Datatec — On a growth track for FY24

Datatec (JSE: DTCJ)

Last close As at 19/04/2024

ZAR35.42

−0.56 (−1.56%)

Market capitalisation

ZAR8,130m

More on this equity

Research: TMT

Datatec — On a growth track for FY24

Datatec reported solid results for FY23 with revenue and adjusted EBITDA ahead of our forecasts. As supply chain issues eased in H2, all divisions accelerated revenue growth as they started to work down order backlogs, and working capital was tightly managed to reduce net debt by 18% at year-end. Further unwind of the backlog combined with sustained strong demand drives our revenue and adjusted EBITDA upgrades for FY24 and FY25. After factoring in higher interest rates, our underlying EPS reduces by 8% in FY24 and 4% in FY25.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Datatec

On a growth track for FY24

FY23 results

Software and comp services

5 June 2023

Price

ZAR38.27

Market cap

ZAR8,607m

ZAR19.56:$1

Net debt ($m) at end FY23

106.6

Shares in issue

224.9m

Free float

86%

Code

DTCJ

Primary exchange

JSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.2

10.1

4.5

Rel (local)

6.7

10.7

(3.8)

52-week high/low

ZAR47.87

ZAR29.81

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 International (IT services); and Logicalis LatAm (IT services in Latin America).

Next events

AGM

27 July 2023

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Datatec is a research client of Edison Investment Research Limited

Datatec reported solid results for FY23 with revenue and adjusted EBITDA ahead of our forecasts. As supply chain issues eased in H2, all divisions accelerated revenue growth as they started to work down order backlogs, and working capital was tightly managed to reduce net debt by 18% at year-end. Further unwind of the backlog combined with sustained strong demand drives our revenue and adjusted EBITDA upgrades for FY24 and FY25. After factoring in higher interest rates, our underlying EPS reduces by 8% in FY24 and 4% in FY25.

Year
end

Revenue
($m)

PBT*
($m)

Diluted EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

02/22

4,546

69.1

14.2

39.3

13.8

20.1

02/23

5,143

86.7

24.1

77.7

8.1

39.7

02/24e

5,499

89.6

21.5

7.0

9.1

3.6

02/25e

5,761

113.0

27.6

8.9

7.1

4.6

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

FY23 revenue and adjusted EBITDA ahead

FY23 revenue grew 13% y-o-y (20% in constant currency) and was 3% ahead of our forecast. Adjusted EBITDA also grew 13% y-o-y and was 3% ahead. Exceptionally high share-based payments of $52.6m (vs our $32.1m) reduced underlying EPS below our forecast. Better-than-expected working capital management resulted in operating cash flow 64% higher than forecast and an 18% reduction in net debt y-o-y. Datatec announced a final dividend of 10c/195 ZARc.

Revising up revenue and adjusted EBITDA

Based on FY23 results, we have revised up our group revenue forecasts by 4% for FY24 and FY25, resulting in adjusted EBITDA upgrades of 1% and 2%, respectively. We forecast adjusted EBITDA margin expansion from 3.5% in FY23 to 4.1% by FY26. Factoring in higher net finance costs, we reduce our underlying EPS forecasts by 8% in FY24 and 4% in FY25. We expect net debt to increase over FY24 as working capital requirements normalise before reducing again from FY25.

Valuation: Significant value to unlock

Datatec currently trades on an EV/adjusted EBITDA multiple of 2.8x FY24e and 2.5x FY25e, well below its peer group (c 8x for both years). On a conservative sum-of-the-parts valuation using peer group averages, we estimate that Datatec could be worth 98% more than the current share price. A return to revenue growth in Logicalis Latin America and improving profitability across the group will be key to reducing the discount to peers. The ongoing strategic review continues to seek ways address this persistent gap, with the recent sale of Analysys Mason a key example of unlocking value and returning it to shareholders. Management is introducing new incentive schemes for divisional management focused on ownership at the divisional rather than group level to further drive performance.

Review of FY23 results

Exhibit 1: FY23 results highlights – continuing operations

$m

FY22

FY23e

FY23a

y-o-y growth

Diff

Revenue

4,546

5,017

5,143

13%

3%

Gross Profit

730

717

745

2%

4%

Adj. EBITDA

158.9

175.2

180.2

13%

3%

EBITDA

143.5

129.5

98.2

(32)%

(24)%

Normalised operating profit

100.5

111.4

123.9

23%

11%

Profit before tax (normalised)

69.1

74.3

86.7

26%

17%

Net income (normalised)

29.7

45.4

53.2

79%

17%

EPS - diluted normalised (c)

14.2

20.2

24.1

70%

20%

EPS - company uEPS (c)

16.0

6.8

6.1

(62)%

(10)%

Dividend (c)

39.3

69.9

77.7

98%

11%

Revenue growth (%)

10.6

10.4

13.1

Gross Margin (%)

16.1

14.3

14.5

Adj. EBITDA Margin (%)

3.5

3.5

3.5

Normalised Operating Margin

2.2

2.2

2.4

Operating cash flow*

70

91

149

112%

64%

Net debt*

130

155

107

(18)%

(31)%

Source: Datatec, Edison Investment Research. *Note: Includes discontinued operations.

Exhibit 2: Earnings and EPS reconciliations

$m

FY22

FY23

EPS (c)

FY22

FY23

Profit after tax

34,567

(33,424)

Profit from discontinued operations

5,766

7,052

Basic

16.7

36.9

Gain on disposal of discontinued operations

0

109,915

Continuing operations

14.3

(16.1)

Minority interest

(6,431)

(3,209)

Discontinued operations

2.4

53.0

Net income for equity

33,902

80,334

Diluted

16.2

36.9

Net income for equity - continuing operations

29,109

74,804

Continuing operations

13.9

(16.1)

Net income for equity - discontinued operations

4,793

5,530

Discontinued operations

2.3

53.0

Adjustments to calculate headline earnings

Impairment of fixed assets

0

11,620

Headline

16.2

(9.3)

Profit on disposal of investments

0

(111,438)

Continuing operations

13.9

(10.8)

Loss/(profit) on disposal of fixed assets

(82)

422

Discontinued operations

2.3

1.5

Realised FX gains on equity loans settled

(1,174)

0

Headline diluted

15.8

(9.3)

Tax effect

33

(794)

Continuing operations

13.5

(10.8)

Minority interests

329

(379)

Discontinued operations

2.3

1.5

Headline earnings

33,008

(20,235)

Continuing operations

28,215

(23,451)

Underlying

18.7

7.9

Discontinued operations

4,793

3,216

Continuing operations

16.0

6.1

Reconciliation from headline to underlying earnings

Discontinued operations

2.7

1.8

Unrealised FX losses/(gains)

(470)

9,115

Underlying diluted

18.2

7.6

Acquisition-related fair value adjustments

(567)

38

Continuing operations

15.5

5.9

Restructuring costs

0

15,157

Discontinued operations

2.7

1.7

Amortisation of acquired intangible assets

10,100

11,886

One-off tax items impacting EBITDA

0

11,863

Underlying excluding SPB

27.4

29.5

Acquisition, integration and corporate actions costs

0

2,318

Tax effect

(3,009)

(7,258)

Minority interests

(979)

(5,745)

Underlying earnings

38,083

17,139

Continuing operations

32,471

13,311

Discontinued operations

5,612

3,828

Source: Datatec

Exhibit 1 shows Datatec’s FY23 results versus our forecasts for continuing operations. Revenue grew 13% y-o-y (20% in constant currency, cc) and was 3% ahead of our forecast. Adjusted EBITDA also grew 13% y-o-y and was also 3% ahead. As there were various one-off charges and adjustments that we had not forecast, EBITDA was below our estimate. Share-based payments totalling $52.6m were charged in the year compared to our $32.1m forecast – this was the main difference at the underlying EPS (uEPS) level. Better-than-expected working capital management resulted in operating cash flow 64% higher than our forecast and a reduction in net debt of 18% yo-y (or 20% compared to net debt from continuing operations at the end of FY22).

Datatec discloses EPS based on three measures: reported, headline (per Johannesburg Stock Exchange rules) and underlying. In Exhibit 2 we summarise the adjustments to arrive at headline and underlying earnings. Although underlying EPS usually takes account of share-based payment (SBP) charges, as the amount charged in FY23 was exceptionally high, the company used uEPS before share-based payment charges (29.5c) as the basis for its final dividend calculation. Based on dividend cover of 3x, it declared a final dividend of 10c/195 ZARc. This is in addition to the special dividend paid out in H223 using the proceeds of the sale of Analysys Mason (67c/1,250 ZARc).

Divisional performance

Exhibit 3 summarises performance by division down to adjusted EBITDA.

Exhibit 3: Divisional performance

$m

FY22

FY23

y-o-y

FY22

FY23

Revenue

Westcon

2,890

3,421

18%

Logicalis International

1,133

1,232

9%

Logicalis Latin America

523

491

-6%

4,546

5,143

13%

Gross profit

Gross margin

y-o-y pp

Westcon

319

329

3%

11.0%

9.6%

-1.4

Logicalis International

304

306

1%

26.9%

24.9%

-2.0

Logicalis Latin America

107

110

3%

20.4%

22.3%

1.9

730

745

2%

16.1%

14.5%

-1.6

EBITDA

EBITDA margin

Westcon

68

48

-29%

2.4%

1.4%

-0.9

Logicalis International

64

50

-21%

5.7%

4.1%

-1.6

Logicalis Latin America

28

21

-26%

5.4%

4.3%

-1.1

Central costs

(17)

(22)

27%

143

98

-32%

3.2%

1.9%

-1.2

Adjusted EBITDA

Adjusted EBITDA margin

Westcon

79

95

21%

2.7%

2.8%

0.1

Logicalis International

65

66

2%

5.7%

5.4%

-0.4

Logicalis Latin America

28

25

-11%

5.3%

5.1%

-0.3

Central costs

(12)

(6)

-52%

159

180

13%

3.5%

3.5%

0.0

Source: Datatec

Westcon International

Westcon grew revenue 18.3% y-o-y (25.4% cc), with growth accelerating from 16.1% in H123 to 20.4% in H223. As flagged at H123 results, supply chain issues started to ease, making it possible to ship from the order backlog. Exhibit 4 shows how the backlog has developed over the last two years, with management noting that it started to decline from Q423 due to improved hardware shipments. The overall backlog declined 6% y-o-y but was down a more significant 20% from its peak at the end of H123, while the software backlog increased due to strong order intake.

The division has combined revenue from unified communications with networking revenue and together they made up just over half of FY23 revenue. Recurring revenue grew 32% over the same period, making up 38% of FY23 revenue.

Exhibit 4: Backlog on half-yearly basis

Exhibit 5: Revenue by technology

Source: Datatec

Source: Datatec

Exhibit 4: Backlog on half-yearly basis

Source: Datatec

Exhibit 5: Revenue by technology

Source: Datatec

As was the case at the half-year, Westcon’s gross margin was negatively affected by the strength of the US dollar – this was compensated for by hedging gains reported within operating costs. Most of these were recognised in H123, resulting in an adjusted EBITDA margin of 4.0% in H123, dropping to 1.7% in H223 and averaging out at 2.8% for the year compared to 2.7% in FY22.

The bulk of share-based payment charges were reported in Westcon ($36.3m out of $52.6m) resulting from the Westcon International Equity Appreciation Plan (WI EAP) that was put in place five years ago and has now finished, as has the Westcon SARS scheme. Based on a starting valuation of $125m, 10% of the value of WI above the starting valuation is to be paid to the EAP pool. As WI was not sold within five years of the start of the scheme (ie by 1 March 2023), it was valued by an independent valuer. At the end of FY23, the company noted that $61m of the $63.5m short-term liability for share-based payments related to the WI EAP and Share Appreciation Rights schemes (of which $11m relates to Datatec head office participants of the EAP) and will be paid out shortly. Based on the value of the EAP units for Datatec head office participants at the end of FY23 ($287.15/unit), the threshold that had to be reached ($125/unit base level grown at 10% pa over the five years = $201.31) and the number of units (one million), we estimate that WI was valued at c $488.5m at the end of FY23

Exhibit 6: Westcon working capital metrics H122–H223

Source: Datatec. Note: DSO = days sales outstanding, DPO = days purchases outstanding.

The division reduced its net debt position from $85.0m at the end of FY22 to $68.4m at the end of FY23. Exhibit 6 shows the change in working capital metrics over the last two years. The main driver of reduced working capital requirements has been the extension of payment terms by suppliers, recognising the high level of part-finished inventory held by Datatec because of component shortages. As supply chain issues continue to recede and Westcon is able to ship more orders, we expect that any reduction in supplier payment terms will largely by offset by higher inventory turns and the ability to bill for completed projects.

Logicalis International

Logicalis International (LI) grew revenue 8.7% y-o-y in FY23 (16.0% cc), with growth of 5.6% in H123 and 11.5% in H223. Gross margin decreased by 2pp to 24.9% due to product mix and the strength of the US dollar. Adjusted EBITDA increased 2% y-o-y, resulting in a margin of 5.4%, down from 5.7% in FY22. The main driver of the margin decline was weaker performance in the UK and Germany. While the backlog increased y-o-y by 4%, it declined 8% from its peak at the end of H123. The company noted strength in orders from Asia and as these often relate to long-term infrastructure projects, this increased the backlog. As supply chain issues eased the division was able to ship more hardware, which made up 46% of FY3 revenue compared to 42% in FY22. Cloud revenue increased 54% y-o-y to make up 18% of revenue.

Exhibit 7: Backlog on half-yearly basis

Exhibit 8: Revenue by segment

Source: Datatec

Source: Datatec

Exhibit 7: Backlog on half-yearly basis

Source: Datatec

Exhibit 8: Revenue by segment

Source: Datatec

The division reduced its net debt position from $110.9m at the end of FY22 to $88.0m at the end of FY23. Inventory and receivables days reduced y-o-y and days payable were flat, resulting in a $14m decrease in net working capital.

Exhibit 9: Logicalis International working capital metrics

Source: Datatec. Note: DIO = days inventory outstanding.

Logicalis LatAm

The division saw a revenue decline of 6.3% for FY23 (growth of 1.2% cc), mainly due to weakness in Brazil where revenue was down 16% as it suffered most from supply chain disruption. Over the same period, recurring revenue increased 7% to make up 49% of revenue (FY22: 43%) due to growth in managed services. Despite the revenue decline, gross profit increased 3%, resulting in a 2pp increase in gross margin to 22.3%, helped by a higher proportion of managed services. The adjusted EBITDA margin decreased marginally from 5.3% to 5.1%.

The order backlog increased 1% from the end of FY22 but was down 15% from the peak at the end of H123 (Exhibit 10). The division reduced its net debt position from $40.4m at the end of FY22 to $25.2m at the end of FY23. While DIO were higher y-o-y, DSO reduced and DPO increased, resulting in a reduction in working capital.

Exhibit 10: Backlog on half-yearly basis

Exhibit 11: Working capital metrics

Source: Datatec

Source: Datatec

Exhibit 10: Backlog on half-yearly basis

Source: Datatec

Exhibit 11: Working capital metrics

Source: Datatec

Outlook and changes to forecasts

Supply chain issues continue to ease, although not yet normalised, and we expect each division to continue to reduce their order backlogs through the course of FY24.

New incentive schemes announced

With the completion of the WI EAP, the company has decided to change the way it incentivises divisional management by offering them the chance to own stakes in their respective divisions rather than incentive schemes based on Datatec shares. A scheme was launched for Logicalis International in March with a holding company set up between Datatec PLC and the division. Datatec PLC owns 94.6% of the holding company and the remaining 5.4% is held by divisional management, who will be able to monetise their stakes if the division is sold. A further 0.9% will be available for purchase by management to allow for changes to the management team. A similar scheme is being set up for Westcon (expected in Q224) and is planned for Logicalis LatAm.

There are still some incentive schemes operating at the group level, thus we continue to expect Datatec to report share-based payment charges, albeit at a significantly lower level than in FY22 and FY23. The new divisional incentive schemes will not attract any IFRS2 share-based payment charges although they will increase the minority interest deduction at the group level.

Changes to forecasts

We have revised our forecasts to reflect FY23 results and we introduce FY26 forecasts. We have revised up our revenue forecasts for FY24 and FY25 and our adjusted EBITDA increases marginally in both years. Higher net finance costs and slightly higher share-based payment forecasts reduce our uEPS forecast in FY24 and FY25. We assume that working capital requirements increase as supplier payment terms normalise through the course of the year, resulting in an increase in our net debt forecast. At the end of FY24, we estimate a net debt/EBITDA ratio of 1.0x, reducing to 0.7x by the end of FY25.

Exhibit 12: Changes to forecasts

$m

FY24e

FY24e

FY25e

FY25e

FY26e

Old

New

y-o-y

Change

Old

New

y-o-y

Change

New

y-o-y

Revenue

5,282

5,499

7%

4%

5,534

5,761

5%

4%

6,036

5%

Gross Profit

794

830

11%

4%

842

879

6%

4%

932

6%

Adj. EBITDA

192

194

8%

1%

215

220

14%

2%

248

13%

EBITDA

185

186

90%

1%

208

212

14%

2%

240

13%

Normalised operating profit

137

135

9%

(2)%

160

158

18%

(1)%

184

16%

Profit before tax (normalised)

96

90

3%

(6)%

116

113

26%

(3)%

138

23%

Net income (normalised)

53

50

(6)%

(6)%

66

64

29%

(2)%

80

24%

EPS - diluted normalised (c)

23.3

21.5

(9)%

(8)%

28.7

27.6

29%

(4)%

34.3

24%

EPS - Company underlying uEPS (c)

22.6

20.9

242%

(8)%

28.1

26.8

29%

(5)%

33.6

25%

Dividend (c)

7.5

7.0

9.4

8.9

11.2

Revenue growth (%)

5.3

6.9

4.8

4.8

4.8

Gross Margin (%)

15.0

15.1

15.2

15.3

15.4

Adj. EBITDA Margin (%)

3.6

3.5

3.9

3.8

4.1

Normalised Operating Margin

2.6

2.4

2.9

2.7

3.0

Operating cash flow

98

53

145

158

158

Net debt

168

187

140

159

136

Revenue

Westcon

3,427

3,660

7%

7%

3,599

3,843

5%

7%

4,035

5%

Logicalis

1,855

1,839

7%

-1%

1,935

1,918

4%

-1%

2,001

4%

Logicalis International

1,278

1,299

5%

2%

1,329

1,351

4%

2%

1,405

4%

Logicalis LatAm

577

540

10%

-6%

606

567

5%

-6%

596

5%

Total

5,282

5,499

7%

4%

5,534

5,761

5%

4%

6,036

5%

EBITDA

Westcon

106.8

106.2

119%

-1%

123.0

123.1

16%

0%

141.3

15%

Logicalis

98.6

100.1

40%

1%

106.2

110.3

10%

4%

120.7

9%

Logicalis International

70.6

71.5

42%

1%

75.7

77.4

8%

2%

83.4

8%

Logicalis LatAm

28.1

28.6

35%

2%

30.5

32.8

15%

8%

37.3

14%

Central costs

(20.2)

(20.1)

-8%

0%

(21.0)

(20.9)

4%

0%

(21.7)

4%

Total

185.3

186.3

90%

1%

208.2

212.5

14%

2%

240.3

13%

Adjusted EBITDA

Westcon

107.8

108.2

14%

0%

124.0

125.1

16%

1%

143.3

15%

Logicalis

100.9

101.1

11%

0%

108.5

111.3

10%

3%

121.7

9%

Logicalis International

72.4

72.0

9%

-1%

77.5

77.9

8%

0%

83.9

8%

Logicalis LatAm

28.6

29.1

17%

2%

31.0

33.4

15%

8%

37.8

13%

Central costs

(17.0)

(15.6)

160%

-8%

(17.8)

(16.4)

5%

-8%

(17.2)

5%

Total

191.8

193.8

7%

1%

214.7

220.0

14%

2%

247.8

13%

Source: Edison Investment Research

Valuation

On a group basis, Datatec is valued on an EV/adjusted EBITDA of 2.8x FY24e and 2.5x FY25e and on a normalised P/E basis of 9.1x FY24e and 7.1x FY25. To more accurately reflect the dynamics of the different divisions, we continue to value Datatec on a sum-of-the-parts basis. Although Logicalis is now reported through two divisions (International and Latin America), we continue to combine them in the valuation as their business models are similar. Using the EV/EBITDA peer multiples in Exhibit 13, average net debt for FY23 (we add c $100m to the year-end figure as the group typically operates at this level of net debt across the year), and a 30% discount (South Africa sovereign risk and holding company discount), we arrive at a per-share valuation of ZAR75.74. This implies 98% upside from the current share price.

Through the ongoing strategic review, management has started to unlock some of this value with the recent sale of Analysys Mason and the subsequent return of cash to shareholders. We believe further transactions may take place in the medium term when market conditions start to improve. In the meantime, the company continues to work on operational improvements across the three divisions.

Exhibit 13: Sum-of-the-parts valuation

 

Revenues

Adjusted EBITDA

2024e

2025e

2024e

2025e

Logicalis

1,839

1,918

101

111

Westcon

3,660

3,843

108

125

Central costs

 

 

(16)

(16)

 

Peer multiples

Revenues

EBITDA

 

2024e

2025e

2024e

2025e

Logicalis

0.8

0.7

8.6

8.0

Westcon

0.3

0.3

8.2

7.6

Central costs

 

 

8.0

8.0

 

Implied EV based on

 

 

Enterprise value

Revenues

EBITDA

Economic interest

Mean EV

(US$m)

2024e

2025e

2024e

2025e

 

Logicalis

1,443

1,419

874

894

83%

734

Westcon

1,168

1,320

888

946

92%

845

Central costs

 

 

(124)

(131)

100%

(128)

Group EV

1,451

Assumed average FY23 net debt

(207)

SOTP – Equity value

1,244

Discount for: RSA sovereign risk, holding company risk

30%

Adjusted equity value

871

Shares in issue (m)

224.9

SOTP value per share (US$)

3.87

SOTP value per share (ZAR)

75.74

Latest share price (ZAR)

38.27

Upside from latest share price

98%

Source: Edison Investment Research, Refinitiv (as at 1 June)


Exhibit 14: Financial summary

28-February

$'k

2020

2021

2022

2023

2024e

2025e

2026e

Revenue

 

 

4,214,421

4,109,463

4,546,398

5,143,125

5,499,402

5,761,380

6,035,937

Cost of Sales

(3,472,843)

(3,418,939)

(3,816,630)

(4,398,618)

(4,669,839)

(4,882,057)

(5,103,920)

Gross Profit

741,578

690,524

729,768

744,507

829,564

879,323

932,016

Adjusted EBITDA

 

 

166,280

152,490

158,922

180,182

193,767

219,982

247,819

EBITDA

158,657

118,619

143,457

98,246

186,267

212,482

240,319

Normalised operating profit

 

 

105,157

97,859

100,540

123,934

134,540

158,436

183,885

Amortisation of acquired intangibles

(11,297)

(8,635)

(10,100)

(11,886)

(4,894)

(2,186)

(977)

Exceptionals

(3,700)

(27,771)

0

(40,915)

0

0

0

Share-based payments

(7,623)

(11,493)

(15,465)

(52,641)

(7,500)

(7,500)

(7,500)

Reported operating profit

82,537

49,960

74,975

18,492

122,146

148,750

175,408

Net Interest

(25,874)

(25,692)

(31,051)

(38,090)

(44,973)

(45,389)

(45,389)

Joint ventures & associates (post tax)

(204)

908

(427)

882

0

0

0

Exceptionals

2,029

59

540

(1,333)

0

0

0

Profit Before Tax (norm)

 

 

79,079

73,075

69,062

86,726

89,567

113,047

138,496

Profit Before Tax (reported)

 

 

58,488

25,235

44,037

(20,049)

77,173

103,361

130,020

Reported tax

(31,809)

(19,540)

(9,470)

(13,375)

(27,010)

(36,176)

(45,507)

Profit After Tax (norm)

34,615

30,034

36,179

56,372

58,218

73,481

90,023

Profit After Tax (reported)

26,679

5,695

34,567

(33,424)

50,162

67,185

84,513

Minority interests

(13,772)

(3,103)

(6,431)

(3,209)

(8,258)

(9,028)

(9,827)

Discontinued operations

1,332

0

5,766

116,967

0

0

0

Net income (normalised)

20,843

26,938

29,748

53,163

49,960

64,453

80,196

Net income (reported)

14,239

2,592

33,902

80,334

41,904

58,156

74,686

Average number of shares outstanding (m)

210.5

198.8

203.2

218.0

224.1

224.9

224.9

EPS - diluted normalised (c)

 

 

9.7

13.2

14.2

23.5

21.5

27.6

34.3

EPS - basic reported (c)

 

 

6.8

1.3

16.7

36.9

18.7

25.9

33.2

EPS - Company underlying uEPS (c)

 

 

9.9

13.5

16.0

6.1

20.9

26.8

33.6

Dividend (c)

7.0

6.6

39.3

77.7

7.0

8.9

11.2

Revenue growth (%)

(2.7)

(2.5)

10.6

13.1

6.9

4.8

4.8

Gross Margin (%)

17.6

16.8

16.1

14.5

15.1

15.3

15.4

Adj. EBITDA Margin (%)

3.9

3.7

3.5

3.5

3.5

3.8

4.1

Normalised Operating Margin

2.5

2.4

2.2

2.4

2.4

2.7

3.0

BALANCE SHEET

Fixed Assets

 

 

512,598

554,690

613,155

610,565

613,057

617,376

622,019

Intangible Assets

291,279

314,486

320,089

293,184

293,434

295,549

297,976

Tangible Assets

43,300

39,987

32,517

33,054

35,296

37,501

39,715

Right-of-use assets

83,953

94,837

80,639

56,248

56,248

56,248

56,248

Investments & other

94,066

105,380

179,910

228,079

228,079

228,079

228,079

Current Assets

 

 

2,083,928

2,242,568

2,399,078

3,015,700

2,981,993

3,104,375

3,225,430

Stocks

253,271

242,005

309,227

411,059

410,817

429,486

449,004

Debtors

1,110,510

1,108,105

1,223,824

1,508,470

1,554,899

1,628,971

1,706,599

Cash & cash equivalents

347,189

488,632

453,926

584,683

503,959

532,687

555,591

Other

372,958

403,826

412,101

511,488

512,318

513,231

514,235

Current Liabilities

 

 

(1,765,823)

(1,980,013)

(2,152,175)

(2,869,641)

(2,801,057)

(2,867,328)

(2,919,662)

Creditors

(1,275,690)

(1,401,804)

(1,544,198)

(2,088,899)

(2,009,175)

(2,067,255)

(2,111,006)

Short term borrowings

(338,945)

(392,877)

(433,176)

(577,224)

(577,224)

(577,224)

(577,224)

Lease liabilities

(34,325)

(36,398)

(32,870)

(27,005)

(27,005)

(27,005)

(27,005)

Other

(116,863)

(148,934)

(141,931)

(176,513)

(187,652)

(195,843)

(204,428)

Long Term Liabilities

 

 

(187,610)

(176,624)

(229,112)

(224,284)

(226,183)

(227,580)

(229,043)

Long term borrowings

(18,638)

(42,371)

(56,440)

(41,624)

(41,624)

(41,624)

(41,624)

Lease liabilities

(95,148)

(77,847)

(61,523)

(45,412)

(45,412)

(45,412)

(45,412)

Other long term liabilities

(73,824)

(56,406)

(111,149)

(137,248)

(139,147)

(140,544)

(142,007)

Net Assets

 

 

643,093

640,621

630,946

532,340

567,811

626,844

698,743

Minority interests

(70,778)

(57,465)

(67,516)

(60,331)

(68,589)

(77,617)

(87,444)

Shareholders equity

 

 

572,315

583,156

563,430

472,009

499,221

549,227

611,298

CASH FLOW

Op Cash Flow before WC and tax

169,980

157,888

162,842

191,802

193,767

219,982

247,819

Working capital

57,231

79,903

(76,807)

(18,203)

(112,872)

(25,074)

(43,348)

Exceptional & other

19,330

(3,453)

10,677

(193)

(830)

(913)

(1,004)

Tax

(36,941)

(36,597)

(26,282)

(24,182)

(27,010)

(36,176)

(45,507)

Operating cash flow

 

 

209,600

197,741

70,430

149,224

53,054

157,819

157,960

Capex

(28,036)

(35,145)

(24,841)

(36,669)

(38,048)

(39,487)

(40,988)

Acquisitions/disposals

(9,179)

(3,694)

(16,424)

114,821

0

0

0

Net interest

(30,972)

(25,745)

(31,265)

(38,596)

(44,973)

(45,389)

(45,389)

Equity financing

(51,683)

(2,808)

(6,150)

(7,725)

0

0

0

Dividends

(15,137)

(4,905)

(43,136)

(154,399)

(22,192)

(15,651)

(20,114)

Other

20,019

1,880

(2,034)

(2,914)

(28,565)

(28,565)

(28,565)

Net Cash Flow

94,612

127,324

(53,420)

23,742

(80,724)

28,728

22,904

Opening net debt/(cash)

 

 

100,753

139,867

60,874

130,096

106,595

187,319

158,591

FX and non-cash movements

(133,726)

(48,331)

(15,802)

(241)

0

0

0

Closing net debt/(cash)

 

 

139,867

60,874

130,096

106,595

187,319

158,591

135,687

Source: Datatec, 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 £60,000 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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 £60,000 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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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