Data#3 profits hit by "disappointing" acquisition results

Data#3 has blamed one-off events negatively impacting its services businesses for a “disappointing” full-year profit, as the company reports an 8.4 percent profit decrease year on year.

In the company’s financial results for the year ending 30 June 2018, Data#3 reported revenue of $1.18 billion, up from its 2017 results of $1.09 billion.

Despite this, the company announced that is earnings and its dividend had been impacted by mixed profit results, reporting growth in the core Data#3 business being offset by lower-than-expected earnings from its Business Aspect and Discovery Technology acquisitions.

Data#3 reported after-tax net profits of 14.1 million, down $1.7 million from the $15.8 million it reported in 2017. The company reported a gross product sales profit increase of 6.7 percent to $77.4 million, while its services gross profit fell 4.2 percent to $82.7 million.

Overall revenue generated from sales was up about $72 million to $961.2 million from $889.2 million in 2017, while services revenue increased by $11 million to $219 million from 2017’s $208 million.

Business Aspect consulting revenues for the full year were up 3.7 percent to $25.2 million. After a making a loss in the first half of the year, the segment was buoyed by a stronger second half, according to the company.

Data#3 described Discovery Technology’s revenue performance, which fell $2.5 million to $5.1 million as “disappointing and unexpected”, with the performance largely pinned on a customer’s early termination of a five-year contract, which is currently the subject of legal proceedings.

The company reported that its total services gross margin decreased from 41.5 percent to 37.8 percent, reflecting a change in the sales mix.

Data#3 also attributed managed services profit declines to the decommissioning of its Data#3 cloud platform, announced in late 2017.

“As announced in the interim report we had a very challenging start to the year and delivered a first-half profit that was approximately 50 percent lower than the previous corresponding period,” the company stated in its financial report.

“This disappointing result was due to a number of one-off events, both planned and unplanned, which affected the product and services businesses.”  

Data#3 chief executive Laurence Baynham echoed those statements.

“We are pleased to have achieved a significantly improved second-half performance, which largely recovered the first-half shortfall, but fell short of our full-year objective to improve on FY17 earnings,” he added.

The company declared a final fully franked dividend of 6.60 cents per share, compared to 5.55 cents in 2017, bringing the total dividend for the 2018 financial year to 8.20 cents per share.

Data#3's share price was steady at $1.6 at the time of writing.