reports
- Richard Williamson
Datatec - Operational focus drives H125 profit growth
In H125, while revenue declined due to mix and net revenue accounting, Datatec grew gross profit by 3.5% y-o-y and adjusted EBITDA by 18.5%, resulting in a 56.2% increase in underlying EPS (uEPS). Both Westcon and Logicalis International delivered strong profit growth, while Logicalis Latin America managed to offset lower revenues with reductions in its cost base. Management continues to expect a better financial performance from all three businesses in FY25. We have upgraded our forecasts to re...
- Richard Williamson
Datatec - Better profitability across the board
Datatec’s H125 results confirmed improved profitability in each division, resulting in a 56% y-o-y increase in underlying EPS to 11.4c. Group revenue declined 5.5% y-o-y, mainly reflecting a shift towards net revenue- reported software, but gross profit increased 3.5% due to a better product mix. Combined with good cost control, adjusted EBITDA increased by 18.5% y-o-y, resulting in a 0.9pp increase in the adjusted EBITDA margin to 4.1%. The group closed H125 with net debt of $108m, down from $1...
- Richard Williamson
Datatec - Encouraging H1 across all divisions
Datatec’s trading statement flags a robust performance at group level in H1. Westcon continues to deliver profit growth, Logicalis International delivered a strong increase in profitability while financial performance at Logicalis Latin America has also improved. As a result, management expects H1 underling EPS to be 11–12c, up over 50% year-on-year on a like-for-like basis. Our FY25 estimates are unchanged and look well supported.
- Richard Williamson
Datatec - Positive outlook for FY25
Datatec reported 6% revenue growth in FY24, with the backlog normalising after a period of tightness in the supply chain. Strong performances from Westcon and Logicalis International were partially offset by weaker profitability in Logicalis Latin America, resulting in flat adjusted EBITDA margins year-on-year. Management expects improved financial performance from all divisions in FY25; we forecast year-on-year growth in underlying EPS of 26%.
- Richard Williamson
Datatec - Underlying earnings more than tripled in FY24
Datatec reported FY24 revenue growth of 6%, with a strong performance from Westcon, a good performance in Logicalis International masked by a higher level of net revenue software sales and a mixed performance in Logicalis Latin America. Group gross profit grew 16% y-o-y and adjusted EBITDA grew 7%, resulting in a flat adjusted EBITDA margin of 3.5%. Underlying EPS of 20.2c more than tripled versus the prior year and good control of working capital resulted in year-end net debt of $123m. The comp...
- Richard Williamson
Datatec - FY24 underlying EPS more than doubles y-o-y
In a second more detailed trading update for FY24, Datatec confirmed revenue growth of 6% to $5.46bn, with Westcon International delivering excellent performance, Logicalis International having a strong H2 and Logicalis Latin America affected by difficult market conditions in Argentina and Brazil. The company also provided provisional EPS data, with reported EPS likely to come in ahead of our forecast and underlying EPS just below our forecast. We maintain our forecasts pending FY24 results on o...
- Richard Williamson
Datatec - FY24 revenue growth of 5.8%
Datatec expects to report revenue of $5.44bn for FY24, up 5.8% y-o-y, and noted that the quality of earnings improved in the year. During H224, Westcon International continued to deliver a strong financial performance. Logicalis International also had a strong half, although its reported revenue growth has been suppressed by a higher proportion of net revenue-reported software sales. Logicalis Latin America had a tougher H2 due to difficult market conditions in Argentina and Brazil. We maintain ...
- Richard Williamson
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 unchange...
- Richard Williamson
Datatec - Solid H124 performance supports FY24 outlook
For H124, Datatec reported 15% y-o-y revenue growth, gross margin expansion, EBITDA growth of 39% and adjusted EBITDA growth of 2%. Underlying EPS increased 336% to 9.6c. After incurring restructuring charges and elevated share-based compensation in FY23, H124 provided a cleaner set of numbers. Supply chain issues eased during H1 allowing Datatec to reduce its order backlog by 21% from the end of FY23. The company is seeing strong demand for cyber security and networking solutions, and while cha...
- Richard Williamson
Datatec - Sustained demand in H124
In its H124 trading update, Datatec noted that all divisions reported improved performance versus H123. Westcon’s performance was described as excellent, with a strong performance from Logicalis International and a much-improved performance from Logicalis Latin America, although macroeconomic pressures remain in the region. The company continues to see good demand for its solutions and services and is actively managing supply chain challenges to service customers. We maintain our forecasts pendi...
- Richard Williamson
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 reduce...
- Richard Williamson
Datatec - Starting FY24 in a strong position
Datatec reported group continuing revenue growth of 13% for FY23 (20% in constant currency) with adjusted EBITDA from continuing operations also increasing 13%. Supply chain issues started to ease allowing the company to accelerate delivery of its order backlog. Demand remained robust, resulting in a flat order backlog at the year-end, despite double-digit revenue growth. At a divisional level, Westcon delivered excellent results, Logicalis International performance was solid and, while down for...
- Richard Williamson
Datatec - Confirming EPS for FY23
As Datatec expects to report EPS measures for FY23 that differ from FY22 by more than 20%, it has provided an update prior to reporting full FY23 results on 23 May. Reported EPS is expected to be 36.9c (FY22: 16.7c) and underlying EPS (which excludes one-off items such as the gain on the September 2022 sale of Analysys Mason) is expected to be 7.9c (FY22: 18.7c). Adjusting for exceptionally high share-based payments, underlying EPS would be 29.5c (FY22: 27.4c). We plan to update our forecasts wh...
- Richard Williamson
Datatec - Another year of double-digit revenue growth
Datatec expects to report FY23 revenue of $5.16bn, which represents growth of 13% compared to FY22 and is 3% ahead of our forecast. Westcon performance was well ahead of our expectations, with Logicalis International slightly ahead and Logicalis Latin America below. Overall, the group saw signs of improvement in the supply chain, although the backlog remained elevated at the year-end. The secular growth in networking and cyber security solutions continues to be the main driver of demand. We main...
- Richard Williamson
Datatec - Focus on Westcon International
Since embarking on a restructuring of the Westcon International (Westcon) division in FY18, management has grown divisional revenue at a CAGR of 5.7% (FY18–22) and improved profitability. Westcon has set ambitious targets in its latest medium-term plan (FY23–27), supported by its ongoing digital transformation programme. With our valuation of Westcon higher than the current enterprise value of the group, we believe that successful achievement of this plan could unlock significant shareholder val...
- Richard Williamson
Datatec - Resilient performance despite challenges
Datatec reported a mixed performance in H123: strong demand for cloud infrastructure, cybersecurity and networking solutions drove revenue and order growth, while supply chain issues continued to hamper the ability to deliver orders. Currency headwinds further impacted profitability, however, healthy order backlogs across all divisions should support better revenue growth in H223/FY24 as supply chain issues ease.
- Richard Williamson
Datatec - The positives outweigh the negatives
Datatec’s H123 results suggest continuing revenue momentum in H123 driven by enterprise demand for cybersecurity, networking and cloud infrastructure, although with a mixed picture across the group. Excluding Analysys Mason, group revenues rose 9% y-o-y to US$2.41bn, while gross profits fell 5% to US$338m and adjusted EBITDA rose by 16% to US$88m. Underlying EPS fell by 67% to 2.2 US cents (3.6 US cents including Analysys Mason), particularly impacted by share-based payment charges. Net debt (fo...
- Richard Williamson
Datatec - Mixed performance in H123, special dividend
Datatec’s trading update indicated slowing momentum in H123, with geopolitical and economic headwinds and the strengthening dollar offsetting demand-driven technology tailwinds. Weakness was principally down to Logicalis LatAm. Management expects reported EPS of between 4.5 and 5.5 US cents, a year-on-year fall of between 13% and 29%, with underlying EPS expected to be between 3.0 and 4.0 US cents, a year-on-year fall of between 52% and 64%. Our estimates anticipate a year-on-year rise in FY23 r...
- Richard Williamson
Datatec - Management buyout of Analysys Mason
As a first step in its ongoing strategic review, Datatec has announced the management buyout of Analysys Mason, its TMT research and management consultancy arm, backed by Bridgepoint Development Capital for an EV of up to £210m (US$260m), 2.9x FY22 EV/sales and 14.4x FY22 EV/adjusted EBITDA (excluding share-based payment charges). Management’s strategic review, which has not necessarily concluded, has started to unpick the group’s embedded value, with the sale of Analysys Mason leaving Datatec a...
- Richard Williamson
Datatec - Potential strategic sale of Analysys Mason
FY22 was a year of robust global demand for technology solutions, with supply chain issues and semiconductor shortages constraining Datatec’s ability to meet that demand, leading to a growing backlog of pending orders. Datatec’s three divisions all had a strong year, which would have been even stronger for Westcon and Logicalis if orders could have been fully met. We note management’s cautious tone on H123 in particular, although we believe Datatec remains a defensive player in an uncertain worl...
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