Chairman's Statement

Jens Montanana

We are on a clear path to sustainable growth.

Overall this was a very pleasing year with a good set of results for Logicalis; our strongest revenue growth in five years, and the highest profit since FY15. All regions grew except North America, which has been impacted by lower product sales and reduced capex demands from many customers.

Revenues from continuing operations were $1.6 billion (FY17 $1.5 billion), including $39.1 million of revenue from acquisitions made during the period. Overall, revenues from product sales were up by 3.5%, with an increase in Cisco solution sales. Services revenues now represent 37% of the total revenues and were up 12.1% with strong growth in both professional services and annuity revenues.

Our European region contains the newly created shared services operation of South Africa, which has become a centre of excellence for managed services and supports many of our European customers. In Europe, the UK results improved significantly and Germany had a strong year. The UK benefited from a large supplier credit.

Latin America showed improvements, notably in Brazil, Argentina and a recently set up operation in Puerto Rico. In September 2017, Logicalis won a large multi-year project with a regional service provider covering multiple territories within Latin America which will contribute significantly to the business.

In July 2017, Logicalis acquired 51% of the share capital of NubeliU Limited, a South American company specialising in cloud computing projects based on OpenStack. NubeliU’s expertise in OpenStack will accelerate the global expansion of Logicalis’ cloud computing and SDx (software defined everything) practices, strengthening its position as a cloud integrator and ensuring its ability to meet its customers’ requirements on their journey to digital transformation.

During FY18, Logicalis acquired 54% of the share capital of Packet Systems (Indonesia), which was integrated with the existing Indonesian operation, and made a strong contribution to the Asia Pacific region.

The sale of the SMC business in the Netherlands in October 2017 brought $42 million of cash into the business in H2 FY18.

Logicalis’ gross margins from continuing operations were 25.0% (FY17 24.1%), benefiting from the improved services mix and a large supplier credit.

Gross profit from continuing operations was up 10.9% to $392.5 million (FY17 $354.0 million). Before restructuring costs, EBITDA from continuing operations was $91.4 million (FY17 $78.5 million), with a corresponding EBITDA margin of 5.8% (FY17 5.3%), and we expect to see the EBITDA margins continue to trend upwards. Operating profit from continuing operations before restructuring costs was $65.4 million (FY17 $54.1 million).

Digital innovation is accelerating and business technology is continuing to undergo a major shift. Logicalis is transitioning itself into a digital enabler for its customers, driven by the explosion of data, the rise of mobile and the cloud. Many opportunities exist to tap into themes such as security to augment its strong networking heritage.

Logicalis is also investing in areas such as business intelligence and data analytics to grow its data centre infrastructure offerings for customers. Cloud continues to be a key feature in the business and IT strategies of customers and Logicalis is well positioned to support customers, embracing all cloud strategies.

Logicalis remains confident about the prospects for the industry and its positioning and expects to build on the solid progress made in the past year to deliver a strong financial performance in FY19.