DATA#3 LIMITED — Annual Report 2014

Aug 20, 2014

FY14 Results Briefing21 August 2014

DATA#3 LIMITED (DTL)

FY14 FINANCIAL PERFORMANCE

ROBUST BUSINESS MODEL SAW TOP LINE GROWTH

• • Total revenue up 8.1% to \$833.6M
• •Product revenue up 9.0% to \$697.3M
• •Services revenue up 3.5% to \$134.8M
• •Other revenue up 23.4% to \$1.5M
• • Total gross profit down 2.7% to \$119.2M
• •Product GP down 3.4% to \$66.0M
• •Services GP down 2.5% to \$56.8M
• • Gross margin down from 15.9% to 14.8% due to change in sales mix and general pressure on margins
• • Reflected by
• • Solid contribution from Software Licensing, contract maintenance services and recruitment & contracting
• • Continued investment in building our Managed Solutions & Cloud offerings and expertise

FULL YEAR REVENUE UP

MARGINS HELD UP REASONABLY WELL GIVEN MARKET CONDITIONS

Product and services gross profits and margins albeit declining, held up reasonably well given the competitive market and change in mix

REGIONAL MOVEMENT IN GP

% change in gross profitFY14 vs. FY13

No significant lift in Qld Government IT investment and a subdued corporate sector saw QLD slow further.

Solid growth in NSW and VIC

SA was most challenged location

Underlying GP in WA grew solidly particularly given 'once-off' benefit from the Fiona Stanley Hospital contract in FY13

The niche national services businesses declined as they struggled for traction with our sales business

MARKET DEMANDS & INVESTMENT DROVE EXPENSES UP

Internal staff costs (\$M)

Internal staff costs up 2.9% due to higher selling costs to deliver revenue and the need to retain competitive scale in all locations

Operating expenses up 3.8% due to additional depreciation & amortisation for investments (systems, premises, cloud) that provide leverage as growth returns

LOWER GROSS PROFIT & HIGHER EXPENSES DROVE PROFIT, EARNINGS, DIVIDENDS DOWN

NPAT decreased 38% to 7.5mEPS declined 38% to 4.89 centsDividend payout 4.5 cents (3.0 cents in 2H)Payout ratio 92%

MOVEMENT FY13 TO FY14

Consolidated comparison FY13 to FY14

9

MOVEMENT FY13 TO FY14

Segment comparisons FY13 to FY14

BALANCE SHEET FUNDAMENTALS REMAIN STRONG

• •Cash flow 'seasonality' consistent with previous years
• • Strong operating cash flow of \$29.4 million, with cash flow conversion of 3.9 times
• • Full year average daily cash balance up from \$31.1Mto \$36.3M
• •Closing cash balance \$103.4M up 21%
• •Debtors DSOS industry best practice at 29 days
• •Net Tangible Assets down 1.6% to \$26.3M
• •No material debt

CASHFLOW & BALANCE SHEET TRENDS

NTA (\$M)

OUR BUSINESS

FY14 STARTED WITH STRUCTURAL REALIGNMENT AND CONSOLIDATION

• • Aligned around our customers' movement to HYBRID ITa combination of on premise, outsourced and cloud
• • Realigned the 5 areas of specialisation into 3
• oSoftware Solutions
• oInfrastructure Solutions
• oManaged Solutions
• • Consolidated all 'back office' functions into 2 businesses
• oShared Services (HR, Systems, Marketing, Logistics)
• oCorporate Services (F&A, Legal)

FY14 STRUCTURE

STRONG NATIONAL FOOTPRINT

STRONG PARTNERSHIPS With leading global vendors

STRONG PARTNERSHIPS Endorsed by many awards

Global award

•Microsoft - Devices and Deployment Partner of the Year

National awards

• •Lenovo – Innovation Partner of the Year
• •Microsoft - Enterprise Partner of the Year
• • Sophos – LAR Partner of the Year (for Australia and New Zealand)
• •Symantec – Partner of the Year (for Australia and New Zealand)
• •VMware – Solution Provider of the Year (for Asia Pacific Japan)
• • VMware – End User Computing Partner of the Year (for Australia and New Zealand)
• •ARN Enterprise Reseller of the Year – ⁷th consecutive year

OPERATIONAL PERFORMANCE

SOFTWARE SOLUTIONSOfferings…

A complete software solution from on premise to outsourced to cloud

• •Supply and manage the license
• •Deploy and manage the software, and
• •Customise and improve user adoption of software

SOFTWARE SOLUTIONSFY14 performance…

• •Growth in revenue & gross profit in an, at best, flat market
• • Combination of increasing market share, maximising vendor channel program incentives, and further gains in operational efficiency
• •Increased selling costs to service contracts
• • Moved more customers to licensed software in the public cloud - Microsoft, Symantec, VMWare & Adobe
• • Remained a member of Microsoft's Worldwide Licensing Partner Engagement Board
• •Won major awards including a global Microsoft award

INFRASTRUCTURE SOLUTIONSOfferings…

• • Lifecycle hardware asset management services
• • Procurement, quality control, deployment, tracking, & disposal
• •Multi-vendor maintenance services
• • Unified communication & collaboration for mobile business users
• • Hybrid IT infrastructure for delivery of IT Services, on premise, outsourced and in the cloud

INFRASTRUCTURE SOLUTIONS FY14 performance…

• •Revenues declined 10% and gross profit declined 8%
• •Market conditions impacted hardware procurement
• • Strong contract maintenance services offsetting theFiona Stanley Hospital contract in FY13
• •Project services gross profit increased 4%
• • Member of the Hewlett-Packard Global Partner Advisory Board + Cisco Advisory Board for Asia Pacific

MANAGED SOLUTIONSOfferings…

• •Workforce recruitment, contracting, augmentation
• •Business user operational support
• •Full operational infrastructure outsourcing
• • Development and delivery of Data#3's Hybrid cloud infrastructure-as-a-service

MANAGED SOLUTIONS FY14 performance…

• • Workforce solutions strong in a challenging market revenue up 9%, and gross profit up 5%
• • Outsourcing revenues up 3% but onboarding & transition projects drove gross profit down by 3%. Contracts structured to provide increasing returns over their term
• • Develops and delivers Data#3's hybrid as-a-service cloud
• •Upfront investment in future cloud based revenues
• •Some strategic customers and an increasing pipeline
• •With continuing investment, returns limited in the year.

PEOPLE SATISFACTION Held to prior years…

Net Promoter % Recommend Data#3

667 permanent23 casual 322 contractors>1,000 people

FY15

A MARKET UNIQUELY IN TRANSITION

THREE ELEMENTS TO THE TRANSITION

IT commoditising

IT consumption changing

Risk shifting

IMPLICATIONS OF THE TRANSITION

IT commoditising

Data centre desktop product and related services

Competitive and price sensitive

Demands solution packaging & operational efficiency

IT consumption changing

HYBRID IT From product to outsource to cloud

From Capex to Opex

Demands solution breadth, integration and financing

Risk shifting

From implementation to adoption

New apps and service types

Demands investment and trusting relationships

OUR RESPONSE TO THE TRENDS

IT commoditising

IT consumption changing

Sales efficiency

Investment in supply chain automation

'Rapid' service packaging

Investing in aaS

People augmentation

Maturing selective sourcing solutions

Investing in aaS

Finance partner

Risk shifting

New Consulting services

Business Productivity Services

Investing in aaS

Investing in apps

SUPPORTING REFERENCES

SHAREHOLDER PERSPECTIVE

In a market in transition, is DTL positioned to grow revenues, profit and dividends?

We think we are and as our customers re-architect their IT strategies, we believe we're positioned strongly with new solutions and references

SHAREHOLDER PERSPECTIVE

When can we expect this to happen?

We're seeing conditions improving which should translate in time to more positive sentiment toward investment.

This in turn will lead to more significant take-up in apps, aaS and transformational services

ACQUISITION OF INTEREST IN DISCOVERY TECHNOLOGY

INVESTMENT DETAILS

• •\$2.5M for 42.5% ownership
• •Funding from cash flow with no impact on dividends
• •Option to June 2015 for additional 16.2%
• •Option to June 2017 for balance

• •Board position

• Reseller rights for CCX - Connected Customer eXperience – Wi-Fi content management and analytics

MARKET OPPORTUNITY

• •68% adults own a smartphone
• •86% users look for info
• •88% take action as a result
• • CCX delivers meaningful content from which mobile visitors can take action
• •Ground floor opportunity in a fast growing market
• •Strategic repositioning to apps and services
• • Immediate return as a reseller + mid term return onequity investment

FY15OUTLOOK

FY15 GUIDANCE

"Having taken costs and capacity out in the previous two years, the 2015 plan targets growth through market share gain and the introduction of additional complementary revenues.

Our financial objective is to improve on the 2014 result."

APPENDIX – FINANCIAL SUMMARY

	FY14 \$'000	FY13 \$'000	% Change
Product revenue	697,319	639,644	$+9.0%$
Services revenue	134,776	130,182	$+3.5%$
Other revenue	1,500	1,216
Total revenue	833,595	771,042	$+8.1%$
Total gross profit (excluding other revenue)	118,869	122,525	$-3.0%$
Total gross margin %	14.3%	15.9%
Total expenses	109,517	106,269	$+3.1%$
EBITDA	12,219	18,700	$-34.7%$
EBIT	9,703	16,664	$-41.8%$
EBIT margin %	1.2%	2.2%
NPBT	10,852	17,472	$-37.9%$
NPAT	7,524	12,138	$-38.0%$
Net operating cash flow	29,419	30,489	$-3.5%$
Cash flow conversion (Net op cash flow/NPAT)	3.9 times	2.5 times
	FY14	FY13	% Change
Earnings per share	4.89 cents	7.88 cents	$-38.0%$
Dividend per share	4.50 cents	7.00 cents	$-35.7%$
Dividend payout ratio	92%	89%
Return on equity %	22.4%	35.8%

DISCLAIMER

This presentation has been prepared by Data#3 Limited ("the Company"). It contains general background information about the Company's activities current as at the date of the presentation. It is information given in summary form and does not purport to be complete. The distribution of this presentation in jurisdictions outside Australia may be restricted by law and you should observe any such restrictions.

This presentation is not (and nothing in it should be construed as) an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security in any jurisdiction, and neither this document nor anything in it shall form the basis of any contract or commitment. The presentation is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding ifan investment is appropriate.

The Company has prepared this presentation based on information available to it, including information derived from publicly available sources that have not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, correctness or reliability of the information, opinions and conclusions expressed.

Any statements or assumptions in this presentation as to future matters may prove to be incorrect and differences may be material. To the maximum extent permitted by law, none of the Company, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.