Data#3 predicts profit U-turn after three years of declines

Data#3 is projecting an increase in pre-tax profit for the first half of the 2015 financial year following three years of declining first-half and full-year pre-tax profits.

The giant Brisbane reseller is projecting net profit before tax in the range of $4.5 million to $5.5 million in the first half, up from $3.7 million year-on-year.

Managing director John Grant said that achieving this "solid growth" hinges on November and December sales, when it is hoping to close and ship some "identified on-premise opportunities". 

"The final result, however, is dependent on our vendor partner's ability to supply, which we can't be certain of right up until the end of the half," Grant said. Data#3 did not reveal the name of the vendor. 

Revenue vs profits

Data#3 has seen strong long-term revenue growth, but profits have suffered. 

Between the 2011 to 2014 financial year, its revenue climbed from $697.7 million to $833.6 million while pre-tax profit more than halved from $21.8 million to $10.8 million.

Data#3's first-half and full-year profits have fallen for the past three years; the last time it reported an increase in pre-tax profits was in the 2011 full year.

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Despite optimism it can turn around this trend, the company is facing a backdrop of "continuing uncertainty", chairman Richard Anderson said at the company's annual general meeting last week.

He said margins had come under pressure, while costs had been relatively higher to handle a large number of smaller transactions as the company moved from on-premise reselling to outsourcing and cloud revenue.

Sales margins had declined for the last three years as companies "sweat" on-premise assets, stated Grant, who described Data#3 as a company in transition.

While he argued the company had executed its outsourcing business model relatively well, "we haven’t yet reached the scale required to optimise the leverage that should come with these investments".

Grant will step down from the managing director role at the end of 2015, with Laurence Baynham appointed chief executive last week.