Datatec — On track for better performance in FY24

Datatec (JSE: DTCJ)

Last close As at 18/05/2024

ZAR37.61

0.17 (0.45%)

Market capitalisation

ZAR8,633m

More on this equity

Research: TMT

Datatec — On track for better performance in FY24

Datatec reported a strong performance in H124, with revenue up 15% y-o-y, adjusted EBITDA up 2% and underlying EPS up 336%. As supply chain issues have eased, the company has been able to reduce its backlog from previously elevated levels. Datatec expects improved performance in all divisions in FY24. While the company closely manages working capital, higher revenues and a gradual reduction in supplier extended payment terms drive our higher net debt forecasts. Our estimates are broadly unchanged at a group level, with adjustments at a divisional level to reflect Westcon strength and uncertainty in Latin America, and higher operating profitability offsetting increased interest costs.

Katherine Thompson

Written by

Katherine Thompson

Director

Datatec_resized

TMT

Datatec

On track for better performance in FY24

H124 results

Software and comp services

7 November 2023

Price

ZAR38.46

Market cap

ZAR8,827m

ZAR18.29:$1

Net debt (ZARm) at end H124

174.8

Shares in issue

229.5m

Free float

86%

Code

DTCJ

Primary exchange

JSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.1

7.8

(11.6)

Rel (local)

(2.2)

13.2

(16.4)

52-week high/low

ZAR47.08

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

FY24 trading update

March 2024

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Datatec is a research client of Edison Investment Research Limited

Datatec reported a strong performance in H124, with revenue up 15% y-o-y, adjusted EBITDA up 2% and underlying EPS up 336%. As supply chain issues have eased, the company has been able to reduce its backlog from previously elevated levels. Datatec expects improved performance in all divisions in FY24. While the company closely manages working capital, higher revenues and a gradual reduction in supplier extended payment terms drive our higher net debt forecasts. Our estimates are broadly unchanged at a group level, with adjustments at a divisional level to reflect Westcon strength and uncertainty in Latin America, and higher operating profitability offsetting increased interest costs.

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

14.8

18.7

02/23

5,143

86.7

24.1

77.7

8.7

36.9

02/24e

5,568

86.7

20.8

7.1

10.1

3.4

02/25e

5,833

112.1

27.6

8.7

7.6

4.1

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

Solid performance across all divisions in H124

Revenue growth was strong across all divisions: Westcon +15% y-o-y, Logicalis International +12% and Logicalis Latin America +20%. FX losses weighed on adjusted EBITDA, which benefited from FX gains in H123: Westcon -4% y-o-y, Logicalis International +7% and Logicalis Latin America +50%. Underlying EPS for continuing operations increased 336% y-o-y to 9.6c, helped by materially lower share-based payment charges post completion of the Westcon incentive scheme.

Better profitability offsets higher finance costs

We have upgraded our Westcon revenue and adjusted EBITDA forecasts for FY24–26e while trimming our Logicalis LatAm forecasts. Higher group profitability more than offsets the increase in net interest costs arising from higher levels of debt to leave our FY24 underlying EPS broadly unchanged.

Valuation: Working to unlock value

Datatec currently trades on an EV/adjusted EBITDA multiple of 3.8x FY24e and 3.3x 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 84% more than the current share price. Sustained 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 last year’s sale of Analysys Mason a key example of unlocking value and returning it to shareholders. Management has introduced new incentive schemes for divisional management focused on ownership at the divisional rather than group level to further drive performance.

Review of H124 results

Exhibit 1 summarises Datatec’s performance at a group level in H124. Revenue grew 15% y-o-y (16% constant currency (cc)) while gross profit increased 24% over the same period. With a significantly lower level of share-based payments and one-off costs in H124 compared to H123, EBITDA was 39% higher y-o-y. Operating costs included FX gains totalling $29.5m ($18.9m unrealised) in H123 compared to FX losses of $13.3m ($9.2m unrealised) in H124, resulting in a 2% increase in adjusted EBITDA year-on-year. Reversing the effect of the unrealised gains/losses, adjusted EBITDA would have been 44% higher at $99m. Net income from continuing operations increased 140% y-o-y and headline EPS from continuing operations increased 88% y-o-y. Underlying EPS from continuing operations increased 336% y-o-y – adjustments include amortisation of acquired intangibles, unrealised FX gains/losses, restructuring costs, one-off tax items affecting EBITDA and other one-off costs.

Net debt increased 58% y-o-y, reflecting higher working capital requirements as the company increased shipments from the backlog (which declined 35% y-o-y and 21% h-o-h to $932m). The company also made the final $59m payment to settle the Westcon International Equity Appreciation Plan, which has now been replaced with a divisional ownership scheme (more detail below).

Exhibit 1: H124 results highlights

$m

H123

H124

y-o-y

Revenue

2,408.5

2,762.7

14.7%

Gross profit

337.8

417.9

23.7%

EBITDA

57.9

80.6

39.3%

Share-based payments

16.0

7.1

-55.9%

Restructuring charges and other adjustments

13.7

1.8

-86.9%

Adjusted EBITDA

87.6

89.4

2.1%

Operating profit

24.6

50.2

103.9%

Profit after tax

5.0

15.7

215.1%

Minority interests

(0.5)

(1.8)

223.4%

Discontinued operations

6.3

0.0

-100.0%

Net income to equity holders – group

10.8

14.0

29.9%

Net income to equity holders – continuing operations

5.8

14.0

140.4%

Adjustments

1.7

0.2

-91.1%

Headline earnings – continuing operations

7.5

14.1

88.2%

Adjustments

(2.7)

7.3

-369.9%

Underlying earnings – continuing operations

4.8

21.5

347.3%

Underlying EPS (uEPS) – group

3.6

9.6

166.7%

uEPS – continuing operations

2.2

9.6

336.4%

Net debt – continuing operations

111.0

174.8

57.5%

Gross margin

14.0%

15.1%

1.1%

EBITDA margin

2.4%

2.9%

0.5%

Adjusted EBITDA margin

3.6%

3.2%

-0.4%

Operating margin

1.0%

1.8%

0.8%

Source: Datatec

Exhibit 2 summarises performance at a divisional level and Exhibits 3 and 4 show the progression of recurring revenue. At a group level, recurring revenue made up 40% of total revenue in H124 compared to 43% in H123 (see Exhibits 3 and 4). As supply chain issues during FY22 and FY23 made it more difficult to get hold of hardware products, this element had grown in backlog. Product lead times have reduced over the last 12 months, allowing the group to ship more hardware as a percentage of total revenue, resulting in a lower contribution from recurring revenue.

Exhibit 2: Divisional performance

$m

H123

H124

y-o-y

H123

H124

Revenue

Westcon

1,614

1,854

15%

Logicalis International

576

645

12%

Logicalis Latin America

219

263

20%

2,408

2,763

15%

Gross profit

Gross margin (%)

y-o-y pp

Westcon

153

204

33%

9.5

11.0

1.5

Logicalis International

137

158

15%

23.7

24.4

0.7

Logicalis Latin America

49

57

17%

22.2

21.6

-0.6

338

418

24%

14.0

15.1

1.1

EBITDA

EBITDA margin (%)

Westcon

52

60

16%

3.2

3.2

0.0

Logicalis International

18

26

41%

3.2

4.0

0.8

Logicalis Latin America

(1)

6

-685%

-0.5

2.2

2.7

Central costs

(11)

(11)

-2%

58

81

39%

2.4

2.9

0.5

Adjusted EBITDA

Adjusted EBITDA margin (%)

Westcon

65

62

-4%

4.0

3.4

-0.6

Logicalis International

27

28

7%

4.6

4.4

-0.2

Logicalis Latin America

4

6

50%

1.8

2.3

0.5

Central costs

(7)

(7)

-3%

88

89

2%

3.6

3.2

-0.4

Source: Datatec

Exhibit 3: Recurring revenue

Exhibit 4: Recurring revenue contribution

Source: Datatec

Source: Datatec

Exhibit 3: Recurring revenue

Source: Datatec

Exhibit 4: Recurring revenue contribution

Source: Datatec

Westcon International: Continued strong performance

Westcon saw revenue growth of 15% y-o-y (16% cc), with particularly strong demand for cyber security and networking solutions (see Exhibit 5 for revenue split). As supply chain issues started to recede, product supply lead times improved and the business was able to increase the amount shipped from backlog (see Exhibit 6). Westcon gross profit increased 33% y-o-y and gross margin expanded 1.5pp to 11.0%. The increase was mainly due to stabilisation of exchange rates compared to H123 when the US dollar strengthened significantly versus sterling and the euro. In H123, the negative effect of currency on gross margin was partially offset by hedging gains reported in operating expenses. In H124 Westcon reported FX losses of $4.6m (including $2.7m unrealised) compared to FX gains of $32.1m (including $19.3m unrealised) in H123.

Reported EBITDA increased 16% y-o-y and adjusted EBITDA declined by 4% y-o-y, with the adjusted EBITDA margin declining 0.6pp to 3.4%. In H123, adjusted EBITDA excluded share-based payments of $12.0m and other one-offs totalling $1m, whereas in H124, adjusted EBITDA only excluded share-based payments of $2.5m. Excluding foreign exchange and share-based payment charges, operating expenses increased 12.9% y-o-y.

Exhibit 5: Revenue by product type

Exhibit 6: Backlog on a half-yearly basis

Source: Datatec

Source: Datatec

Exhibit 5: Revenue by product type

Source: Datatec

Exhibit 6: Backlog on a half-yearly basis

Source: Datatec

44% of revenue was generated from the Comstor business unit, up from 41% in H123, with the remainder from the Westcon business unit. Exhibit 7 shows the increase in the reseller contribution to revenue in H124 versus H123.

Exhibit 7: Revenue by customer

Exhibit 8: Working capital

Source: Datatec

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

Exhibit 7: Revenue by customer

Source: Datatec

Exhibit 8: Working capital

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

Inventory turns improved, partially offset by slightly higher DSOs and lower DPOs, resulting in a reduction of net working capital days by one to 15 compared to H123. This in turn drove a $10.6m y-o-y reduction in divisional net debt to $67.7m.

Logicalis International: Double-digit revenue growth

Logicalis International reported revenue growth of 12% (12% cc), with the strongest growth from the EMEA region (Exhibit 10). Hardware revenue increased as a proportion of total revenue (Exhibit 9) as product lead times reduced. Cloud revenue increased 58% y-o-y to $155m to make up 24% of divisional revenue. Gross profit was 15% higher y-o-y resulting in a gross margin improvement of 0.7pp to 24.4%. EBITDA increased 41% y-o-y and adjusted EBITDA 7%. Adjustments to EBITDA in H124 were $0.8m for share-based payments and $1.8m in one-off tax costs and in H123 were $0.3m for share-based payments, $5.2m for restructuring and $2.6m for one-off tax costs.

Order intake in H124 was strong albeit slightly lower than in H123. Combined with improving supplier lead times, the backlog declined 17% y-o-y and 10% h-o-h (Exhibit 11).

Net working capital decreased to $41m from $77m at the end of FY23 but increased from $16m at the end of H123. Working capital metrics per Exhibit 12 show that DSOs were relatively flat y-o-y while DIOs and DPOs both reduced. Net debt increased to $113m from $88m a year ago due to the increase in working capital.

Exhibit 9: Revenue by segment

Exhibit 10: Revenue by geography

Source: Datatec

Source: Datatec

Exhibit 11: Backlog by geography

Exhibit 12: Working capital progression, H123–24

Source: Datatec

Source: Datatec DIO=days inventory outstanding

Exhibit 9: Revenue by segment

Source: Datatec

Exhibit 11: Backlog by geography

Source: Datatec

Exhibit 10: Revenue by geography

Source: Datatec

Exhibit 12: Working capital progression, H123–24

Source: Datatec DIO=days inventory outstanding

Logicalis Latin America: Growth despite situation in Argentina

Logicalis Latin America saw revenue growth of 20% y-o-y (31% cc) with growth from all regions, despite challenges in Argentina (Exhibit 13), benefiting from strong order intake in H223 and improving product lead times. As with Logicalis International, hardware sales increased as a proportion of total revenue (Exhibit 14). Cloud revenue increased 21% y-o-y to make up 22% of divisional revenue.

Order intake in H124 was lower than in H123 and backlog reduced by 28% y-o-y and 16% h-o-h to $118m (Exhibit 15). Gross profit increased 17% and gross margin reduced by 0.6pp to 21.6%. Despite the impact of hyperinflation in Argentina and FX losses, EBITDA increased from a loss of $1.0m to a profit of $5.8m. Adjusted EBITDA increased 50% with an adjusted EBITDA margin of 2.3%, up 0.5pp. Adjustments in H124 included share-based payments of $0.2m; adjustments in H123 included share-based payments of $0.3m and restructuring and other one-off costs of $4.7m.

Divisional net debt was essentially flat year-on-year at $25.5m despite strong revenue growth over the period. Net working capital improved from $98m in H123 to $67m in H124 as the reduction in DSOs and DIOs more than offset the reduction in DPOs (Exhibit 16).

Exhibit 13: Revenue by geography

Exhibit 14: Revenue by segment

Source: Datatec

Source: Datatec

Exhibit 15: Backlog by geography

Exhibit 16: Working capital progression, H123–24

Source: Datatec

Source: Datatec

Exhibit 13: Revenue by geography

Source: Datatec

Exhibit 15: Backlog by geography

Source: Datatec

Exhibit 14: Revenue by segment

Source: Datatec

Exhibit 16: Working capital progression, H123–24

Source: Datatec

Management incentive plans

With the completion of the Westcon International Equity Appreciation Plan in FY23, the company 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 94.7% of the ordinary equity of the holding company and the remaining 5.3% 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 fixed return investment was also issued to Datatec PLC.

In September, a similar plan was implemented for Westcon International with an intermediate holding company called Westcon International Group Holdings Ltd (WIGHL) inserted in the group structure owned by Westcon International Ltd (WIL). Management purchased 5% of the shares in WIGHL and WIL holds the remaining 95%, with 1% earmarked for potential management participation in the future. WIGHL also issued a fixed return instrument to WIL.

There are still some incentive schemes operating at the group level as well as share appreciation rights at divisional level, thus Datatec will continue to report share-based payment charges, albeit at a significantly lower level than in FY22 and FY23. The new divisional share ownership schemes will not attract any IFRS2 share-based payment charges.

Outlook and changes to forecasts

The company expects improved performance in all divisions in FY24. By division:

Westcon: demand is easing through a combination of improving product supply and macroeconomic uncertainty, however the company believes its digital and data platforms are helping to differentiate it from the competition.

Logicalis International: the backlog is reducing as the higher interest rate environment is dampening demand and the supply chain is improving. Customers are expanding their use of digital technologies with hybrid infrastructure increasingly being used to complement cloud solutions.

Logicalis Latin America: the division is seeing improving lead times and accelerating cloud adoption by customers. The Brazilian and Mexican economies are improving although the current situation in Argentina remains uncertain.

We have revised our forecasts to reflect H124 performance. We have raised our Westcon revenue and adjusted EBITDA forecasts on the back of strong performance in H1 and we have trimmed our Logicalis Latin America forecasts to reflect continued uncertainty in the region. At a group level, our FY24 adjusted EBITDA forecast increase offsets higher interest costs and our uEPS forecast is broadly unchanged. We have increased our net debt forecast, reflecting higher working capital requirements, particularly as suppliers start to reduce their previously extended payment terms.

Exhibit 17: Changes to forecasts

$m

FY24e

FY25e

FY26e

Old

New

Y-o-y

Change

Old

New

Y-o-y

Change

Old

New

Y-o-y

Change

Revenue

5,499

5,568

8%

1%

5,761

5,833

5%

1%

6,036

6,111

5%

1%

Gross Profit

830

844

13%

2%

879

893

6%

2%

932

944

6%

1%

Adj. EBITDA

194

197

9%

2%

220

222

13%

1%

248

250

13%

1%

EBITDA

186

184

88%

(1)%

212

213

16%

0%

240

241

13%

0%

Normalised operating profit

135

137

11%

2%

158

162

18%

2%

184

188

16%

2%

Profit before tax (normalised)

90

87

(0)%

(3)%

113.0

112.1

29%

(1)%

138

138

23%

(0)%

Net income (normalised)

50

48

(9)%

(3)%

64.5

64.4

33%

(0)%

80

80

25%

0%

EPS – diluted normalised (c)

21.5

20.8

(14)%

(3)%

27.6

27.6

33%

(0)%

34.3

34.5

25%

0%

EPS – Company underlying uEPS (c)

20.9

21.2

247%

1%

26.8

26.0

23%

(3)%

33.6

33.2

27%

(1)%

Dividend (c)

7.0

7.1

8.9

8.7

11.2

11.1

Revenue growth (%)

6.9

8.3

4.8

4.8

4.8

4.8

Gross Margin (%)

15.1

15.2

15.3

15.3

15.4

15.5

Adj. EBITDA Margin (%)

3.5

3.5

3.8

3.8

4.1

4.1

Normalised Operating Margin

2.4

2.5

2.7

2.8

3.0

3.1

Operating cash flow

53

37

158

160

158

159

Net debt

187

205

159

175

136

151

Revenue

Westcon

3,660

3,728

9%

2%

3,843

3,915

5%

2%

4,035

4,111

5%

2%

Logicalis

1,839

1,839

7%

0%

1,918

1,918

4%

0%

2,001

2,001

4%

0%

Logicalis International

1,299

1,299

5%

0%

1,351

1,351

4%

0%

1,405

1,405

4%

0%

Logicalis Latin America

540

540

10%

0%

567

567

5%

0%

596

596

5%

0%

Total

5,499

5,568

8%

1%

5,761

5,833

5%

1%

6,036

6,111

5%

1%

EBITDA

Westcon

106.2

111.4

130%

5%

123.1

128.2

15%

4%

141.3

144.9

13%

3%

Logicalis

100.1

94.5

32%

-6%

110.3

106.0

12%

-4%

120.7

117.7

11%

-2%

Logicalis International

71.5

67.7

34%

-5%

77.4

75.5

12%

-2%

83.4

83.3

10%

0%

Logicalis Latin America

28.6

26.8

27%

-6%

32.8

30.5

14%

-7%

37.3

34.4

13%

-8%

Central costs

(20.1)

(21.7)

-1%

8%

(20.9)

(21.2)

-2%

2%

(21.7)

(21.8)

2%

0%

Total

186.3

184.3

88%

-1%

212.5

213.0

16%

0%

0.2

240.8

13%

0%

Adjusted EBITDA

Westcon

108.2

114.4

20%

6%

125.1

130.2

14%

4%

143.3

146.9

13%

2%

Logicalis

101.1

98.5

8%

-3%

111.3

108.2

10%

-3%

121.7

119.9

11%

-1%

Logicalis International

72.0

71.2

7%

-1%

77.9

77.2

9%

-1%

83.9

85.0

10%

1%

Logicalis Latin America

29.1

27.3

10%

-6%

33.4

31.0

13%

-7%

37.8

34.9

13%

-8%

Central costs

(15.6)

(15.6)

155%

0%

(16.4)

(16.4)

5%

0%

(17.2)

(16.9)

3%

-1%

Total

193.8

197.3

10%

2%

220.0

222.0

13%

1%

247.8

249.8

13%

1%

Source: Edison Investment Research

Valuation

On a group basis, Datatec is valued on a minority-adjusted EV/adjusted EBITDA multiple of 3.8x FY24e and 3.3x FY25eand on a normalised P/E basis of 10.1x FY24e and 7.6x 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 18, average of end-FY23 and FY24e net debt (we add $100m to this as the group typically operates at a higher 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 ZAR70.95. This implies 84% upside from the current share price.

Through the ongoing strategic review, management has started to unlock some of this value with the 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 18: Sum-of-the-parts valuation

 $m

Revenues

Adjusted EBITDA)

FY24e

FY25e

FY24e

FY25e

Logicalis

1,839

1,918

98

108

Westcon

3,728

3,915

114

130

Central costs

(16)

(16)

 

Peer multiples (x)

Revenues

EBITDA

 

FY24e

FY25e

FY24e

FY25e

Logicalis

0.8

0.8

9.3

8.5

Westcon

0.3

0.3

8.2

7.7

Central costs

8.0

8.0

 

Implied EV based on

 

 

Enterprise value

Revenues

EBITDA

Economic interest

Mean EV

(US$m)

FY24e

FY25e

FY24e

FY25e

 

Logicalis

1,523

1,500

918

916

83%

761

Westcon

1,139

1,277

938

1,006

92%

895

Central costs

(125)

(131)

100%

(128)

Group EV

1,528

Assumed average net debt

(256)

SOTP – Equity value

1,272

Discount for: RSA sovereign risk, holding company risk

30%

Adjusted equity value

890

Shares in issue (m)

229.5

SOTP value per share (US$)

3.88

SOTP value per share (ZAR)

70.95

Latest share price (ZAR)

38.46

Upside from latest share price

84%

Source: Edison Investment Research, Refinitiv (as at 6 November)

.

Exhibit 19: Financial summary

28-February

$'k

2020

2021

2022

2023

2024e

2025e

2026e

INCOME STATEMENT

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

Revenue

 

 

4,214,421

4,109,463

4,546,398

5,143,125

5,567,814

5,833,212

6,111,360

Cost of Sales

(3,472,843)

(3,418,939)

(3,816,630)

(4,398,618)

(4,723,610)

(4,940,259)

(5,166,861)

Gross Profit

741,578

690,524

729,768

744,507

844,204

892,953

944,499

Adjusted EBITDA

 

 

166,280

152,490

158,922

180,182

197,291

222,017

249,840

EBITDA

158,657

118,619

143,457

98,246

184,256

213,017

240,840

Normalised operating profit

 

 

105,157

97,859

100,540

123,934

136,972

162,015

187,873

Amortisation of acquired intangibles

(11,297)

(8,635)

(10,100)

(11,886)

(3,340)

(2,079)

(1,294)

Exceptionals

(3,700)

(27,771)

0

(40,915)

0

0

0

Share-based payments

(7,623)

(11,493)

(15,465)

(52,641)

(11,239)

(9,000)

(9,000)

Reported operating profit

82,537

49,960

74,975

18,492

122,393

150,937

177,579

Net Interest

(25,874)

(25,692)

(31,051)

(38,090)

(50,282)

(49,894)

(49,894)

Joint ventures & associates (post tax)

(204)

908

(427)

882

(2)

0

0

Exceptionals

2,029

59

540

(1,333)

80

0

0

Profit Before Tax (norm)

 

 

79,079

73,075

69,062

86,726

86,688

112,122

137,979

Profit Before Tax (reported)

 

 

58,488

25,235

44,037

(20,049)

72,189

101,043

127,685

Reported tax

(31,809)

(19,540)

(9,470)

(13,375)

(25,266)

(35,365)

(44,690)

Profit After Tax (norm)

34,615

30,034

36,179

56,372

56,348

72,879

89,686

Profit After Tax (reported)

26,679

5,695

34,567

(33,424)

46,923

65,678

82,995

Minority interests

(13,772)

(3,103)

(6,431)

(3,209)

(8,042)

(8,488)

(9,239)

Discontinued operations

1,332

0

5,766

116,967

0

0

0

Net income (normalised)

20,843

26,938

29,748

53,163

48,306

64,391

80,447

Net income (reported)

14,239

2,592

33,902

80,334

38,882

57,189

73,756

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

24.1

20.8

27.6

34.5

EPS - basic reported (c)

 

 

6.8

1.3

16.7

36.9

17.3

25.4

32.8

EPS - Company underlying uEPS (c)

 

 

9.9

13.5

16.0

6.1

21.2

26.0

33.2

Dividend (c)

7.0

6.6

39.3

77.7

7.1

8.7

11.1

Revenue growth (%)

(2.7)

(2.5)

10.6

13.1

8.3

4.8

4.8

Gross Margin (%)

17.6

16.8

16.1

14.5

15.2

15.3

15.5

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

2.5

2.8

3.1

BALANCE SHEET

Fixed Assets

 

 

512,598

554,690

613,155

610,565

611,442

613,427

615,611

Intangible Assets

291,279

314,486

320,089

293,184

291,821

291,101

290,571

Tangible Assets

43,300

39,987

32,517

33,054

35,296

38,001

40,715

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

228,077

228,077

228,077

Current Assets

 

 

2,083,928

2,242,568

2,399,078

3,015,700

3,011,043

3,137,062

3,262,020

Stocks

253,271

242,005

309,227

411,059

415,547

434,606

454,541

Debtors

1,110,510

1,108,105

1,223,824

1,508,470

1,597,124

1,673,253

1,753,039

Cash & cash equivalents

347,189

488,632

453,926

584,683

486,054

515,972

540,204

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)

(2,827,629)

(2,895,406)

(2,948,584)

Creditors

(1,275,690)

(1,401,804)

(1,544,198)

(2,088,899)

(2,033,608)

(2,093,087)

(2,137,569)

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)

(189,791)

(198,089)

(206,786)

Long Term Liabilities

 

 

(187,610)

(176,624)

(229,112)

(224,284)

(226,548)

(227,962)

(229,445)

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)

(139,512)

(140,926)

(142,409)

Net Assets

 

 

643,093

640,621

630,946

532,340

568,309

627,120

699,602

Minority interests

(70,778)

(57,465)

(67,516)

(60,331)

(68,373)

(76,861)

(86,100)

Shareholders equity

 

 

572,315

583,156

563,430

472,009

499,936

550,259

613,502

CASH FLOW

Op Cash Flow before WC and tax

169,980

157,888

162,842

191,802

195,495

222,017

249,840

Working capital

57,231

79,903

(76,807)

(18,203)

(132,890)

(25,997)

(45,060)

Exceptional & other

19,330

(3,453)

10,677

(193)

(752)

(913)

(1,004)

Tax

(36,941)

(36,597)

(26,282)

(24,182)

(25,266)

(35,365)

(44,690)

Operating cash flow

 

 

209,600

197,741

70,430

149,224

36,587

159,742

159,085

Capex

(28,036)

(35,145)

(24,841)

(36,669)

(35,242)

(36,564)

(37,945)

Acquisitions/disposals

(9,179)

(3,694)

(16,424)

114,821

0

0

0

Net interest

(30,972)

(25,745)

(31,265)

(38,596)

(50,282)

(49,894)

(49,894)

Equity financing

(51,683)

(2,808)

(6,150)

(7,725)

0

0

0

Dividends

(15,137)

(4,905)

(43,136)

(154,399)

(22,192)

(15,866)

(19,514)

Other

20,019

1,880

(2,034)

(2,914)

(27,500)

(27,500)

(27,500)

Net Cash Flow

94,612

127,324

(53,420)

23,742

(98,629)

29,918

24,232

Opening net debt/(cash)

 

 

100,753

139,867

60,874

130,096

106,595

205,224

175,306

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

205,224

175,306

151,074

Source: Datatec, Edison Investment Research


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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

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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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