FY14 Interim Results

FY14 Interim Results
February 2014
Geoff Lewis
Chief Executive Officer
Dean Langenbach
Chief Operating Officer
Michael Large
Chief Financial Officer
‘Our guidance of a H1 EBITDA of $9.5m - $10m demonstrates
the trend of improved margins and cash flow from Q4 FY13,
and the traction we are achieving in the market, are a sound
platform for increased profitability in FY14 and beyond.’
Ron Baxter
Chairman - ASG Group
AGM - November, 2013
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H1 Summary
• Revenue increased by 4.2 per cent to $79.0 million
 Higher margin service revenue increased by 6%
 Achieved against a backdrop where global IT spend growth was 0.4% during 2013
(Gartner, 7th Jan 2014)
• Reported EBITDA $10.7 Million*
• Reported EBITDA Margins 13.5% per cent
 Operating EBITDA margin 12.1%
 Improved product mix – vindication of “new world” strategy
• Profit before tax $5.6 million




$12.5 million improvement on corresponding period
Driven by reduced costs, improved revenue and strong margins
Benefited from very strong second quarter successes
Organic growth in challenging IT business environment
Results meet guidance given in November 2013
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* Includes write-back provision of $1.1 million
H1 Financial Summary
Dec 2013
Dec 2012
(restated)
Movement
Revenue
$79.0m
$75.9m
+$3.1m
EBITDA
$10.7m*
($2.3m)#
+$13m
$5.6m
($6.9m)
+$12.5m
$3.8m
($4.6m)
+$8.4m
EBITDA Margins
13.5%
(3.0%)
+16.5%
EPS
1.85c
(2.68c)
+4.53c
NPBT
NPAT
Strong performance based on sustainable organic
business base
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* Includes write-back provision of $1.1 million
#Includes $2.4 million impairment & write-down
Profit & Loss
• EBITDA $10.7 million* (operating EBITDA $9.6 million)
• Net Profit (before tax) of $5.6 million
• Net Profit (after tax) of $3.8 million
• Solid sustainable revenue on reduced cost base
• Executed $101m+ of contracts in H1-2014
Organic growth in revenues on a reduced cost base
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* Includes write-back provision of $1.1 million
Profit & Loss (cont)
Dec 2013
($ ’000
Dec 2012
Restated
($ ’000
Revenue
79,032
75,853
Net Profit Before Income Tax
Income Tax Expense
Net Profit After Tax
Interest + Tax
EBIT
5,625
(1,807)
3,818
(3,433)
7,251
(6,861)
2,221
(4,640)
487
(5,127)
Amortisation & Depreciation
EBITDA
(3,453)
10,704
(2,857)
(2,270)
4.2%
21%
Organic Revenue Growth, Tight Cost Control,
Growing EBITDA margins
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Balance Sheet
• Net working capital improved $13.1 million
 Data Centre reclassified from current to fixed asset
 Improved liquidity position funded from strong operating cash flows
 Second half targeting improved cash reserves
• Borrowings
 Net borrowings increased by $3.5 million, comprising $2.1 million in finance leases
underpinned by long term revenue contracts
 Net debt remains at less than 2X annualised operating EBITDA
 Cash reserves and undrawn funding lines total $8 million
 Finance facilities restructured & extended to June 2018 resulting in reduced
financing costs - repaid expensive Overdraft Facility
• Investment
 Expanded New World SaaS capability portfolio in response to needs of existing and
new clients - $1.7 million
Working Capital & Undrawn Funding Lines of $8
million support future revenue growth
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Balance Sheet
$’000’s
180,000
160,000
140,000
Net Assets $88,734
2,947
Net Assets $84,861
235
33,769
29,952
36,578
37,679
91,400
90,997
120,000
100,000
Cash
Receivables & WIP
PP&E & Other Non-current
Intangibles
Payables and Current Liabilities
Non-current Liabilities
Assets
80,000
60,000
40,000
20,000
0
Liabilities
-20,000
-44,472
-51,082
-40,000
-60,000
-31,488
-22,920
at 31 Dec 2013
at 30 June 2013
• Stronger balance sheet, flexibility to pursue strategic
growth and/or capital management initiatives
• Refinanced to June 2018, in favour of secure longerterm debt
• Net debt increase of $3.4M supporting new contracts
• Utilisation of tax losses, deferred tax assets now
unwinding
-80,000
Improvement in Net Working Capital of $13.1
million
2/7/2014
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H1 Operating Cash Flow – Analysis
$’000’s
9,000
8,000
7,000
6,000
5,000
7,587
4,000
1,380
10,704
3,000
2,000
2,947
5,436
1,000
2,226
0
-1,000
-2,000
-2,000
Opening Cash
July 2013
•
EBITDA
Working Capital
Investing
Net Financing
Tax, Interest &
Other
Closing Cash
Dec 2013
Operating cash flow funded net reduction in trade creditors of $4.2 million and net
increase in trade debtors of $5 million - $9.2 million turn around. (Refer Note 15 in Half Year Report)
Underlying Operating Cash flow funded improved
working capital position
New World Update
• ASG “New World” IT business model producing solid revenue growth and
good margin on the back of our 1st Mover Advantage
 New World services revenues over 8.75% of H1 contribution – and increasing
• ASG does not believe technology based acquisitions will provide entry
into the New World market.
 The key is in transforming the business model to make yourself relevant by delivering
utility priced solutions directly to business customers
 Inherent in this is the managed service & brokerage pedigree within the ASG
integrated, business model
• Market already moving on beyond simplistic ‘infrastructure as a service
(IaaS)’ technology models to software focused business outcomes (SaaS) as
predicted by ASG
 28th August 2012 – Australian Financial Review - “the traditional model for delivering
cloud services will grow increasingly commoditised and antiquated.” (Geoff Lewis)
Does the investment market understand ASG?
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New World Update - continued
• Market moving towards the vision outlined by ASG in 2012
 28th August 2012 – Australian Financial Review - “ASG has adopted a service
brokerage model to deliver enterprise applications (such as business analytics and
enterprise resource planning software).” (Geoff Lewis)
 28th August 2012 – Australian Financial Review - “decisions for such services will
increasingly come from senior corporate managers and not IT departments.”
(Geoff Lewis)
 30th January 2014 - Sprint 14 Conference, London - “The UK Government has
taken a startling new stance on major IT contracts, outlawing new deals larger
than £100 million (AU$190m) and declaring that it’s time the country moved past
traditional arrangements with “legacy technology giants”, in a move which
appears to mirror similar State Government initiatives in Australia” (UK Minister
for the Cabinet Office)
Customers do!
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Outlook and Guidance
• Continued growth in New World Business service provision utilising proven
capability
• $101 million+ in new contracts won H1 across government and private sectors
• Pipeline of select opportunities at proposal or qualification stage >$200 million
 New world opportunities in excess of $50 million, and increasing
• Market conditions remain challenging for traditional IT Services
• ASG revenues insulated due to strong underpinning by long term
managed service & New World contracts
• ASG expects similar EBITDA margins to be maintained in line with H1 FY2014
• Focus on cost savings and efficiencies underpinning EBITDA growth
ASG already banking “New World” revenues.
Competitors are playing costly catch-up.
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Q&A