2017 consolidated presentation - final - without notes · fy 2017 $6.08bn fy 2016 $6.45bn ebitda...
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Technology Distribution Integration & Managed Services Consulting & Research
DATATEC GROUPAUDITED PROVISIONAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017
© Datatec 2017 2
DATATEC GROUPAGENDA
Results summary & overviewJens Montanana, Datatec Group CEO
Financial resultsIvan Dittrich, Datatec Group CFO
Operational reviewJens Montanana, Datatec Group CEO
Current trading & prospectsJens Montanana, Datatec Group CEO
© Datatec 2017
Technology Distribution Integration & Managed Services Consulting & Research
RESULTS SUMMARY & OVERVIEW
© Datatec 2017 4OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPFINANCIAL RESULTS SUMMARY
RevenueFY 2017 $6.08bnFY 2016 $6.45bn
EBITDAFY 2017 $118.9mFY 2016 $162.1m
Gross marginFY 2017 13.7%FY 2016 13.5%
DividendsFY 2017 4.2 US¢FY 2016 17.0 US¢
Underlying EPSFY 2017 11.0 US¢FY 2016 32.0 US¢
© Datatec 2017 5OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPOVERVIEW
Challenging end to year
Growth in managed services and network security
Continuing strong dollar
Very disruptive final phase of SAP/BPO transition
© Datatec 2017
Technology Distribution Integration & Managed Services Consulting & Research
FINANCIAL RESULTS
© Datatec 2017 7OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPFINANCIAL PERFORMANCE
US$m FY 2017 FY 2016 Growth %
Revenue 6,083.4 6,454.8 (6%)
Gross profit 833.1 868.7 (4%)
Gross margin % 13.7% 13.5%
Operating costs (714.2) (706.6) 1%
Operating cost margin % 11.7% 10.9%
EBITDA 118.9 162.1 (27%)
EBITDA% 2.0% 2.5%
Depreciation & amortisation (58.4) (51.5) 13%
Intangible impairment - (0.1)
Operating profit 60.5 110.5 (45%)
Operating profit % 1.0% 1.7%
Revenues and gross profit impacted by weaker Westcon performance
Gross margins expanded to 13.7%
EBITDA impacted by Westcon restructuring costs
Depreciation & amortisation increased due to high capex
© Datatec 2017 8OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPFINANCIAL PERFORMANCE – CONTINUED
US$m FY 2017 FY 2016 Growth %
Operating profit 60.5 110.5 (45%)
Net finance costs (24.2) (23.9) 1%
Profit before tax 41.7 88.4 (53%)
Underlying EPS (US cents) 11.0 32.0 (66%)
HEPS (US cents) 2.0 19.4 (90%)
Abnormally high effective tax rate at 74%
Underlying EPS excludes restructuring costs
Financial year close and reporting delayed by SAP implementation in Europe
© Datatec 2017 9OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPADJUSTED EBITDA BRIDGE
119
139
182
17 2 1
Reported EBITDA Restructuring costs Unrealised FX Other Adjusted** EBITDA FY16 adjusted EBITDA
7
** Adjusted for uEPS adjustments
© Datatec 2017 10OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPCONTRIBUTION PER DIVISION
* Contribution to EBITDA is calculated before Corporate costs
74%
25%
1%
FY 2017
75%
24%
1%
FY 2016
REVENUE GROSS PROFIT
Westcon Logicalis Consulting & Financial Services
55%
44%
1%
FY 2017
57%41%
2%
FY 2016
EBITDA*
40%
58%
2%
FY 2017
52%
47%
1%
FY 2016
Larger EBITDA contribution from
Logicalis
© Datatec 2017 11OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPREVENUE & GROSS PROFIT % CONTRIBUTION BY GEOGRAPHY
35%
15%
33%
11%
6%
FY 2017
35%
14%
34%
9%8%
FY 2016
REVENUE GROSS PROFIT
29%
22%
33%
12%4%
FY 2017
28%
21%33%
11%7%
FY 2016
North America Latin America Europe Asia-Pacific MEA
Geographic mix affected margins
Increased contribution from Latin America and
Asia-Pacific
© Datatec 2017 12OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPBALANCE SHEET SUMMARY
US$m FY 2017 FY 2016
Assets 3,484.9 3,382.9Non-current assets
Goodwill 461.7 462.6Acquired intangible assets & software 48.6 59.8Other non-current assets 276.1 243.7
Current assets 2,698.5 2,616.8
Equity & Liabilities 3,484.9 3,382.9Shareholders’ funds 855.0 830.3Non-controlling interests 51.9 39.1Long-term liabilities 126.5 100.7Amounts due to vendors 1.1 10.5Current liabilities 2,450.4 2,402.3
Net debt (396.5) (205.4)
Increase in receivables
$4.04 NAV per share
1.1 current ratio
Increased net debt, as a result of Westcon-Comstor
© Datatec 2017 13OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPCASH FLOW
US$m FY 2017 FY 2016
EBITDA 118.9 162.1Working capital changes (184.6) (59.4)Other working capital changes 12.7 (2.8)Other movements 15.7 29.2
Cash (utilised in)/generated from operations (37.3) 129.1Net finance costs paid (25.3) (21.2)Taxation paid (43.3) (39.9)
Net cash (outflow)/inflow from operating activities (105.9) 68.0Net cash outflow for acquisitions (1.9) (46.2)Net cash outflow from other investing activities (67.8) (73.1)Dividends to shareholders (20.9) (22.2)Net cash inflow/(outflow) from financing activities 17.4 (11.2)
Decrease in cash & cash equivalents (179.1) (84.7)Cash & cash equivalents at beginning of year (132.7) (22.1)Translation difference on cash & cash equivalents 11.9 (25.9)
Cash & cash equivalents at end of period (299.9) (132.7)
Deteriorating operating cash flows from working capital changes
Large cash outflows from receivables due to increased prepaid expenses in Logicalis
© Datatec 2017 14OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPCASH FLOW FROM OPERATING ACTIVITIES
US$m
(32.9)
12.3
119
(84)(12) (89) 13 16
(25) (44) (106)
EBITDA Increase inreceivables
Increase ininventories
Decrease inpayables
Other workingcapital
changes
Othermovements
Net financecosts
Taxation paid Net cashoutflow from
operatingactivities
© Datatec 2017
Technology Distribution Integration & Managed Services Consulting & Research
OPERATIONAL REVIEW
© Datatec 2017
Technology Distribution Integration & Managed Services Consulting & Research
WESTCON GROUP
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 17
OUTLOOKOVERVIEW
WESTCON GROUPFINANCIAL PERFORMANCE
US$m FY 2017 FY 2016 Growth %
Revenue 4,532.1 4,869.6 (7%)
Gross profit 456.0 497.1 (8%)
Gross margin % 10.1% 10.2%
Operating costs (402.5) (408.6) (1%)
Operating cost margin % 8.9% 8.4%
EBITDA 53.5 88.5 (40%)
EBITDA% 1.2% 1.8%
Operating profit 20.3 62.2 (67%)
Operating profit % 0.4% 1.3%
Disappointing year end marred by BPO transformation challenges
Significant year end disruption in EMEA caused by final SAP phase
Almost 80% of revenue shortfall was in EMEA
Unexpected costs impacted Asia-Pacific and MEA profitability
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 18
OUTLOOKOVERVIEW
WESTCON GROUP
37%
11%
33%
11%
8%
FY 2017
37%
10%33%
10%10%
FY 2016
REVENUE GROSS PROFIT
27%
18%36%
12%
7%
FY 2017
26%
17%35%
11%
11%
FY 2016
North America
Latin America
Europe
Asia-Pacific
MEA
REVENUE & GROSS PROFIT % CONTRIBUTION BY GEOGRAPHY
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 19
OUTLOOKOVERVIEW
WESTCON GROUPREVENUE % BY BUSINESS UNIT, CUSTOMER & TECHNOLOGY CATEGORY
40%
60%
FY 2017
44%
56%
FY 2016
BUSINESS UNIT CUSTOMER
Comstor Westcon
70%
20%
10%
FY 2017
68%
19%
13%
FY 2016
TECHNOLOGY
39%
21%
25%
15%
FY 2017
34%
26%
23%
17%
FY 2016
ResellerSystem integrator
Service provider
Security Unified communications
Networking Data centre & other
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 20
OUTLOOKOVERVIEW
WESTCON GROUPHISTORICAL QUARTERLY SALES
US$m
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2
FY 2015
1 031
1 254
1 068
1 210 1 257 1 188
1 276 1 190
1 141
1 338
1 169 1 135
FY 2016 FY 2017
Qtr 3 Qtr 4
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 21
OUTLOOKOVERVIEW
WESTCON GROUPGROSS PROFIT & EBITDA BY GEOGRAPHY
3.3%
GROSS PROFIT EBITDA
US$m US$m
12984
173
55 56
497
121 80
165
5733
456
-
50
100
150
200
250
300
350
400
450
500
550
NorthAmerica
Latin America Europe Asia-Pacific MEA Total
FY 2016 FY 2017
70
28
43
14
(6)
(60)
89
63
26 43
(2)(13)
(63)
54
(80)
(60)
(40)
(20)
-
20
40
60
80
100
120
NorthAmerica
LatinAmerica
Europe Asia-Pacific MEA Centralcosts
Total
FY 2016 FY 2017
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 22
OUTLOOKOVERVIEW
US$m FY 2017 FY 2016
Accounts receivable 1,245.2 1,219.9
DSO (days) 71 70
Inventory 400.0 387.4
Inventory turns 9.4x 9.8x
Accounts payable (1,060.9) (1,093.0)
DPO (days) 72 73
Net working capital 584.3 514.3
NWC (days) 39 34
Current ratio 1.1 1.1
Net debt (403.4) (271.0)
WESTCON GROUPWORKING CAPITAL
DSO’s deteriorate due to BPO & SAP challenges with collections in Europe
Net debt increases due to lower cash earnings and higher working capital
© Datatec 2017 LOGICALIS
GROUPWESTCON
GROUPDATATEC GROUP 23
OUTLOOKOVERVIEW
WESTCON GROUPNET DEBT
(700)
(600)
(500)
(400)
(300)
(200)
(100)
-
Feb-
14
Mar
-14
Apr-
14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15
Feb-
15
Mar
-15
Apr-
15
May
-15
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16
Feb-
16
Mar
-16
Apr-
16
May
-16
Jun-
16
Jul-1
6
Aug
-16
Sep
-16
Oct
-16
Nov
-16
Dec
-16
Jan-
17
Feb-
17
Impacted by investment in capex over the three year period
© Datatec 2017 24OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
WESTCON GROUPOUTLOOK
Resolving issues associated to BPO transformation
Focus on improving working capital and cash generation
Stabilising operating platform post completion of SAP transition
Reduction in capital expenditure and central costs
Return to revenue growth and better profitability
© Datatec 2017
Technology Distribution Integration & Managed Services Consulting & Research
LOGICALIS GROUP
© Datatec 2017 26OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
LOGICALIS GROUPFINANCIAL PERFORMANCE
US$m FY 2017 FY 2016 Growth %
Revenue 1,510.3 1,532.8 (1%)
Gross profit 363.3 353.4 3%
Gross margin % 24.1% 23.1%
Operating costs (284.3) (272.5) 4%
Operating cost margin % 18.8% 17.8%
EBITDA 79.0 80.9 (2%)
EBITDA% 5.2% 5.3%
Operating profit 54.4 56.3 (3%)
Operating profit % 3.6% 3.7%
Revenue flat despite market challenges, weakness in UK
Gross margin improvement delivered by beneficial services mix
Operating costs increase due to restructuring costs in UK and
Australia
© Datatec 2017 27OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
LOGICALIS GROUP
30%
28%
31%
11%
FY 2017
30%
27%
34%
9%
FY 2016
REVENUE GROSS PROFIT
33%
28%
27%
12%
FY 2017
31%
28%
31%
10%
FY 2016
North America
Latin America
Europe
Asia-Pacific
REVENUE & GROSS PROFIT % CONTRIBUTION BY GEOGRAPHY
© Datatec 2017 28OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
LOGICALIS GROUPREVENUE BY SEGMENT & PRODUCT REVENUE BY VENDOR
SEGMENT
65%
13%
22%
FY 2017
69%
12%
19%
FY 2016
Product
Professional services
Maintenance & managed services
VENDOR
50%
10%
6%
34%
FY 2017
52%16%
7%
25%
FY 2016
Cisco
IBM
HPE
Other
© Datatec 2017 29OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
LOGICALIS GROUP
GROSS PROFIT EBITDA
US$m US$m
110 100 110
33
353
120 10198
44
363
-
50
100
150
200
250
300
350
400
North America Latin America Europe Asia-Pacific Total
FY 2016 FY 2017
24
38
18
7
(6)
81
27
39
8 10
(5)
79
(20)
(10)
-
10
20
30
40
50
60
70
80
90
NorthAmerica
Latin America Europe Asia-Pacific Central costs Total
FY 2016 FY 2017
GROSS PROFIT & EBITDA BY GEOGRAPHY
© Datatec 2017 30OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
LOGICALIS GROUPWORKING CAPITAL
US$m FY 2017 FY 2016
Deferred revenue 77.3 77.9
Inventory 38.5 47.2
Inventory days (excluding spares stock) 14 18
Accounts receivable 296.7 279.8
DSO (days) 50 45
Accounts payable (259.7) (266.4)
DPO (days) 88 82
Net working capital 75.5 60.6
Net cash * 18.1 77.6
* Excluding lease liabilities, Datatec loans and other borrowings
DSO increase due to extended payment terms in Latin America
Cash affected by large prepaid expenses in Brazil
© Datatec 2017 31OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
LOGICALIS GROUPOUTLOOK
Logicalis well positioned to further improve services mix
Exploring expansion opportunities in existing geographies
Continual adjustment to cloud-based infrastructure solutions
Sentiment improving in Logicalis core markets
© Datatec 2017
Technology Distribution Integration & Managed Services Consulting & Research
CURRENT TRADING & PROSPECTS
© Datatec 2017 33OVERVIEW
WESTCON GROUP
LOGICALIS GROUP
DATATEC GROUP OUTLOOK
DATATEC GROUPCURRENT TRADING & PROSPECTS
Westcon-Comstor operational challenges expected to be resolved
Focus is on working capital, cash generation and earnings
Better growth expected in Europe and Asia
Higher interest rates and continuing strong dollar
Technology Distribution Integration & Managed Services Consulting & Research
© Datatec 2017
QUESTIONS
© Datatec 2017 35
DATATEC GROUPDEFINITIONS
UNDERLYING EARNINGS
Excluding impairment of goodwill and intangible assets, profit or loss on sale of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments, fair value movements on acquisition-related financial instruments, restructuring costs relating to fundamental reorganisations and the taxation effect on all of the aforementioned
CONSTANT CURRENCY
The pro forma constant currency information, which is the responsibility of the directors of Datatec, presents the Group’s revenue for the current year had it been translated at the average foreign currency exchange rates of the prior year. This information is for illustrative purposes only and because of its nature, may not fairly present the Group’s revenues. The Group’s auditors, Deloitte & Touche have issued an unmodified reasonable assurance report (ISAE 3420: Reasonable Assurance Engagements to Report on the Compilation of Pro Forma Financial Information) on the pro-forma financial information presented, a copy of which is available for inspection at the Company’s registered office
To determine the revenues in constant currency terms, the current financial reporting period’s monthly revenues in local currency have been converted to US dollars at the average monthly exchange rates prevailing over the same period in the prior year. The calculation has been prepared for each of the Group’s material currencies, being that of the British Pound, Euro, Brazilian Real, Australian Dollar, Canadian Dollar, Singapore Dollar, Mexican Peso and South African Rand, using the average exchange rates against the US Dollar
© Datatec 2017 36
DATATEC GROUP
This presentation may contain statements regarding the future financial performance of the Group which may be considered to be forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty, and although the Group has taken reasonable care to ensure the accuracy of the information presented, no assurance can be given that such expectations will prove to have been correct.
The Group has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. It is important to note, that:
unless otherwise indicated, forward-looking statements indicate the Group’s expectations and have not been reviewed or reported on by the Group’s external auditors;
actual results may differ materially from the Group`s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate;
the Group cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on these forward-looking statements; and
the Group disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason, other than as required by the JSE Limited Listings Requirements.
DISCLAIMER