Datatec - Strong year across the board despite challenges

FY22 could be characterised as a year of robust global demand for technology solutions, with the ability to meet that demand constrained by supply chain issues, semiconductor shortages and a growing backlog of pending orders. This led to a strong year for all three of Datatec’s divisions, which would have been even stronger if orders could have been fully met. Datatec’s reported revenue for FY22 was US$4.64bn, up 13%, with adjusted EBITDA rising by 16% to US$177m, representing a 3.8% margin (FY21: 3.7%). Highlighting the operational gearing of the business, underlying EPS rose 38% to 18.7 US cents per share versus our forecast FY22 EPS of 17.0 US cents. As a result, the group declared a dividend of ZAR1.11 (FY21: ZAR1.00) in addition to the special dividend, taking the total dividend paid for the year to c 39.2 US cents per share. Net debt at 28 February 2022 rose to US$130m (FY21: US$61m), beating our FY22 forecast of US$166m, with strong cash generation partly mitigating the build-up of inventory. We remain positive about the group’s prospects in FY23, despite continuing economic and geopolitical uncertainties. Datatec trades on c 3.8x FY22 EV/adjusted EBITDA, which we believe understates the group’s performance and prospects. In light of the FY22 results, we propose to review to review our forecasts shortly.