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Strategic review to unlock embedded value

Datatec 31 August 2021 Update
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Datatec

Strategic review to unlock embedded value

Strategic review

IT services

31 August 2021

Price

ZAR29.05

Market cap

ZAR5.9bn

ZAR14.7/US$

Net debt (US$m) at 28 February 2021

60.9

Shares in issue

203.2m

Free float

62%

Code

DTCJ

Primary exchange

Johannesburg

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

Rel (local)

52-week high/low

ZAR31.5

ZAR20.0

Business description

Datatec is a South Africa-listed multinational ICT business, serving clients globally, predominantly in the networking and telecoms sectors. The group operates through three main divisions: Westcon International (distribution); Logicalis (IT services); and Analysys Mason (consulting).

Next events

Trading update

September/October 2021

Interim results

28 October 2021

Analysts

Richard Williamson

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

Datatec is a research client of Edison Investment Research Limited

Datatec has announced a strategic review to ‘unlock and maximise shareholder value’ and ‘address the persistent gap between Datatec’s valuation and the inherent value of its underlying assets’. The solid operating performance across all divisions in FY21 gives us reassurance for Datatec’s interim results as the H122 reporting period ends, with strong industry growth globally. The positive anticipated H122 performance only exacerbates the gulf in valuation between Datatec and its peers. We have left our estimates unchanged but have revisited our valuation analysis and, with all three divisions expected to perform well, our conservative SOTP analysis highlights potential upside of c 175% from current share price levels. As the global economy recovers, the shares offer defensive growth and an attractive yield, with the potential for significant upside as management (with a track record of deal making) unlocks this embedded value. The group trades on 2.8x FY22e EV/EBITDA and 12.0x FY22e P/E.

Year end

Revenue
(US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

02/20

4,214

79.1

9.9

7.00

20.0

3.5

02/21

4,109

73.1

13.6

6.80

14.6

3.4

02/22e

4,317

79.1

16.5

5.50

12.0

2.8

02/23e

4,548

101.6

24.9

8.28

8.0

4.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Benign global outlook, bounce back in IT spending

The negative impact of the COVID-19 pandemic was relatively short-lived for the IT services sector. As the sector gathers pace, Gartner is projecting worldwide IT spending totalling US$4.2tn in 2021, an increase of 8.6% from 2020, or 6.4% in constant currency terms (July 2021). Despite the COVID-19 pandemic continuing to cloud the horizon, particularly in emerging markets, IT spending in 2021 is projected to grow year-on-year in every region globally.

Sum-of-the-parts highlights investment opportunity

Datatec’s broad comparator universe has seen an uplift from the COVID-19 pandemic, enjoying further multiple expansion as investors have recognised the sector as a safe haven with defensive growth characteristics once fears over the pandemic started to abate. Datatec appears to have been left behind by this revaluation. By considering peer groups for each of its divisions individually, we estimate that Logicalis could be worth US$1.2bn, Westcon US$0.5bn and Analysys Mason US$0.2bn. This compares with the group’s current EV of US$462m.

Valuation: Significant embedded value

Although listed in Johannesburg, Datatec has negligible exposure to the South African market, with the equity story being a dollar-denominated global ICT play. Despite this, the group currently trades on 2.8x EV/EBITDA and 12.0x P/E in FY22e, substantially below its peer group. This view is supported by a simple sum-of-the-parts (SOTP) analysis, which suggests a group EV of c US$1.9bn and a fair value per share that is multiples of Datatec’s current share price. As confirmed by the strategic review, management is committed to unlocking this underlying value.

Outlook: Strong growth as pandemic impact eases

Increased polarisation: Scale and specialisation

The negative impact of the COVID-19 pandemic was relatively short-lived for the IT services sector. After the immediate transition to remote working, customers started to plan for longer-term digital transformation, with demand focused around public/hybrid cloud infrastructure, security, software-defined networking, cloud-based unified communications, remote collaboration tools and analytics.

Not only are end-users looking to accelerate the implementation of digital technologies, but they are also increasingly open to outsourcing the management of this infrastructure/application stack, driving greater annuity revenues and improving margins for service providers with the appropriate expertise. This factor appears to have principally benefited the scale players (ie those with a diversity of customers, a broad product range, strong vendor relationships and robust balance sheets), leaving smaller IT services companies at a competitive disadvantage.

With a diversified mix of businesses, a broad global presence and a strong balance sheet, Datatec has been well-placed to benefit from the recovery in global IT spending. Software and services (including annuity income) has continued to grow as a proportion of group sales (FY21: 47% of revenues) and, with management expecting many of the technology trends of FY21 to persist in FY22, the group retains its strategic focus on networking, security and cloud infrastructure.

Bounce back in global IT spending underway

After 2020, which could be characterised as a year of largely tactical IT investment in reaction to the COVID-19 pandemic, Gartner is projecting worldwide IT spending will total US$4.2tn in 2021, an increase of 8.6% from 2020, or 6.4% in constant currency terms (July 2021). Gartner is expecting companies to become more strategic in their digital transformation initiatives as the economy recovers, targeting investment in technologies with a clear business rationale.

Despite the COVID-19 pandemic continuing to cloud the horizon, particularly in emerging markets, Gartner projects IT spending to grow year-on-year in every region globally. Gartner’s growth projections also indicate continuing emerging market currency weakness relative to the dollar, with constant currency growth c 2.2% below nominal growth rates. As Datatec reports in dollars, any emerging market currency weakness will provide a marginal drag on its results.

Sector performance has fed into valuations and M&A

Recognising the resilience of the industry’s performance, share prices across the IT services sector have risen strongly following the initial impact of the pandemic, with investors increasingly recognising the sector’s defensive growth prospects both during the pandemic and as it abates. The average share price of Logicalis’s and Westcon’s peer groups (Exhibits 1 and 2) has risen by c 30% since the start of 2021.

This strong trading across the sector has driven corporate activity, including:

Telefónica’s acquisition of Cancom’s UK and Ireland operations (July 2021) for €400m, at an FY20 EV/EBITDA multiple of 15.8x, strengthening its cloud and cybersecurity divisions and consolidating its digital transformation offering;

Converge Technology’s three acquisitions of Vicom Computer Services for US$25m, Dasher Technologies for US$40m and ExactlyIT for US$26m (H121);

ePlus’s acquisition of System Management Planning (January 2021);

Synnex’s proposed merger with Tech Data (March 2021); and

Datatec’s own acquisition of Siticom (June 2021) to strengthen its advanced networking integration offering around 5G and cloud-based network interoperability.

Private equity has also been a visible buyer in the UK, with recent deals including:

Platinum Equity’s acquisition of Ingram Micro for US$7.2bn from HNA (July 2021);

Inflexion’s c £200m investment in ANS Group (June 2021), to be put together with its existing investment, UKFast, to create a leading UK hybrid cloud services provider; and

August Equity’s buy-and-build investment in Integrity360 in June 2021.

Management has a history of strategic disposals

Looking back at Datatec’s long-term track record, there is a history of management making strategic disposals that have delivered attractive shareholder returns. Firstly, in 2004, Logicalis Australia/New Zealand was sold to IBM for US$66m; then in 2017, Logicalis SMC Netherlands was sold to DXC for US$42m; and most recently, in 2017, Westcon Americas was sold to Synnex for US$644m (US$630m paid in cash on closing, together with a US$14m earnout), with Synnex also taking an initial 10% stake in Westcon International for US$30m. These final two transactions led to special dividends of ZAR24 (US$1.72) per share being paid to shareholders in 2018 and 2020, contributing materially to the group’s total shareholder returns.

Defensive growth, significant upside potential

Turning to Datatec, all three of its divisions can point to a track record of solid profitability with the group’s core focus on software and services in networking, security and cloud infrastructure expected to deliver strong growth as the global economy recovers.

Despite this, to date the group appears to have been overlooked by the market as peer multiples have recovered post-COVID-19. Datatec currently trades on 2.8x EV/EBITDA and 12.0x P/E in FY22e, while our peer group indicates that a blended multiple of 12.8x EV/EBITDA or 20.8x P/E in FY22e could be justified. Our firm belief is that Datatec’s low relative valuation is retrospective and does not reflect the positive transformation management has achieved, Datatec’s improved operational performance since 2018 (64% EBITDA CAGR FY18–21) or the group’s future growth prospects. This view is further underlined by a simple SOTP analysis (below), which highlights the group’s embedded value in a sector actively targeted by private equity.

The announcement of the strategic review confirms that management remains committed to unlocking this underlying value on behalf of shareholders.

Valuation: Peer multiples coupled with sum-of-the-parts

Focusing on peer valuations, Datatec’s broad comparator universe has seen an uplift from the COVID-19 pandemic, enjoying further multiple expansion as investors have recognised the sector as a safe haven with defensive growth characteristics as fears over the pandemic start to abate. We look at each of Datatec’s three principal businesses separately.

Logicalis: SOTP EV ~US$1.2bn

Logicalis has an international peer group drawn principally from North America and Europe (Exhibit 1). These businesses have average FY1e gross margins of 22.4% and EBITDA margins of 8.1%, comparable to our FY22 estimates for Logicalis of 25.4% and 6.5% respectively. We avoid comparing sales multiples as these are complicated by differing policies internationally to recording revenues net or gross. The core peer group trades on a mean EBITDA multiple of 13.5x FY1e and 12.3x FY2e. Applying these multiples to Logicalis (working set out in Exhibit 4) leads to an enterprise value of c US$1.4bn. Allowing for minorities (principally a 35% share of Logicalis LatAm), we estimate that Datatec holds a weighted c 80% economic interest in Logicalis, implying a mid-range enterprise value of US$1.2bn. This compares to Datatec’s current group EV of US$462m.

Exhibit 1: Peer group for Logicalis – IT services companies

Share price

Quoted ccy

EV ($m)

Gross margin 1FY (%)

EBITDA margin 1FY (%)

EBIT margin 1FY (%)

EV/sales 1FY (x)

EV/sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

Div yield 1FY (x)

Atea

171.4

NOK

2,284

20.3

4.1

2.6

0.5

0.5

11.9

10.3

24.4

19.5

3.6

Bechtle

60.74

9,072

15.0

6.5

5.0

1.2

1.1

18.6

17.3

34.6

31.5

0.8

Cancom

54.42

2,251

30.8

10.8

9.6

1.3

1.2

12.0

14.1

37.3

33.6

1.3

CDW Corp

198.07

US$

30,662

17.1

8.4

7.8

1.5

1.4

17.8

17.2

25.7

23.6

0.8

Computacenter

2860

GBp

4,741

13.1

4.7

3.5

0.5

0.5

11.5

11.3

20.9

20.4

1.9

Converge Technology

10.73

C$

1,528

23.5

6.8

3.1

1.2

0.9

17.8

10.5

45.7

19.1

NM

Econocom Group

3.39

1,316

21.0

6.8

5.1

0.4

0.4

6.1

5.9

9.7

8.7

3.4

ePlus

105.26

US$

1,360

25.3

8.8

8.4

0.8

0.8

9.1

9.0

14.3

14.4

NM

Insight Enterprises

98.7

US$

3,816

15.5

4.4

3.9

0.4

0.4

9.6

8.9

14.4

12.9

NM

Reply

171.7

7,354

NM

16.8

13.6

4.3

3.8

25.4

23.0

45.1

39.9

0.4

Sopra Steria Group

168.4

4,983

42.7

11.3

7.1

0.9

0.9

8.1

7.3

16.0

13.5

1.6

Mean

 

 

 

22.4

8.1

6.3

1.2

1.1

13.5

12.3

26.2

21.6

1.7

Median

 

 

 

20.6

6.8

5.1

0.9

0.9

11.9

10.5

24.4

19.5

1.4

Source: Refinitiv (priced at 30 August 2021)

Westcon International: SOTP EV ~US$550m

As with Logicalis, Westcon’s peer group (Exhibit 2) is principally drawn from North America and Europe. The average gross margin for Westcon’s peers is 9.5%, with EBITDA margins of 3.4%, compared to our FY22 estimates for Westcon of 11.3% and 1.9% respectively. Setting aside sales multiples for the reasons stated under the Logicalis paragraph, the peer group averages 9.6x FY1e and 9.1x FY2e EV/EBITDA. Applying these multiples to Westcon International (working set out in Exhibit 4) would indicate an enterprise value of c US$600m. Factoring in Datatec’s 92% economic interest (8% is held by Synnex) indicates a valuation for Datatec’s interest of c US$550m.

Exhibit 2: Peer group for Westcon International – IT distribution companies and resellers

Share price

Quoted ccy

EV ($m)

Gross margin 1FY (%)

EBITDA margin 1FY (%)

EBIT margin 1FY (%)

EV/sales 1FY (x)

EV/sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

Div yield 1FY (x)

Also Holding

293

CHF

4,183

5.6

2.1

1.6

0.3

0.3

13.6

12.5

23.0

20.3

1.4

Arrow Electronics

120.77

US$

10,730

11.2

4.7

4.2

0.3

0.3

6.6

6.4

8.9

8.4

0.0

Avnet

40.46

US$

5,041

12.3

3.6

3.0

0.2

0.2

6.7

6.7

9.1

9.0

2.2

Esprinet

15.6

1,048

4.7

1.6

1.4

0.2

0.2

10.8

9.6

18.5

15.6

2.1

Scansource

35.28

US$

980

11.4

3.9

3.2

0.3

0.3

7.6

6.8

10.9

9.8

NM

SYNNEX Corp

127.81

US$

6,544

7.0

3.3

3.1

0.3

0.3

9.1

8.4

15.5

14.4

0.0

Wesco International

116.28

US$

10,232

20.4

6.2

5.1

0.6

0.5

9.2

8.4

13.3

11.4

NM

WPG Holdings

47.65

TWD

7,383

3.7

2.0

1.7

0.3

0.3

13.4

13.8

7.9

8.4

8.1

Mean

 

 

 

9.5

3.4

2.9

0.3

0.3

9.6

9.1

13.4

12.2

2.3

Median

 

 

 

9.1

3.4

3.0

0.3

0.3

9.2

8.4

12.1

10.6

1.8

Source: Refinitiv (priced at 30 August 2021)

Analysys Mason: SOTP EV ~US$210m

Analysys Mason’s peer group (Exhibit 3) is weighted towards North America over Europe, as this is where the majority of consultancies are listed. The peers indicate average FY1e gross margins of 42.8% and EBITDA margins of 18.0%, compared to our FY22 estimates of 43.2% and 15.1% respectively. The peer group trades on a mean EV/sales multiples of 3.6x and 3.3x, and average EV/EBITDA multiples of 18.1x and 17.0x for FY1e and FY2e, respectively. Applying these multiples to Analysys Mason (set out in Exhibit 4) indicates an enterprise value of c US$210–280m, falling to a mid-range valuation of c US$210m once Datatec’s 82% economic interest is accounted for, with the remainder held by the consulting partnership.

Exhibit 3: Peer group for Analysys Mason – IT consultancies

Share price

Ccy

EV ($m)

Gross margin 1FY (%)

EBITDA margin 1FY (%)

EBIT margin 1FY (%)

EV/sales 1FY (x)

EV/sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

Div yield 1FY (x)

Accenture

333.23

US$

212,683

32.6

18.8

15.1

4.2

3.8

22.4

20.3

37.8

33.8

1.1

Booz Allen Hamilton

81.11

US$

13,192

54.3

10.8

9.3

1.6

1.5

14.5

13.6

19.3

17.5

1.9

Capgemini

190.7

44,547

34.2

15.5

11.5

2.2

2.0

13.9

12.9

23.4

21.1

1.1

Forrester Research

46

US$

837

59.8

13.6

11.5

1.7

1.6

12.6

11.3

25.4

21.2

NM

FTI Consulting

140.78

US$

4,960

31.2

12.8

11.2

1.8

1.7

14.1

12.3

21.9

18.9

NM

Gartner

306

US$

27,263

69.1

25.6

21.5

5.9

5.2

23.1

26.6

39.2

45.7

0.0

GlobalData

1540

GBp

2,607

44.9

32.9

27.5

10.0

9.4

30.5

26.8

50.5

43.1

1.2

Huron Consulting

49.05

US$

1,356

28.8

11.0

7.5

1.5

1.4

13.8

12.1

18.9

16.7

NM

Wipro

9

US$

44,082

30.1

21.1

17.5

NM

NM

NM

NM

30.7

28.5

0.7

Mean

42.8

18.0

14.7

3.6

3.3

18.1

17.0

29.7

27.4

1.0

Median

34.2

15.5

11.5

2.0

1.9

14.3

13.2

25.4

21.2

1.1

Source: Refinitiv data (priced at 30 August 2021)

Significant embedded value within the group

Applying the mean EV/sales (where relevant) and EV/EBITDA multiples from each of the core comparator groups above, it appears that the current market valuation implies a significant discount to Datatec’s peers. We do not believe this level of discount is justified as, based on peer multiple analysis, a valuation for either Logicalis or Westcon alone would be worth more than the current entire group enterprise value.

By our calculation (Exhibit 4), having adjusted the three divisional valuations for minority interests, applying a nominal 10x EV/EBITDA multiple to group central costs (which we estimate at c US$15m for FY22 and FY23) and applying a subjective discount of 30% (to allow for sovereign risk, the conglomerate structure and other discount factors), the group SOTP valuation is still multiples of Datatec’s current share price.

Exhibit 4: Sum-of-the-parts analysis

Enterprise value
(US$m)

Implied EV based on

Datatec effective economic interest

Mean EV

Per share

Revenues

EBITDA

2022e

2023e

2022e

2023e

Logicalis

1,829*

1,762*

1,417

1,464

80%

1,152

Westcon

825*

842*

588

604

92%

549

Consulting

281

275

213

244

82%

208

Central costs

 

 

(150)

(150)

100%

(150)

Sum of the parts (EV)

1,759

Assumed average FY22 net debt**

(184)

SOTP – equity value

1,575

Discount for: RSA sovereign risk, holding company risk

30%

Adjusted equity value

1,103

Shares in issue (m)

203.2

SOTP value per share (US$)

5.43

SOTP value per share (ZAR)

79.77

Latest share price (ZAR)

29.05

Upside from latest share price

175%

Source: Edison Investment Research. Notes: *Due to differences in how peers report revenues (net or gross), we have disregarded sales multiples in calculating a valuation for Logicalis and Westcon. **As year end net debt is typically a low point in the annual cycle, we have assumed average net debt through the year is c US$100m higher than year-end levels.

If the group’s embedded value can be effectively unlocked, our SOTP analysis points to the potential for the group’s valuation to more than treble from current levels.

We recognise that there are a number of specific risk factors relevant to the equity story, including sovereign risk, emerging market exposure and currency risk, limited institutional investor liquidity, a lack of peers on the Johannesburg Stock Exchange, with direct peers listed in Europe or North America, high (but reducing) exposure to a single vendor (Cisco) and the conglomerate discount. We would also note that, although recovering, group EBITDA margins (Logicalis – 7%, Westcon – 2%, Analysys Mason – 15%) remain below their respective peer group averages for FY22.

However, we also recognise that management has delivered a strongly improving operational performance across all three business lines since 2018, despite the impact of the COVID-19 pandemic in FY21, delivering an EBITDA CAGR FY18–21 of 64% and 43% CAGR in EPS FY19–21. The group has a strong balance sheet with low net debt (FY21: US$61m), which has delivered strong cash generation and allowed management to restart dividends (FY21: 3.4% yield).

Although listed in Johannesburg, Datatec has negligible exposure to the South African market, with the equity story being a dollar-denominated global ICT play. Despite this, Datatec is valued at a substantial discount to its global peer group, currently trading on 2.8x EV/EBITDA and 12.0x P/E in FY22e. It also trades on a 64% discount to our SOTP valuation. Given Datatec’s historical performance and medium-term growth prospects, we do not believe that this valuation discount is fully warranted.

With management clearly positioning Datatec as an international investment story, and assuming a continued strong operating performance, we expect the peer group discount to narrow materially over time. However, we also recognise that full closure of the discount to fair value may require further simplification of the group’s corporate structure.

Management remains committed to unlocking this underlying value.

Exhibit 5: Financial summary

Year end 28 February

US$000

2019

2020

2021

2022e

2023e

INCOME STATEMENT

IFRS

IFRS

IFRS

IFRS

IFRS

Revenue

 

 

4,332,381

4,214,421

4,109,463

4,316,503

4,548,473

Cost of Sales

(3,644,637)

(3,472,843)

(3,418,926)

(3,589,219)

(3,773,478)

Gross Profit

687,744

741,578

690,537

727,284

774,995

EBITDA

 

 

86,761

158,657

118,632

163,070

185,253

Normalised operating profit

 

 

89,727

105,157

97,868

105,613

130,149

Amortisation of acquired intangibles

(10,217)

(11,297)

(8,635)

(8,586)

(8,046)

Exceptionals

(21,323)

(3,700)

(27,771)

(6)

(6)

Share-based payments

(9,764)

(7,623)

(11,493)

0

0

Reported operating profit

48,423

82,537

49,969

97,021

122,098

Net Interest

(22,577)

(25,874)

(25,692)

(26,560)

(28,525)

Joint ventures & associates (post tax)

(1,403)

(204)

908

0

0

Exceptionals

(228)

2,029

55

0

0

Profit Before Tax (norm)

 

 

65,747

79,079

73,084

79,052

101,624

Profit Before Tax (reported)

 

 

24,215

58,488

25,240

70,460

93,573

Reported tax

(20,959)

(31,809)

(19,540)

(31,707)

(37,429)

Profit After Tax (norm)

17,554

34,615

30,035

43,479

60,975

Profit After Tax (reported)

3,256

26,679

5,700

38,753

56,144

Minority interests

(1,816)

(13,772)

(3,103)

(10,180)

(10,478)

Discontinued operations

11,694

1,332

0

0

0

Net income (normalised)

15,738

20,843

26,932

33,299

50,497

Net income (reported)

13,134

14,239

2,597

28,573

45,666

Average number of shares outstanding (m)

237.8

210.5

198.6

201.8

203.2

EPS - normalised (c)

 

 

6.62

9.90

13.56

16.50

24.85

EPS - diluted normalised (c)

 

 

6.55

9.74

13.20

16.07

24.21

EPS - basic reported (c)

 

 

5.52

6.77

1.31

14.16

22.48

EPS - Company underlying uEPS (c)

 

 

6.61

9.90

13.56

16.50

24.85

Dividend (c)

0.00

7.00

6.80

5.50

8.28

Revenue growth (%)

10.4

(2.7)

(2.5)

5.0

5.4

Gross Margin (%)

15.9

17.6

16.8

16.8

17.0

EBITDA Margin (%)

2.0

3.8

2.9

3.8

4.1

Normalised Operating Margin

2.1

2.5

2.4

2.4

2.9

BALANCE SHEET

Fixed Assets

 

 

437,786

512,598

554,690

586,356

620,633

Intangible Assets

284,877

291,279

314,486

333,525

349,507

Tangible Assets

60,306

43,300

39,987

39,469

41,600

Right-of-use assets

0

83,953

94,837

107,983

124,147

Investments & other

92,603

94,066

105,380

105,380

105,380

Current Assets

 

 

2,284,521

2,083,928

2,242,568

2,355,228

2,480,642

Stocks

332,256

253,271

242,005

263,893

287,778

Debtors

1,258,853

1,110,510

1,108,105

1,193,253

1,291,165

Cash & cash equivalents

344,400

347,189

488,632

493,178

495,607

Other

349,012

372,958

403,826

404,905

406,093

Current Liabilities

 

 

(1,909,272)

(1,765,823)

(1,980,013)

(2,079,906)

(2,186,085)

Creditors

(1,358,928)

(1,259,013)

(1,385,208)

(1,455,970)

(1,529,510)

Tax and social security

(15,826)

(16,677)

(16,596)

(16,596)

(16,596)

Short term borrowings

(413,770)

(338,945)

(392,877)

(412,671)

(434,848)

Lease liabilities

0

(34,325)

(36,398)

(38,232)

(40,286)

Other

(120,748)

(116,863)

(148,934)

(156,437)

(164,844)

Long Term Liabilities

 

 

(100,805)

(187,610)

(176,624)

(184,945)

(194,268)

Long term borrowings

(31,383)

(18,638)

(42,371)

(44,506)

(46,897)

Lease liabilities

0

(95,148)

(77,847)

(81,769)

(86,163)

Other long term liabilities

(69,422)

(73,824)

(56,406)

(58,670)

(61,207)

Net Assets

 

 

712,230

643,093

640,621

676,734

720,923

Minority interests

(63,303)

(70,778)

(57,465)

(67,645)

(78,123)

Shareholders equity

 

 

648,927

572,315

583,156

609,089

642,800

CASH FLOW

Op Cash Flow before WC and tax

117,848

169,980

157,896

163,076

185,259

Working capital

(19,941)

57,231

79,903

(36,274)

(48,257)

Exceptional & other

(28,917)

(11,642)

(28,293)

(6)

(6)

Tax

(38,531)

(36,941)

(36,597)

(31,707)

(37,429)

Operating cash flow

 

 

30,459

178,628

172,909

95,090

99,567

Capex

(36,886)

(28,036)

(35,145)

(36,036)

(36,971)

Acquisitions/disposals

(25,318)

(9,179)

(3,694)

0

0

Net interest

(22,434)

(25,874)

(25,692)

(26,560)

(28,525)

Equity financing

(43,881)

(51,683)

(2,808)

0

0

Dividends

(53)

(15,137)

(4,905)

(11,174)

(16,831)

Other

1,991

20,019

1,880

(44,459)

(45,830)

Net Cash Flow

(96,122)

68,738

102,545

(23,139)

(28,590)

Opening net debt/(cash)

 

 

6,380

100,753

139,867

60,861

84,000

FX

(15,116)

(9,270)

(11,312)

0

0

Other non-cash movements

16,865

(98,582)

(12,227)

0

0

Closing net debt/(cash)

 

 

100,753

139,867

60,861

84,000

112,590

Source: Datatec accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Datatec and prepared and issued by Edison, in consideration of a fee payable by Datatec. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Datatec and prepared and issued by Edison, in consideration of a fee payable by Datatec. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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