​Data#3 shift towards services restores profit growth

Data#3 has announced that its maintenance, software, and consulting business drove up its net profit after tax by 39.2 percent in the first half of the 2015 financial year.

Data#3 has managed to restore profit growth during the six months ended December 31, 2014, after experiencing profit declines throughout the last financial year.

The company has announced that net profit after tax grew 39.2 percent to AU$3.6 million for the first half of the 2015 financial year. At the same time, revenue was up 1.8 percent to AU$406.4 million, and gross profit increased by 8.6 percent to AU$62.4 million for the half year.

The results for 1H15 provide a significant difference from the start of last financial year, where Data#3 had reported that revenue was down by 1.8 percent, and profit had fallen by 11.7 percent when compared to the same period in 2013.

Data#3 managing director John Grant said the results marked the company's return to profit growth and an increasing strategic shift towards services.

"We have a significant product business, which performed well in the half. We are also seeing early evidence of our strategic shift to an increasingly service-centric business in the company's return to growth over the past six months," he said.

"Overall, this solid first-half result underpins our full-year guidance to improve on last year's net profit before tax of AU$10.9 million."

According to the company, while its services revenue made up only 18 percent of total revenue, it grew to AU$75.8 million for the half year, up from AU$65.1 million reported during the first half of the 2014 financial year.

Revenue from its maintenance, software, and consulting business drove growth in its services revenue, the company said.

Data#3 also highlighted that its acquisition of Business Aspect last year helped expand its consulting capability into New South Wales, the Australian Capital Territory, and Victoria. The aim of the AU$6 million acquisition was to allow Data#3 to expand its consulting capabilities.

The company also struck up a deal with Discovery Technology during the half year. Under the acquisition agreement, Data#3 paid AU$1.5 million to acquire an initial 42.5 percent of shares in the Wi-Fi analytics company. Data#3 said that while Discovery Technology is not fully integrated into the company, it is engaged with Data#3 as a reseller with "significant opportunities in the pipeline".

As part of its FY15 strategy, Data#3 said its technology investment will remain subdued but it will increasingly shift to outsourcing and cloud in a hybrid IT environment. It also expects that the product-centric sectors will continue to suffer, while IT spend outside IT budgets will continue to grow.

"With the changes we're seeing in the way our customers are choosing to consume and pay for technology, our strategic shift from primarily product centric to increasingly service centric is the right strategy to underpin sustainable growth in the long-term shareholder markets," said recently appointed CEO Laurence Baynham.

"At the same time, we are very mindful of optimising our performance in the second half and achieving all our full-year guidance to improve on FY14's net profit after tax of AU$10.9 million."