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PBS Group churning on tech sales but profits thin

Productive Business Solutions Limited, PBS, has grown its sales by four-fifths since listing on the Jamaica stock market six years ago.

The company that serves as distributor of Xerox printing products, but deepened its technology services operations in recent years, is benefiting from being part of a “fast-growing industry”, as noted by Chairman Paul ‘PB’ Scott.

He also believes the company holds unfilled promise.

“It can really become so much bigger than it is now,” said Scott at the company’s annual general meeting.

Since listing, the company has transitioned towards IT services alongside trading in printers and supplies. Its half-year to June surpassed US$161 million, which was nearly equivalent to its full year sales of US$171 million in 2016.

Still, PBS’s relatively rapid growth hasn’t yet translated to high profits, although its core earning before buildout costs, that is, finance costs, taxation and depreciation, stands at about 13 per cent of total sales.

The business lines include imaging, network communications, professional services, advanced services, information technology and security systems.

In 2022, PBS grew revenue to US$312 million, which was up 39 per cent year on year and 82 per cent since listing. PBS now makes the bulk of its income from equipment and IT sales, which account for 60 per cent of total revenue, up from 33 per cent in 2016.

The opposite has transpired with paper supplies and sales which accounted for 14 per cent of total revenue in 2022, down from 29 per cent in 2016.

The rise of digital content and remote work has negatively affected printing. But Scott, while acknowledging move away from traditional printed products, such as photos and official documents, he insisted the situation wasn’t as dire as people assume.

“People talk about the death of the printer, but they are also not considering a number of other factors,” he said. “The proliferation of content means that there are thousands of more things out there.”

At half-year 2023, PBS earned profit of US$4.4 million on revenue of US$161 million, reflecting a profit margin of 2.7 per cent. It reflected a one point improvement from the previous year, when profit of US$2.35 million on sales of US$157 million produced a 1.7 per cent profit margin.

The company continues to buildout its network, which impacts on profitability. Scott said that were the company still private and not listed, PBS would have spent millions in capital expenditure annually to expand its Colombia operations, but that it would have resulted in losses.

When the company listed it operated in 14 territories but has since grown its markets to 19. Its biggest earnings come from Trinidad & Tobago at 25 per cent, followed by Jamaica 13 per cent, El Salvador 11 per cent, and Barbados, Guatemala, Costa Rica and Nicaragua at 8.0 per cent.

The company had 12,000 customers when it went public but has nearly tripled that number to 32,000 and has plans to grow it further to 40,000 in the short term. Its staff count moved from 1,350 in 2017 to about 2,500 employees now.

The company earns mainly from selling hardware equipment and software under the segment ‘equipment sales’, and from ‘recurring sales’. The primary brands it represents include Xerox, Oracle, Cisco, L3, NCR and HP. Its ‘recurring sales’ segment is further divided into two categories: paper and supplies, which include the sale of parts for the equipment, rental, leases of equipment, phone, ID and access cards; and maintenance and servicing, which incorporates contracts for the equipment, and printing of statements.

“We want to be the number one in the region, including central America and Colombia. Unapologetically,” said Scott, alluding to the heavy competition in the regional market.

Pre-listing, PBS held market share of 20 per cent to 60 per cent across its territories for the printing business, and five to 30 per cent for IT services.

The company has since focused on acquiring IT related companies including its competitors to drive growth. Its latest deal was the acquisition of Infotrans in July, a purchase that added 175 professionals, new brands and services, and offices in Curacao, Aruba, Suriname and Colombia for the group and was entered into to fortify PBS’s presence in the Dutch Caribbean region.

The Infotrans deal was preceded by the acquisition of Massy Technologies in 2020.

The company fuels its acquisitions from internal resources, but also through its debt raises including last year’s preference share raise. Scott when asked said that he would consider listing on a Latin American exchange were the company in need of additional capital.

The group’s debt stands at some US$140 million, above its equity of US$112 million. However, that ratio at 125 per cent is an improvement from 180 per cent over the past five years.

PBS is currently listed in Jamaica and Barbados, but asked whether a listing on a Latin American stock exchange was possible, Scott didn’t have a definitive answer.

“I do not know much about Latin markets to be honest,” he said in response to the query raised by the Financial Gleaner.

“It is entirely possible that we would look at listing, in addition to where we are listed now, to raise more capital. The truth is it is hard to assess how large the market for technology in the region will be,” Scott said.

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