datatec group unaudited results for the six months ended 31 august 2005 jens montanana ceo
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DATATEC GROUPUNAUDITED RESULTSFOR THE SIX MONTHS ENDED 31 AUGUST 2005
Jens MontananaCEO
DATATEC GROUP
Trading Environment
• Strong US and Asia markets, weaker Europe
• Higher energy prices creating inflationary pressures
• Global demand for IT continues to improve
• Services opportunities increasing
• Continental Europe continues to lag
• Currency volatility has diminished
DATATEC GROUP
Performance Highlights
• Revenue growth and market share gains in all operations
• Accelerating improvement in financial performance
• HEPS up strongly to 12c (includes 1.8c from positive Lucent settlement)
• Quadrupling of EBITDA operating profits to $40m
• Gross margins continue to expand
• Growing contribution from integration services and consulting
• Strong cash flow generated from operations
DATATEC GROUP
Revenues ($ million)
Continuing revenues grew by 14.2% from $1.2 billion to $1.4 billion
$1,251
$1,442
1H FY 2005 1H FY 20062H FY 2005
$1,287
DATATEC GROUP
Revenue by Region
North America55%
South America2%
Europe34%
Asia7%
South Africa + ME2%
DATATEC GROUP
Gross Margin ($ million)
$125
$163
1H FY 2005 1H FY 20062H FY 2005
$142
DATATEC GROUP
EBITDA ($ million)
$10
$40
1H FY 2005 1H FY 20062H FY 2005
$15
0.10
3.85
DATATEC GROUP
Total Headline Earnings Per Share
US Cents
1H FY 2005 2H FY 2005 1H FY 2006
12.02
DATATEC GROUP
Net Cash
Strong net cash position
$97m$112m
1H FY 2005 1H FY 20062H FY 2005
$140m
EBITDA
8%
18%
1%
73%
Gross Margin
4%
59%
7%30%
DATATEC GROUP
Segmental Analysis
Revenue
3%
78%
17%
2%
Westcon AMG Logicalis MEA
DATATEC GROUP
Future Outlook
• All divisions expected to continue delivering improving financial results
• Revenue increases should be matched by growing profitability
• Global growth may moderate
• Balance sheet and working capital management remains strong
• Management focused on best practices and appropriate growth strategies
• Board considering maiden dividend at year-end
WESTCON GROUP
WESTCON GROUP
Highlights
• Revenue exceeds $1.1 billion with increases over all geographic regions
• Gross Margin increases from 7.6% to 8.5%
• Company generates $10 million cash from operations
• Cost reduction initiatives accelerate growth in EBITDA and Pre-tax profitability
• Americas and Asia Pacific perform above expectations, Europe still slow but starting to improve
• “Thin office concept” being deployed in Eastern Europe and Asia
Revenue and gross margin trend - Six months
WESTCON GROUP
US$m
700
750
800
850
900
950
1,000
1,050
1,100
1,150
7.0
7.4
7.8
8.2
8.6
9.0
Gro
ss P
rofit
%
981 1,044 1,011 1,127
2H FY 2004 1H FY 2005 2H FY 2005 1H FY 2006
WESTCON GROUP
Revenue by Geography
Americas % increases on strength of increased Cisco market share
2H FY 2005 1H FY 2006
Americas Europe Asia Pacific
54%
38%
8%
56%
36%
8%
WESTCON GROUP
Revenue by Vendor
US Cisco market share increases in Q2 FY 2006
2H FY 2005 1H FY 2006
Cisco Nortel Avaya Security Other
53%
11%
10% 10%
16%
59%
10%
9% 8%
14%
Operating expenses
US$m
61
62
63
64
65
66
67
68
69
70
5.0
5.4
5.8
6.2
6.6
7.0
Op
era
ting
Expense
%
67.5 69.2 64.0 64.9
2H FY 2004 1H FY 2005 2H FY 2005 1H FY 2006
WESTCON GROUP
WESTCON GROUP
EBITDA ($M - continuing operations)
(a) Includes non-operating subsidiaries
H1 FY 2005 H1 FY 2006
0
$000
10
20
30
40
Americas (a) Europe Asia Pacific Total
3,6
26,7
5,0
1,7 1,3 2,4
9,9
30,8
Headcount by Region
Region Feb 2004 Aug 2004 Feb 2005 Aug 2005
Americas 432 439 444 435
Europe 509 486 470 426
Asia-Pacific 124 129 134 133
Consolidated 1,065 1,054 1,048 994
WESTCON GROUP
WESTCON GROUP
Consolidated results - Six month periods
(US$, in millions) Aug 2004 Feb 2005 Aug 2006
Sales 1,044 1,011 1,127
Gross Profit 79 79 96
Gross Profit % 7.6% 7.8% 8.5%
Operating Costs 69 64 65
Operating Costs % 6.6% 6.3% 5.8%
EBITDA 10 15 31
EBITDA % 0.9% 1.5% 2.7%
Dep & Amort 5 6 5
D&A % 0.5% 0.6% 0.4%
Interest Expense, Net 3 2 3
Interest Expense % 0.3% 0.3% 0.2%
Pre-Tax Income 2 7 23
Pre-Tax % 0.2% 0.7% 2.1%
*
* Includes profit of $4.3m from Lucent settlement
Note:Ratios based on trailing twelve month results
WESTCON GROUP
Consolidated Balance Sheet - Working Capital - US GAAP
(US$, in millions) Aug 2004 Feb 2005 Aug 2005
Accounts Receivable $299 $283 $325
DSO (days) 53 50 55
Inventory $204 $189 $183
Inventory Turns 9.3x 10.1x 10.7x
Accounts Payable $285 $283 $324
DPO (days) 55 54 60
Current Ratio 1.5 1.5 1.5
Consolidated Balance Sheet - Capitalization - US GAAP
(US$, in millions) Aug 2004 Feb 2005 Aug 2005
Cash $99 $123 $135
Working Capital Lines 97 75 86
Net (Debt) Cash (36) 8 9*
Equity 279 285 287
Debt to Capitalization 0.33 0.29 0.31
Liabilities to TNW 1.65 1.52 1.69
WESTCON GROUP
* Includes $40m inter-company loan payable to Datatec which is eliminated in consolidation
Note:Figures in US dollars. Dollar figure shown for each year represents average (debt) cash balance
for year
WESTCON GROUP
Net Cash / Debt Trend
-250
-200
-150
-100
-50
0
50
$mMar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep
2001 2002 2003 2004 2005
(139,544,122)
(59,842,704)
(30,701,555)
(76,872,694)
WESTCON GROUP
Future Outlook
• Revenue growth should be matched by lower operating cost %
• Profit growth and margin expansion will drive improving ratios
• Expect improvements in Continental Europe to feed through into better overall consolidated performance
• Strong performance in Americas, especially the US, should help underpin 2nd half
• Despite tightening of macro-economic conditions outlook remains favourable
LOGICALIS GROUP
LOGICALIS GROUP
Highlights
• Total revenues up 78% (27% organic growth)
• Market share gains in UK and US (rate of growth outstripped vendors)
• Operating leverage as gross margins increased more than operating expenses
• Transformation to an ICT integrator and services group largely complete
• #3 IBM partner in UK following TBC Group acquisition in September 2005
• Opened new managed service centres in UK and US
• Completed on $50M credit facility to fund growth
LOGICALIS GROUPFinancial Performance - Summary
Note:
Includes Datatec level inter-company transactions which eliminate on Datatec consolidation
Trading in first half of FY 2006 has been strong
(US$000) Half Year ended
31 Aug 2004 31 Aug 2005
Continuing Continuing Variance %
Revenue 139,136 247,278 78%
Gross Profit 29,094 49,665 71%
As % of Revenue 20.9% 20.1%
Operating Expenses 26,743 42,223 58%
As % of Revenue 19.2% 17.1%
EBITDA 2,351 7,442 217%
As % of Revenue 1.7% 3.0%
Operating Profit 733 5,182 607%
As % of Revenue 0.5% 2.1%
Revenue - Geographic Split (continuing operations)
68%
5%25%
2%
LOGICALIS GROUP
North America generated 67% of revenue
% of Revenue
H1 FY 2005
67%
6%26%
1%
H1 FY 2006
North America South America United Kingdom Germany
LOGICALIS GROUP
Revenue - Segmental Split (continuing operations)
Product75%
ProfessionalServices
9%
Maintenance8%
H1 FY 2005 H1 FY 2006
ManagedServices
8%
Product revenue mix has increased following IBM partner acquisition in US
(predominantly product business)
Product81%
ProfessionalServices
7%
Maintenance7%
ManagedServices
5%
LOGICALIS GROUP
Revenue - Product Vendor Mix %
H1 FY 2005 H1 FY 2006
Note:
Continuing operations only
IBM now one of three major vendors (better balance to business)
37%
36%
5% 4%
18%
HP
Cisco
IBM
EMC
Others
26%
32%
4%
10%
28%
HP
Cisco
IBM
EMC
Others
LOGICALIS GROUP
Gross Margin % (continuing operations)
Gross Margins were steady year on year
18.1
30.1
20.922.7
27.2
18.720.1
30.8
25.6
21.5
0
5
10
15
20
25
30
35
UK Germany North America South America Total
H1 FY 2005 H1 FY 2006
%
LOGICALIS GROUP
EBITDA ($M - continuing operations)
Good improvement in the UK with strong performance from the US
(1)
1
2
3
4
5
6
7
8
9
UK Germany North America South America
H1 FY 2005 H1 FY 2006
LOGICALIS GROUP
Key Financial Measures
US$000 Aug 2004 Feb 2005 Aug 2005
Deferred Revenue 17,506 16,799 21,580
Inventory 11,622 9,805 10,349
Inventory Days (Excluding Spares Stock)
17 15 11
Accounts Receivable 37,138 56,938 75,862
DSO Days 41 58 54
Accounts Payable 37,667 50,065 66,658
DPO Days 79 74 76
Net Cash 64,991 56,881 30,913
Net cash reduction reflects cash cost of acquisitions ($24.2M)
LOGICALIS GROUP
Headcount by Region
Region Aug 2004 Feb 2005 Aug 2005
North America 275 354 385
South America 177 181 186
Europe 207 207 295
Total 659 742 866
Increase predominantly due to acquisitions
LOGICALIS GROUP
Recent Important Wins
USPrinting Solutions Company
HP/EMC infrastructure plus managed services ($1.1m)
$2.6m
USGlobal Investment Services
Application development and integration
$2.0m
USInformation Management Provider
Major HP/IBM/EMC and Oracle database consolidation
$3.7m
UK Telecoms Sector Professional services $1.4m
UK InsuranceIP network, voice, data and video convergence plus support ($300k)
$0.9m
UK IT ServicesIP telephony, voicemail and video conferencing solution plus 5 years support ($500k)
$1.0m
UK Education Sector Virtual storage solution $0.7m
South America
Mobile Telecoms Company
Products and services $3.5m
South America
Major Telecom Company
Cisco products $7.3m
LOGICALIS GROUP
Future Outlook
• Management is addressing the following business issues:
- Process and system requirements for our increased scale
- Successful integration of UK acquisitions important
Breadth of solutions for customers
Achieving cost synergies
- Identifying and evaluating other suitable acquisition targets
• Remaining cautious on general economic outlook
• Historically IBM revenues strong in second half
• Expect continuing improvement in second half
ANALYSYS MASON GROUP
Overview
• The group offers a full spectrum of business advisory, management consultancy, research and implementation services
• Trusted “independent” consultancy operating throughout the world with a direct presence in the UK, Ireland, France, Spain, Italy, USA and Singapore
• Analysys Mason’s input has become an indispensable part of any major telecoms initiative
• The group employs approximately 300 professional consultants and support staff
ANALYSYS MASON GROUP
Analysys Research
Telecoms research, publications
and benchmarking
Analysys Consulting
Strategy consulting and economic modelling in
the telecoms sector
Technical, business and management
consultingin telecoms
and high-tech
Contact centre,CRM andchange
management consulting
ANALYSYS MASON GROUP
Highlights
• Successfully integrated the Analysys acquisition and now generating $650k per annum of infrastructure savings
• Proposal win rates and average order size for joint Analysys and Mason bids double those of pre merger
• Expanded geographic footprint, established Singapore office
ANALYSYS MASON GROUPFinancial Performance - Summary
Note:
31 Aug 2004 figures include 6 months’ results (Mason/Catalyst) and 1 month’s results (Analysys)
Half Year ended
31 Aug 2004 31 Aug 2005
$000 $000 Variance %
Revenue 19,150 30,072 +57%
Gross Profit 5,608 10,329 +84%
As % of Revenue 29.3% 34.3%
EBITDA 1,431 3,003 +109%
As % of Revenue 7.5% 10%
PBT 1,252 2,685 +114%
As % of Revenue 6.5% 9%
ANALYSYS MASON GROUP
Revenue - Geographic Split
% of Revenue
H1 FY 2005
67%
1%
14%
18%
H1 FY 2006
USA UK Europe Rest of World
1%
6%
4%
89%
ANALYSYS MASON GROUP
Revenue - Segmental Split
H1 FY 2005
Mason69%*
Catalyst20%*
Analysys Consulting9%**Analysys Research
2%**
Analysys Consulting38%
H1 FY 2006
Catalyst12%
Mason41%
Analysys Research9%
Note:31 Aug 2004 figures include 6 months’ results (Mason/Catalyst) and 1 month’s results (Analysys)
ANALYSYS MASON GROUP
Gross Margin %
36.1 36.1
11.2
29.3
41.640.1
17.3
34.4
0
5
10
15
20
25
30
35
40
45
50
55
60
Mason AnalysysConsulting
AnalysysResearch
Catalyst Total%
33.528.7
H1 FY 2005 H1 FY 2006
Note:31 Aug 2004 figures include 6 months’ results (Mason/Catalyst) and 1 month’s results (Analysys)
ANALYSYS MASON GROUP
EBITDA - $000
H1 FY 2005 H1 FY 2006
Mason ACL ARL Catalyst Total-500
$000$000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1580
1239
151
1694
9
370
-200
162
1431
3003
ANALYSYS MASON GROUP
Headcount by Division
Division Aug 2004 Feb 2005 Aug 2005
Mason 81 82 84
Analysys Consulting 79 77 76
Analysys Research 20 25 26
Catalyst 32 25 21
AMG Support Services (FTE’s) 50 43 47
Associates
75 75 62
Total 337 327 316
ANALYSYS MASON GROUP
Recent Important Wins
Analysys Consulting and Research Mason and Catalyst
Middle East – Fixed operator – International acquisitions ($1.0m)
W. Europe - Mobile operator - Network roll-out programme management ($4.1m)
European regulators – 3 Mobile interconnect projects ($940k)
UK – Transport – Mobile Radio Project management – ($710k)
W.Europe – Fixed operator – Off-the-shelf and custom research ($475k)
S. Europe – Mobile operator – EDGE/3G network procurement; Analysys follow-on ($145k)
Asia – Regulator – National Broadband strategy ($350k)
UK Public Sector – Technical support – ($140k)
Europe – Venture Capital – Operator purchase ($300k)
Mobile operator – Contact centre processes change management ($950k)
Joint
South Africa – Fixed and mobile operator – International acquisition ($1.0m)
Asia – Fixed operator – Response to privatisation ($630k)
Europe – Mobile operator – 3G Business plan and spectrum bid ($560k)
ANALYSYS MASON GROUPFuture Outlook
• Management is addressing the following business issues:
- Emphasis on marketing and building brand awareness
- Focus on margin performance of all business units within divisions
- Attention to recruitment and retention challenges
- Generating further integration gains and easing cross-divisional working
- Monitoring impact of incentive structure changes on culture and morale
• Telecoms/IT environment is stable
• “Hot” industry themes:
- Triple play
- Mobile content
- Fixed-mobile convergence
- Mergers and acquisitions
- Outsourcing
• Growth expected in a continuing competitive industry
QUESTIONS