Company Overview: Empired Limited is an information technology (IT) services provider. The Company is engaged in design, development and integration of business knowledge, information technology and creativity. The Company operates through two segments: Australia and New Zealand. The Company's business solutions include Cloud Services, Identity and Access Management, Systems Integration, Data Insights and Business Intelligence, Internet of Things, Spatial Services, Mobile Solutions, Digital and Experience Design, Enterprise Content Management (ECM), Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Digital and Experience Design, Infrastructure Transformation Services, Managed Infrastructure Services, Project Management Office (PMO) and Unified Communications. The Company operates in various industries, including retail and manufacturing, public sector, financial services and insurance, health, mining, oil and gas, utilities, transport and education.


EPD Details

Empired Limited is an IT Services Provider having an international exposure, with a broad range of capabilities and a reputation for delivering enterprise-class IT services and solutions.The Group has been providing a broad range of services since establishment and these enable 'end-to-end' advice and solutions assisting its clients through their digital transformation journey and ensuring robust ongoing lifecycle management. Its flexible service delivery approach and “can do” attitude has enabled it to secure clients that range from medium size entities through to some of the world’s largest long-standing enterprise accounts with services delivered across Australia, New Zealand, South East Asia and beyond. Its 80 per cent of the revenue is recorded from 20 per cent of the clients and its year on year growth is said to be underpinned by existing major clients. The group is positioned strongly in a number of large corporate and government organisations. It is expected that by 2019, all digitally transformed organizations will generate at least 45% of their revenue from "Future of Commerce" Business Models. Thus, the group’s growth outlook is expected to impact the broad array of industries and businesses in about $30 plus billion market. EPD also focuses on customer acquisition and helps its clients to improve their productivity and the efficiency of their operations.


Revenue per Industry and Clients (Source: Company Reports)

Undertaken On-market Share Buy-back: The Board announced its intention to undertake an on-market share buy-back of up to a maximum of 15,269,298 shares (being 10% of the smallest number at any time during the last 12 months of fully paid ordinary shares on issue) over the 12 months period commencing from 3 May 2018. The Company considers an on-market share buy-back to be an effective method of returning capital to shareholders where Empired’s shares are trading at a significant discount to the intrinsic value of the Company. The company expects the buyback to be Earnings per Share positive based on existing circumstances. Euroz Securities Limited will act as a broker in relation to the buy-back.    


Drivers of Revenue (Source: Company Reports)

Launch Partner for Microsoft’s Azure Australia Central Regions: Empired is a launch partner for Microsoft’s Azure Australia Central Regions datacentres in Canberra, which will provide Government and highly-regulated organisations the opportunity to deploy their mission-critical workloads to the cloud. Until now, Australian organisations with rigorous security, resilience, connectivity, or supply chain integrity requirements have typically shied away from cloud-based infrastructure and the adoption of cloud across these sectors across Australia and New Zealand (ANZ) has been slow because there has been no real, achievable way for them to take the leap securely. With the introduction of Microsoft’s Azure Australia Central Regions, cloud-first is now a real possibility for government and critical industries across ANZ.


Financial Performance Overview (Source: Company Reports)

Strong Financial Performance: The Group released the results for the half-year period ending on 31 December 2017 that entailed an increase of 2 per cent in revenue to $85,004,257 and 14 per cent in underlying EBITDA to $7.3 million against prior corresponding period (pcp). Net profit of $1,498,895 for the period attributable to members was up by 33 per cent over pcp. Net tangible asset backing per security as on 31 December 2017, was 8.18 cents as compared to 8.34 cents on 30 June 2017. As on 31 December 2017, the Group issued 5,184,166 performance Rights. All major regions performed well outside of Wellington, which was disrupted as a result of the protracted New Zealand election period. The group’s CAPEX was down $0.5 million on prior period. Over 60 per cent of the revenue in 2018 is said to be derived from the multi-year contracts. A standout performance was observed in Auckland and revenue was up by 18 per cent. Underlying EBITDA margin was up from 7.6% to 8.5% while managing a decline in Wellington. Percentage of EBITDA to Operating cash conversion was 80%.


Region-wise Revenue Performance (Source: Company Reports)

Decent Outlook: As a Microsoft partner, the Group is proud to play a role in accelerating the opportunity to digitally transform Government and the operations of critical infrastructure. The Company is now building out a Cohesion platform in the Azure Central Region and expects strong interest such that the secure Azure Central Region will be available to support it. While the government has acknowledged the need for transformation and new technology to provide better services to citizens, it hasn’t really been possible until now. With Microsoft’s Azure Australia Central Regions, Empired can take government and critical industries on that journey. With the work at hand, the Group expects solid revenue growth in H2, over H2 FY17 and expects FY18 H2 EBITDA to be significantly stronger than the first half. It is expected that strong operating cash flow in H2 will continue to reduce net debt. It is expected that by the end of 2019, Digital transformation spending will reach $1.7 trillion worldwide, a 42% increase from 2017; and by 2020, 60% of all enterprises will have fully articulated an organization-wide digital platform strategy and will be in the process of implementing that strategy.

Stock Performance: Empired has been the partner of choice by many businesses because of its client base across ANZ which includes heavy involvement in government related activities along with its existing Cohesion cloud-based enterprise content management (ECM) service. The Group is well placed to deliver strong earnings growth in FY19. An improving NZ public sector outlook is expected to underpin a solid second half and an outstanding outlook for FY19.  Washington H. Soul Pattinson and Company Limited became the substantial holder of the Group by holding 8,154,966 securities with 5.09 per cent of the voting power since 12 March 2018. It is expected that interest will continue to reduce with reducing debt profile. Current assets to current liabilities improved to 108 per cent from 75 per cent. Enterprise Solutions continue to perform with strong growth in billable headcount. Percentage of Debt in Total Capital Employed has reduced as seen from latest result. The stock prices were down by 10.58 per cent in the past six months, followed by a recovery of 4.5 per cent in the last three months. We give a “Speculative Buy” recommendation at the current market price of $0.465, by looking at the overall growth of the Company.
 

EPD Daily Chart (Source: Thomson Reuters)

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