) 20 September 2010

Network Infrastructure Corporation (US) 1 December 2010

Direct Visual (UK) 1 February 2011

The common theme that runs through our operations is customer service of the highest order. Service on every level, whether undertaking the most complex IT outsourcing and Cloud service, expediting an accounts query or delivering technology hardware must be at the forefront of all our customer relationships.

We enjoy extremely good relationships with our global technology partners and work closely with them to provide solutions that combine their technologies with our services. This enables us to become increasingly more relevant to our customers’ businesses. Our Cloud services are designed to assist organisations with their objectives, not just in computing terms but in real business terms. For example, the Logicalis analytics solution provides businesses with planning, consolidation and business intelligence tools in a corporate performance management suite, enabling senior-level executives to more effectively manage their organisation’s performance.

The common theme that runs through our operations is customer service of the highest order.

Our expertise in Cloud and XaaS services gives us the platform to provide specific business solutions such as this.

Information technology has its own language, but in a world where the possibility of what IT can do and the value that IT can bring is ever more fundamental to the delivery of business outcomes, we must continue to bring the language of business and technology together.

As we look to the future we can expect to benefit from our investments in data centres and the increasing focus on cloud-based services. We will continue to manage for improved operational leverage and will remain focused on developing our services portfolio. In addition, we will continue to seek out suitable acquisition targets.

Logicalis is a new breed of business-enabling technology solutions provider. Our mission is to enable our customers to empower their business through technology with a cost and operational model that best meets their needs.

Our mission is to create equilibrium between the business outcomes of our customers and their investments and understanding of technology. In this way we will continue to remain relevant to our customers and our partners.

Ian CookChief Executive Officer

LogicalisAnnual Review 201118 Logicalis today

Collaboration across our marketsWith over 60 offices around the globe and more than 2,000 employees, Logicalis is proud of the wealth of skills and expertise it has to offer. Our organisational structure enables us to work together closely, pooling our talents and experience to develop new and innovative solutions. The technologies we use internally make it easy for our employees to identify colleagues with specific expertise in other parts of the world, to support multinational sales opportunities, and to share customer references and relevant industry sector knowledge, leading to a better understanding of our clients and the sectors and geographies in which they operate.

ResponsivenessWhether the issue at hand is a joint marketing opportunity or a customer request, our local account managers can quickly locate colleagues anywhere else in the world, ensuring speedy response times and faster decisions.

More innovation ‘Two heads are better than one.’ That’s the principle that guides our sales and marketing personnel, so that local marketing programmes and initiatives around the world are fed by the same shared creative spark.

Our business

Communications and Collaboration

Logicalis is a recognised leader in the design, implementation and support of highly integrated Communications and Collaboration solutions, with best-in-class products from Cisco, IBM, Microsoft, Tandberg (now part of Cisco) and other leading vendors.

• Voice and IP Telephony• Network Infrastructure • Contact Centre • Messaging • Presence • Rich Media Conferencing • Collaborative Content/Web 2.0 • Video • Security

Our business

Data Centre and Cloud Solutions

Logicalis’ expertise in Data Centre solutions helps organisations operate their data centres at peak efficiency, minimal cost and maximum effectiveness, and provides the environmental benefits required today.

• Virtualisation and Consolidation • Enterprise Computing • Cloud Services • Storage • Hosting • Switching • Security


Resource sharing Our Managed Service operations around the world are adept at sharing best practice and creating operational efficiencies that lead to lower costs for customers.

Our offices

Europe

UKCardiffEllandLivingstonLondon Slough (HQ)Warrington

GermanyBerlinCologne

North America

Tempe (Arizona)Irvine, San Diego (California)Shelton (Connecticut)Atlanta (Georgia)Lisle (Illinois)Indianapolis (Indiana)Waltham (Massachusetts)Farmington Hills, Commerce Twp. (Michigan)Minneapolis (Minnesota)Bridgewater (New Jersey) New York (New York)Charlotte and Raleigh (North Carolina)West Chester, Dublin (Ohio)Houston, Plano, San Antonio (Texas)Bellevue (Washington)Green Bay, Brookfield (Wisconsin)

South America

BrazilBarueriBelo HorizonteBrasíliaManausRio de JaneiroSão Paulo

ArgentinaBuenos AiresCórdobaRosário

BoliviaSanta Cruz de la Sierra

ChileSantiago

ColombiaBogotá

EcuadorQuito

ParaguayAsunción

PeruLima

UruguayMontevideo

Asia Pacific

AustraliaBrisbaneMelbourneSydney

ChinaChongQinShanghaiSuzhouXiamen

Hong KongHong Kong

MalaysiaCyberjayaKuala Lumpur

SingaporeSingapore

TaiwanHsinchuKaohsiungTaichungTaipei

Our business

Professional and Managed Services

Logicalis’ experienced and certified specialists deliver a portfolio of full life-cycle services, backed by comprehensive Managed Services expertise. These encompass the voice and data infrastructure (fixed and mobile), data centre, hybrid public and private Cloud, and applications found in today’s enterprise ICT environments.

• Consulting • Application Integration and Development • Managed Services • Remote Monitoring and Management • Hosting • Co-location • Managed Infrastructure Services • Business Analytics• Security

Time to market New innovations conceived in our local centres of excellence – such as our UK and US Cooperative Cloud Solutions teams – are quickly disseminated, enabling local market operations to rapidly bring their own offerings to market.

Efficiencies We use our own state-of-the-art telepresence and video conferencing facilities around the world to reduce our travel costs but still reap the benefits of ‘face-to-face’ contact.

Managed Service Centres

UKSloughBracknellCardiff

USAWest ChesterPhoenix

BrazilSão Paulo

ArgentinaBuenos Aires

MalaysiaCyberjaya

ChinaShanghai

LogicalisAnnual Review 201120 International operations

North AmericaHeadcount / 540

Customers / 2,280

Group revenue / 34%

Headquartered in Farmington Hills, Michigan, Logicalis US has more than 20 regional offices and over 500 employees supporting the full spectrum of ICT solutions.

The company has a strong portfolio of communications and enterprise computing solutions which, when combined with industry-leading partnerships with Cisco, HP and IBM, provide customers with powerful choices and solutions. Augmentation of its Enterprise Cloud Services offering has been a key focus.

Today, over 30% of the company’s employees are engaged in services roles applying their specialist expertise in Managed Services, Enterprise Cloud Services, Private Cloud Services, Efficient Data Center/Virtualization/Consolidation Services, Unified Communications and Collaboration Services.

Awards• Cisco National Solution Innovation Partner of the Year• Cisco Powered Private Cloud designation• HP Solution Elite Partner• IBM Choice Award North American Excellence• IBM Beacon Award Outstanding Storage Solutions• IBM Beacon Award in the Outstanding Virtualization and

Consolidation Solution Category

South AmericaHeadcount / 730

Customers / 840

Group revenue / 28%

Logicalis’ South American operation has its main offices in São Paulo (Brazil) and Buenos Aires (Argentina) and employs over 700 staff. The company also has a local presence in Bolivia, Colombia, Chile, Ecuador, Paraguay, Peru and Uruguay.

The company is the largest independent integrator for Cisco throughout the region and a major supplier to the leading telecoms providers. Logicalis South America will continue to leverage its recognised expertise in data centre solutions and is rapidly developing its managed services capability across the region.

It has a strong services business employing over 40% of its people in technical and consulting services roles. Awards• Logicalis won seven Cisco awards for the region, including

a Cisco Global Award for Enterprise Partner of the Year


EuropeHeadcount / 540

Customers / 1,070

Group revenue / 30%

Logicalis has its headquarters in Slough, UK with local offices in the UK and Germany employing around 540 staff. The UK operation, with offices in Slough, London, Warrington, Cardiff, Livingston and Elland, has adopted a hybrid sales approach to delivering multi-vendor integrated solutions across IBM, Cisco, HP, Microsoft and other complementary technologies, and has a rich services offering with major investment in its Managed Services and Data Centre Cloud facilities.

With its headquarters in Cologne, Logicalis Germany has a strong presence in both the North Rhein Westphalia (the largest economic area in Germany by GDP) and the Berlin markets. The company is a Cisco Gold Partner and is very important strategically to Logicalis for its ability to target new business opportunities within the Eurozone. Awards• Logicalis UK won six Cisco awards, including a Cisco

Global award for Architectural Excellence Partner of the Year (Cloud Solutions)

• HP Data Centre Partner of the Year• HP Data Protector Partner of the Year

Asia PacificHeadcount / 380

Customers / 815

Group revenue / 8%

Logicalis’ Asia Pacific region is now fully integrated into the Logicalis Group and trades under the Logicalis name. In September 2010, it acquired the business of Touchbase Singapore from Touchbase Group. Touchbase is a unified communications (UC) solutions provider focusing in the areas of UC and customer contact centre solutions for enterprise and multinational corporations. This acquisition has further built Logicalis’ presence in Asia Pacific, bringing important contact centre expertise. The business has been integrated into Logicalis’ Singapore operation.

The company has three main units centred in Australia, Singapore and Taiwan, with further operations in Malaysia, Hong Kong and China, and a primary Network Operations Centre in Malaysia, with the facilities to support the needs of multinational corporations and services companies across the Asia Pacific region, including some of the largest IP networks in Australia.

Awards• Logicalis Australia won Cisco Virtualization Partner

of the Year

LogicalisAnnual Review 201122 Corporate social responsibility

Logicalis’ policy is to actively and enthusiastically support the welfare of its people, the environment and local communities wherever we have a presence.

Our people Logicalis aims to be an employer of choice: attracting, developing and retaining the best people. We understand that knowledge is the key to success and we maintain good communications with employees through our information and consultation procedures.

Our personnel practices ensure that every employee, wherever they work, whatever their role, is treated equally, fairly and respectfully at all times. Adherence to international health and safety standards ensures that our people are properly protected and cared for, wherever they operate.

Logicalis maintains consistent and transparent diversity policies across all our markets. We firmly believe that career opportunity, recognition and reward should be determined by a person’s capabilities and achievement, not their age, sex, race, religion or nationality. Wherever we operate, Logicalis strives to maintain a workforce that reflects the skills, ethnicity and demographics of the local population. Logicalis recognises that it is the ideas, skills and capabilities of our people that drive our development and growth. In return, Logicalis will invest in whatever training and resources our people need to ensure that they are able to develop and grow with us.

Logicalis is committed to rewarding its shareholders through consistently producing above-average returns and growth.

EnvironmentAs a responsible international provider of ICT solutions, Logicalis seeks to measure and minimise the way in which any of our commercial activities may impact the environment. We are also committed to providing practical advice and support to our customers and suppliers to help them along the path to ever cleaner and greener ICT solutions.

As an early adopter of the Green ICT ideas and activities, Logicalis recognises that a responsible attitude to Green ICT can lead to significant reductions in energy consumption and carbon emissions. As well as reducing greenhouse gases and operational costs, the technologies we promote, such as remote working and video and teleconferencing, enable more flexible working, greater productivity and improved business continuity. Green ICT is good for the planet and it’s good for business.

Community Logicalis encourages our operating companies in every territory to create initiatives that help improve the quality of life for their local communities. Here are just a few highlights.

During the 2010 holiday season, Logicalis US donated $35,000 to 35 charities in communities where its employees work and live; each charity was nominated and selected by local employees in one of 12 geographical regions who also made the cheque presentation. Their support made a big difference for community agencies ranging from food banks and homeless shelters to healthcare research and quality of family.

In addition, the Logicalis US ‘Give Back to the Community’ programme allows each employee eight hours of work time each year to support charities of their choice; total volunteer hours in 2010 amounted to 2,349, and 6,771 since April 2008.


For the fifth year in succession, Logicalis UK made donations to the Berkshire Community Foundation which provides grants to local voluntary groups to support grassroots projects. These include young people with special needs, the disabled, the elderly and the homeless.

Logicalis UK also sponsors Pump Aid, a charity that provides access to clean drinking water and safe, adequate sanitation to those in need in Zimbabwe, Malawi and Liberia.

Logicalis Southern Cone in South America participated for a second year in a recycling programme to support the Foundation of Garrahan Hospital in Argentina, which focuses on complex treatments for children. The programme consists of office collections of disposable paper and plastic cups, to be donated to the Foundation for its recycling.

Logicalis Southern Cone also contributed to local community organisations that help children, such as A.D.A.N.D and San José Providente; and made a donation to EGB Nº98 School, which needed technological equipment to develop a project for the improvement of writing and reading skills.

In Brazil, PromonLogicalis continues to support Junior Achievement, an organisation that teaches children about work readiness and entrepreneurship. The PromonLogicalis Volunteer Program, established in 2009, provides education, work readiness, and social movements to children in the communities of São Paulo and Rio de Janeiro, supported through the following charities: Ação Comunitária, Asylo João Evangelista, CAMP Vila Isabel, CCA Santa Teresa de Jesus, Gotas de Flor com Amor and Lar Escola Recanto Cristão.

Another of the charities associated with the programme is Ser Cidadão, which provides vocational education for adolescents and young adults from poor communities. The association has a 20-year history grounded in the activities developed by the Educação de Trabalho (Education for Work Program).

In Australia, Logicalis made a donation of AUS$5,000 towards the Queensland Flood Relief after the natural disaster in Brisbane.

Local staff also participated in an activity to build brand new bicycles for eight children in foster care. Each child was presented with a helmet and bicycle, which was assembled by Logicalis staff (and checked over by a mechanic before the children were allowed to ride the bike!). For many of the children, this was the first bike that they ever owned.

Logicalis Singapore has supported the SingTel Touching Lives Fund by participating in its Charity Golf tournament for seven years. The Touching Lives Fund (TLF) is SingTel’s corporate philanthropy programme that aims to provide disadvantaged children and young persons with special needs or who are at risk, with learning opportunities and to improve their quality of life. The beneficiaries supported by the TLF in 2010 were APSN Chao Yang School, APSN Tanglin School, AWWA Early Years Centre – EIPIC, MINDS Lee Kong Chian Gardens School, Students Care Service and the Singapore Cancer Society.

Customer oriented – we listen to our customers’ needs and focus on delivering value to their organisations.

Innovative – we attract spirited and creative employees who show heart and conviction in all that they do.

Trusted – we consistently deliver on our promises.

Honest – we have a culture that is based on integrity and openness.

Quality – we are professional in all our business dealings and dedicated to achieving, and maintaining the highest standards.

Empowerment – we foster a ‘can-do’ approach where helping our customers and colleagues is central to our job satisfaction.

Our core values

LogicalisAnnual Review 201124 Board of Directors

1. Jens Montanana ChairmanJens is the founder and chief architect behind Datatec, which he established in 1986, and also Chairman of Logicalis since March 2007. Between 1989 and 1993, Jens served as Managing Director and Vice-President of US Robotics (UK), a wholly owned subsidiary of US Robotics which was acquired by 3Com. In 1993, he co-founded US start-up Xedia Corporation in Boston, MA, an early pioneer of network switching and one of the market leaders in IP bandwidth management, which was subsequently sold to Lucent Corporation. In 1994, Jens became Chairman and Chief Executive Officer (CEO) of Datatec which listed on the Johannesburg Stock Exchange in November 1994 and on the Alternative Investment Market of the London Stock Exchange in 2006. Jens is Non-Executive Director of Versatile Systems, Inc., a Toronto and London listed Canadian company.

2. Ian Cook Chief Executive OfficerIan Cook joined Logicalis as CEO, European Operations in 2003 and became CEO of Logicalis Group in March 2007. Since then, Logicalis has become an international brand and a respected partner of the major technology vendors.

Ian has extensive experience in the technology industry spanning more than 25 years. He joined Logicalis from Damovo where he had extensive involvement in international operations as Chief Operating Officer (COO).

Prior to Damovo in 1990, Ian led the Board of Cablestream which became Siemens Network Systems Ltd (now Affiniti), one of the UK’s leading network integrators. Over a 10-year period at SNSL, he rose to Group Managing Director responsible for operations across Europe. Previously, he was Sales and Marketing Director at Case Communications Ltd, a manufacturer of data communications equipment with operations in the UK, US and Asia Pacific.

3. Mark Rogers Chief Operating OfficerMark Rogers joined Logicalis in 2003 as Finance Director for Logicalis UK, and in 2004 he became Chief Financial Officer (CFO), European Operations. Since March 2007, he has taken on the role of COO for Logicalis Group.

Mark has extensive experience in the technology and service sectors both in the UK and internationally. He spent 20 years at Racal Electronics/Thales, of which 13 years were at Finance Director level within divisions providing Managed Network Services, Telecoms and Survey, and Positioning Services. While at Thales he was also Chairman of Citylink Telecommunications, a joint venture company which had secured a £1.2 billion, 20-year Private Finance Initiative contract with London Underground. Also, he has significant mergers and acquisitions (M&A) experience, including the sale of Racal Telecom to Global Crossing for £1 billion as well as experience in the acquisition and integration of smaller businesses.He started his finance career with Revlon where he qualified as a Chartered Management Accountant.

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4. Nigel Drakeford-Lewis Chief Financial OfficerNigel Drakeford-Lewis is a Fellow of the Institute of Chartered Accountants in England and Wales and also has an honours degree in Economics and Accountancy from Exeter University. Nigel joined Datatec in June 2000, initially to help build an advisory services division which was subsequently merged with Logicalis. He then moved across to Logicalis Group in November 2000 to focus on the reshaping of Logicalis Group and help redefine its strategic direction. Since April 2001, Nigel has been CFO of the Group with responsibility for the financial management and control of the operations across the Group.

After qualifying as a Chartered Accountant with Grant Thornton, Nigel held senior financial positions with Black & Decker, Grand Metropolitan (now Diageo) and Dixons Group. Prior to joining Datatec, Nigel worked for five years as a senior consultant with Arthur D Little on strategy, corporate finance and performance improvement assignments, primarily in the fixed and mobile telecommunications sector.

Ivan Dittrich Non-Executive Director Ivan is a Chartered Accountant and has been with Datatec for the past 10 years. He was appointed as Non-Executive Director to the Logicalis Board on 22 April 2008, and later became Datatec’s Group Finance Director on 1 May 2008. Previously, he was Group Corporate Director and Group Company Secretary of Datatec for five years, as well as Corporate Finance Manager. Ivan successfully managed the Group’s dual listing in London during 2006. Prior to joining Datatec, Ivan worked for PricewaterhouseCoopers in London.

Luiz Fernando T. Rudge Non-Executive Director Luiz Rudge is CEO and a member of the Board of Directors of Promon SA. Following the acquisition by Logicalis of a majority stake in Promon Tecnologia in May 2008, Luiz then became Non-Executive Director on the Logicalis Board.

He joined Promon SA in 1982 and served as Treasurer (1987-1991), Finance Director (1991-2001), and CFO (2001-2010), when he was elected to his current position. He led several corporate finance deals on behalf of Promon, including M&A transactions as well as financing arrangements to support Promon’s proprietary investments and its contracts with clients. Prior to joining Promon and in 1986/1987, Luiz was engaged in foreign trade activities.

Luiz holds a BA degree in Business Administration from Fundação Getulio Vargas (FGV/São Paulo), and he also completed the MA programme in Geography (Urban Development) of the University College/University of London and the Advanced Management Program of the Harvard Business School.


LogicalisAnnual Review 201126 Financial overview

The markets of Europe (which is mainly the UK), North America and South America are now roughly equal in size.

The US remains the single largest market while Asia Pacific, added through the acquisition of Netstar in the prior year, is now just under 10% of the total.

The increase in South America was driven by product sales, particularly to telecommunications service providers.

There was almost no change to the product, professional services and annuity services mix in 2011.

The stronger product sales in 2011 should drive increased annuity sales, aided also by the new cloud-based services.

Overall, as the volume of business has grown, margins and the services mix have, encouragingly, remained very stable.

We are still targeting a 75/25% product versus services split in the medium term.

Revenue geographical split %2010

North America 40%South America 23%UK 34%Germany 2%Asia Pacific 1%

Revenue geographical split %2011

North America 34%South America 28%UK 28%Germany 2%Asia Pacific 8%

Revenue segmental split %2010

Product 77%Professional Services 9%Maintenance & Managed Services 14%

Revenue segmental split %2011

Product 78%Professional Services 9%Maintenance & Managed Services 13%

Asia Pacific region increase

Service mix steady


Similarly, our vendor technology mix is relatively stable.

Approximately half our product business is networking related and the other half comprises enterprise and data centre computer and storage systems and software.

The big increase in networking product sales in South America boosted the Cisco segment, which accounts for the largest share of the mix.

IBM is the next most significant vendor, followed by HP.

The category ‘Others’ includes data storage vendors such as EMC, software from IBM and VMware, and security and system management solutions.

Strong revenue growth and better margins in the US drove the overall improvement.

In Asia and Brazil in particular, the increase in product sales and impact on mix lowered the overall margin percentage.

Our geographical diversification has helped the consolidated gross margins.

The UK margins reflect its sales mix as well as the weaker conditions that still prevail in the UK market.

We remain very pleased with the balance of the overall business.

Revenue by vendor %2010

IBM 31%Cisco 40%HP 18%Others 11%

Revenue by vendor %2011

IBM 30%Cisco 48%HP 11%Others 11%

Gross margin %2010/2011

UK Germany North America South America Total Asia Pacific

18.3 18.3

28.1

21.8 21.324.6

28.7

23.2

31.6

22.2 23.0

35.1

20102011

Cisco largest vendor partner

Strong gross margins


Income statement – unaudited 2011 2010 US$m US$m

Revenue 1,048.0 839.5 Cost of sales (807.6) (653.6)Gross profit 240.4 185.9 Administrative expenses (187.1) (143.7)EBITDA 53.3 42.2 Depreciation of property, plant and equipment (10.0) (5.9)Amortisation of intangible fixed assets (11.7) (11.3)Operating profit 31.6 25.0 Net finance costs (3.1) (3.3)Datatec management fees (4.5) (2.8)Revaluation of minority interest buy-out liability (13.5) (10.4)Profit before tax 10.5 8.5 Tax on profit on ordinary activities (7.3) (4.9)Profit for the year for continuing operations 3.2 3.6 Loss from discontinued operations (2.3) (0.1) Profit for the year 0.9 3.5

Balance sheet – unaudited 2011 2010 US$m US$m

Goodwill and other intangible assets 166.7 154.0Property, plant and equipment 38.9 29.4 Deferred tax asset 18.9 12.8 Total non-current assets 224.5 196.2 Inventories 28.8 33.7Trade and other receivables 292.5 254.8 Cash and cash equivalents 93.6 82.8Total current assets 414.9 371.3 Total assets 639.4 567.5 Trade and other payables (325.8) (299.1)Bank overdrafts and loans (22.2) (6.1)Deferred consideration on acquisition of subsidiaries (7.0) (14.2)Total current liabilities (355.0) (319.4)Net current assets 59.9 51.9 Amounts owed to holding company and fellow subsidiaries (38.3) (47.1)Obligations under finance leases (11.2) (5.5)Liability for minority interest buy-out (46.1) (32.6) Deferred tax liabilities (20.5) (13.2)Other long-term liabilities (13.2) (7.8)Total non-current liabilities (129.3) (106.2)Total liabilities (484.3) (425.6)Net assets 155.1 141.9 Share capital and share premium 130.2 130.2 Minority interest buy-out reserve (46.1) (32.6) Foreign currency exchange and other non-distributable reserves (23.3) (35.4)Retained earnings 63.4 52.7 Attributable to equity holders of the parent 124.2 114.9 Minority interest 30.9 27.0 Total equity 155.1 141.9

Financial results

Our subsidiaries

Percentage heldStatutory name Country of incorporation 2011 2010

Holding Company Logicalis Group Limited England and Wales 100% 100%Subsidiaries of Logicalis Group Limited Logicalis Group Services Limited England and Wales 100% 100%Logicalis UK Limited England and Wales 100% 100%Promon-Logicalis Latin America Limited England and Wales 70% 70%Logicalis Limited (dormant) England and Wales 100% 100%Logical Group Limited (dormant) England and Wales 100% 100%Satelcom Limited (dormant) England and Wales 100% 100%Logicalis Computing Solutions Limited (dormant) England and Wales 100% 100%Hawke Systems Limited (dormant) England and Wales 100% 100%T.B.C. Group Limited (dormant) England and Wales 100% 100%TBC Limited (dormant)* England and Wales 100% 100%Logicalis Computing Solutions Finance Limited (dormant)* England and Wales 100% 100%Direct Visual Group Limited (dormant)* England and Wales 100% N/ADirect Visual Limited* England and Wales 100% N/ADirect Visual Services Limited (dormant)* England and Wales 100% N/ANext Generation Internet Limited (dormant)* England and Wales 100% N/ALogicalis (Ireland) Limited Ireland 100% 100%Logicalis GmbH* Germany 100% 100%Logicalis Deutschland GmbH Germany 100% 100%Logicalis Networks GmbH* Germany 100% 100%Logicalis (US) Holdings, Inc. USA 100% 100%Logicalis, Inc.* USA 100% 100%Logicalis South America, Inc.* USA 70% 70%Network Infrastructure Corporation* USA 100% N/APromonLogicalis Tecnologia e Participacoes Ltda* Brazil 70% 70%PTLS Comercio, Exportacao e Importacao de Equipamentos de Telecommunicacao Ltda* Brazil 70% 70%PLLAL International LLC* Brazil 70% 70%Logicalis Brasil Servicos de Assessoria Tecnica Ltda.* Brazil 70% 70%Logicalis Argentina S.A.* Argentina 70% 70%X-Net Cuyo S.A.* Argentina N/A 70%Logicalis Uruguay S.A.* Uruguay 70% 70%Logicalis Inc. S.A.* Uruguay 70% 70%Logicalis Paraguay S.A.* Paraguay 70% 70%Logicalis Chile S.A.* Chile 70% 70%Logicalis Andina S.A.C.* Peru 70% 70%Logicalis Andina Bolivia LAB. Ltda.* Bolivia 70% N/ALogicalis Colombia S.A.S.* Colombia 70% N/ALogicalis Ecuador S.A.* Ecuador 70% N/ANetStar Group Holding Limited British Virgin Islands 100% 100%NetStar Australia Holding (BVI) Limited (dormant)* British Virgin Islands 100% 100%NetStar Asia Holding (BVI) Limited (dormant)* British Virgin Islands 100% 100%Logicalis Australia Pty Limited* Australia 100% 100%Logicalis Asia Pacific MSC Sdh Bdn* Malaysia 100% 100%Logicalis Malaysia Sdn Bhd* Malaysia 100% 100%Logicalis Singapore Pte Limited* Singapore 100% 100%Logicalis Shanghai Limited* China 100% 100%Logicalis Xiamen Limited* China 100% 100%Logicalis Hong Kong Limited* Hong Kong 100% 100% Note: * indicates a subsidiary which is owned indirectly via an intermediate holding company.


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Logicalis Annual Review 2011

Business

Transcript of Logicalis Annual Review 2011