PBT Group: big data and bigger results

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PBT Group: big data and bigger results

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Published Date: 2021-11-29 | Source: INCE|Community | Author: The Finance Ghost

PBT Group: big data and bigger results

PBT Group has released its financial results for the six months to September 2021. I must commend this company on having clear and detailed reporting, particularly regarding the sources of revenue. Unlike many others on the JSE, this is a small cap that is making a concerted effort to become a bigger cap.

The company talks about "transforming client data into tangible assets" that assist in operations and decision-making. Services range from data engineering through to advisory, managed services, data visualisation and application development.

One of the key aspects of PBT's model is that the company is technology agnostic. Whether the client runs on AWS, Azure or any other tech stack, PBT can play a role.

The bulk of PBT's revenue is still derived in South Africa (89%) with a clear runway to grow the business in Europe in particular. The Australian business contributes around 7% of group revenue but PBT doesn't see much scope to meaningfully increase that.

Naturally, the acceleration of digitalisation has been positive for PBT. The financial services industry contributes 75% of PBT's revenue and most of PBT's consultants can work across industries, which helps with staff utilisation rates.

The top 10 clients contribute just over 60% of group revenue and the largest individual client is 10%. Around 90% of group revenue is earned from time and material fees, which typically span a 12-month period before being renewed. Projects and fixed price contracts contribute 8% of revenue and the other 2% is from other sources.

To give an idea of how quickly the company has grown, revenue in FY19 was R588 million and revenue for just the six months to September 2021 is R469 million. Since 2019, interim cash generated from operations has increased from R19.3 million to R64 million.

In the six months to September 2021, revenue grew 20.4% and earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 40.1%. It's always great news for shareholders when operating margins are expanding.

Headline earnings per share (HEPS) increased by 64.9% to 34.96 cents, so the company is really flying. There is enough cash floating around to pay a dividend as well, with a distribution per share of 25 cents declared.

A significant step for PBT Group is the attainment of Level 1 B-BBEE status with 51% Black Ownership. That's great news for the company as it competes for business in corporate South Africa. There were a series of deals required to achieve this, including the company funding empowerment entities Yonex and Pulsent OH with R65.7 million in preference shares and a loan of R18.66 million respectively, in both cases to enable a subscription for shares. There was also a much smaller deal linked to the PBT Foundation.

Pule Taukobong has joined the board as a non-executive director and Herman Steyn has resigned from the board. Taukobong co-founded a venture capital firm in the US and holds board roles at a number of tech startups including Yoco and SweepSouth.

PBT holds non-core investments that are valued at R183 million or R1.73 per share. Included in this is the 5.81% stake in Zuuse, a global provider of construction payment management solutions. PBT accounts for Zuuse at fair value through other comprehensive income. That sounds terribly complicated, but it means that you won't see any income from it in headline earnings. There are also investments in preference shares and debt.

This implies that the core operations are being valued by the market at R6.27 per share based on the current market price of R8.00 per share. If we use normalised HEPS for the six months of 33.30 cents, then on an annualised basis the company is trading at a Price/Earnings ratio of below 10x.





1 Comments

Ribs 1 month ago

could this mean that its a good company to buy shares?



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