Licensing drives Data#3 profits up

Data#3 (ASX:DTL) has posted strong profits for the first half of the financial year ending 31 December, despite a drop in margins.

Net profit after tax (NPAT) increased by 17 percent to $4.7 million and earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 16 percent to $6.8 million over the previous corresponding period.

However, Data#3's overall gross margin decreased from 17.4 percent to 14.2 percent, reflecting a larger proportion of lower margin revenue from licensing contracts.

Total revenue grew by 33 percent to $306.7 million buoyed by timing charges for billing of major software licensing contracts, which were billed in the first half of the financial year rather than the second half of the previous financial year.

Licensing solutions were the "unquestionable market leader" - growing 54 percent to $179.8 million, said John Grant, managing director for Data#3.

Infrastructure solutions business grew by 21 percent to $111 million but the company's recruitment business declined by 27 percent to $15.3 million caused by the fall in external recruitment market.

Grant said the integrator had strong growth outside of Queensland.

"This was a very strong result, one of the best in the sector," said Grant.

"However while most indicators point to financial conditions improving, we remain cautious and intend to provide greater clarity on our expectations for the full year as the second half progresses."

In November, Data #3 announced that it had won the closed tender for four contracts to build the office IT infrastructure for NBN Co, the company the Federal Government set up to build the National Broadband Network.