Australian govt instability, reduced spend hits Oakton

IT services firm Oakton reported a decline in profits amid 'difficult' market conditions across Australian industry sectors in the year to June 2013.
Written by Tim Lohman, Contributor

Decreased federal government IT spending and an impending election have hit Australian IT services firm Oakton, contributing to a 23 percent year-on-year decline in profits.

Announcing its results for the full year to June 2013, the company said it recorded a net profit after tax of AU$9.16 million. Revenue was down 6 percent to AU$162 million, while earnings before interest, tax, depreciation, and amortisation (EBITDA) was down 23 percent to AU$14.53 million.

In a statement to the Australian Securities Exchange (ASX), Oakton managing director and CEO Neil Wilson said market conditions for the 2013 financial year were difficult across most of the country's industry sectors.

"In particular, spend form the federal government reduced beyond expectations as the drive for a federal budget surplus became a priority, coupled with the early announcement of a federal election," he said.

"These pressures led to a significant reduction in contribution from our ACT [Australian Capital Territory] location, which has materially impacted our trading performance."

Wilson said that in response to the decrease in its ACT business, Oakton had shed staff and would turn to a more "flexible resourcing model" should business in the territory pick up in the current financial year.

The CEO added that the transformation underway at the company — from systems integrator to services integrator — is beginning to pay dividends, in particular its decision to launch an offshore facility in Hyderabad, India, and to reposition itself so as to better react to the market's demand for cloud services.

"Our business will continue to evolve, and the mix of revenue streams will shift over time to include more offshore and more revenue that is not person based and is driven form the deployment of Oakton 'as-a-service' solutions that include the integration of Oakton intellectual property and the services provided by third-party software and infrastructure providers," Wilson said.

Oakton has announced a number of initiatives in recent months to help it combat difficult trading conditions, including teaming up with fellow services company Dimension Data to offer up a range of services beyond plain IT implementations.

It also partnered with Australian IT services company Empired to land a two-year contract with ongoing annual options to provide Barrick Gold APAC's accountancy operations with a fully managed Oracle-based solution.

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