Datatec EBITDA surged on 13.9% in 2015 and EBITDA Margin showed almost no change

13 May 2015 • About Datatec ($DTC) • By InTwits

Datatec reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

• Datatec is a growth stock: FY2015 revenue growth was 13.3%, 5 year revenue CAGR was 11.5% at FY2015 ROIC 11.6%
• EBITDA Margin is relatively stable: 3.3% in FY2015 vs. 3.2% in FY2014 vs. 3.2% in FY2011
• Datatec has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.5%.
• The company has business model with average profitability: ROIC is at 11.6%
• It operates with high leverage: Net Debt/EBITDA is 0.4x while industry average is -0.2x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Datatec ($DTC) key annual financial indicators

mln. $	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	4,303	5,033	5,064	5,688	6,444	13.3%
Gross Profit	598	705	598	841	933	10.9%
EBITDA	138	185	193	184	210	13.9%
Net Income	42	81	78	56	74	32.3%
Balance Sheet
Cash	238	248	314	379	366	-3.3%
Short Term Debt	168	246	241	420	432	2.7%
Long Term Debt	21	14	10	17	22	24.2%
Cash flow
Capex	23	20	26	33	35	7.8%
Ratios
Revenue growth	15.1%	17.0%	0.6%	12.3%	13.3%
EBITDA growth	33.8%	34.0%	4.4%	-4.5%	13.9%
Gross Margin	13.9%	14.0%	11.8%	14.8%	14.5%	-0.3%
EBITDA Margin	3.2%	3.7%	3.8%	3.2%	3.3%	0.0%
Net Income Margin	1.0%	1.6%	1.5%	1.0%	1.1%	0.2%
CAPEX, % of revenue	0.5%	0.4%	0.5%	0.6%	0.5%	-0.0%
ROIC	11.3%	13.8%	12.8%	10.6%	11.6%	0.9%
ROE	6.0%	10.4%	9.2%	6.4%	8.5%	2.0%
Net Debt/EBITDA	-0.3x	0.1x	-0.3x	0.3x	0.4x	0.1x

Revenue and profitability

Datatec's Revenue surged on 13.3% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from -3.5% to -2.4% in FY2015.

Gross Margin showed almost no change in FY2015.

Net Income marign showed almost no change in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 Datatec had CAPEX/Revenue of 0.55%. The company showed almost no change in CAPEX/Revenue from FY2012 to FY2015. It's average CAPEX/Revenue for the last three years was 0.55%.

Return on investment

The company operates at low ROIC (11.57%) and ROE (8.47%). ROIC increased slightly on 0.92 pp from 10.6% to 11.6% in FY2015. ROE increased on 2.0 pp from 6.4% to 8.5% in FY2015.

Leverage (Debt)

Debt level is 0.4x Net Debt / EBITDA and 2.2x Debt / EBITDA. Net Debt / EBITDA increased on 0.1x from 0.3x to 0.4x in FY2015. Debt increased on 3.5% in FY2015 while cash decreased on 3.3% in FY2015.

Appendix 1: Peers in Software & Computer Services

Below we provide Datatec benchmarking against other companies in Software & Computer Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Coms ($COMS)	8.4%	-68.6%	46.8%	763.3%
Centralnic Group ($CNIC)	36.3%	15.9%	4.0%	98.9%
Netdimensions(Hldgs)Ltd ($NETD)	48.5%	12.5%	17.5%	40.1%
Wandisco ($WAND)	30.0%	55.5%	32.8%	40.0%
Dotdigital Group ($DOTD)	48.9%	6.6%	27.8%	32.9%
Median (36 companies)	8.0%	6.3%	6.1%	0.6%
Datatec ($DTC)		17.0%	0.6%	12.3%	13.3%

Top companies by Gross margin, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Lombard Risk Management ($LRM)	99.3%	99.0%	98.8%	99.2%
Phoenix It Group ($PNX)	97.1%	97.0%	97.2%	97.6%
Netcall ($NET)	86.9%	88.2%	89.7%	91.0%
Dotdigital Group ($DOTD)	92.8%	94.0%	92.7%	90.5%
Idox ($IDOX)	86.6%	90.4%	90.8%	89.4%
Median (32 companies)	60.1%	62.1%	63.9%	61.6%
Datatec ($DTC)	13.9%	14.0%	11.8%	14.8%	14.5%

Top companies by EBITDA margin, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eservglobal ($ESG)	112.6%	-32.2%	-2.6%	100.2%
Mail.Ru Group Ltd ($61HE)	39.9%	43.1%	47.4%	50.5%
Lombard Risk Management ($LRM)	6.2%	23.9%	30.8%	29.3%
Dotdigital Group ($DOTD)	29.1%	31.4%	39.4%	29.2%
Idox ($IDOX)	26.5%	30.9%	26.1%	26.0%
Median (38 companies)	14.2%	14.5%	13.0%	12.0%
Datatec ($DTC)	3.2%	3.7%	3.8%	3.2%	3.3%

Top companies by CAPEX/Revenue, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Anite ($AIE)	3.0%	4.0%	3.9%	5.8%
Statpro Group ($SOG)	3.1%	2.0%	2.9%	5.8%
Wandisco ($WAND)	0.2%	2.3%	4.0%	4.2%
Unisys Corp ($USY)	2.1%	2.1%	2.5%	4.1%
International Bus Mach Corp ($IBM)	3.8%	3.9%	3.7%	4.0%
Median (38 companies)	1.5%	1.5%	1.6%	1.9%
Datatec ($DTC)	0.5%	0.4%	0.5%	0.6%	0.5%

Top companies by ROIC, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eservglobal ($ESG)	50.0%	-24.8%	-13.0%	67.9%
Lombard Risk Management ($LRM)	37.7%	51.4%	39.2%	30.2%
Progility ($PGY)	12.7%	10.3%	0.0%	29.2%
Dotdigital Group ($DOTD)	36.6%	26.4%	38.0%	28.5%
International Bus Mach Corp ($IBM)	36.2%	36.1%	31.0%	28.1%
Median (38 companies)	12.8%	10.1%	8.9%	8.9%
Datatec ($DTC)	11.3%	13.8%	12.8%	10.6%	11.6%

Top companies by Net Debt / EBITDA

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Parity Group ($PTY)	6.9x	4.7x		4.9x
Escher Group Hldgs ($ESCH)	2.1x	0.3x	0.4x	2.4x
Ubisense Group ($UBI)	-4.2x	-2.2x	-0.4x	1.8x
Progility ($PGY)	1.0x	2.0x		1.8x
International Bus Mach Corp ($IBM)	0.8x	0.9x	1.2x	1.4x
Median (31 companies)	-0.7x	-0.9x	-0.8x	-0.3x
Datatec ($DTC)	-0.3x	0.1x	-0.3x	0.3x	0.4x

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