UXC posts drop in profits

ICT integrator, UXC (ASX:UXC), has posted a reduction in year-on-year profits despite an increase in its revenue.

Full year profits after tax were $18.85 million, compared with $26.48 million for the previous year. The company was keen to emphasise revenue growth from $611.57 million to $715 million.

The company’s business solutions group focuses on ICT solutions for the government and enterprise market. Its earnings dropped by 21 per cent to $28.7 million despite an 8.2 per cent increase in revenue to $440 million. The company blamed the difficult economy and rising costs for the downturn.

“Our first half was very disappointing. We thought the first half would be well-reduced. That’s largely because our turnover kept growing and our overheads kept growing in line with the turnover but our gross margin dropped,” UXC executive chairman, Geoff Lord, said.

Lord said the takeover of professional services provider, Ingena, had worked well for UXC.

“We’ve had it for six months in our group. It’s formed the nucleus of what we call ‘professional solutions’. It operated according to budget. It contributed about four million pre-tax for the half, which is quite strong," he said. “One of the benefits of 2010 is we’ll have two halves of Ingena”.

But Lord said the Febuary 2008 takeover of Getronics Australia had not run quite as smoothly.

“Getronics took a little while to fit into our company. We needed to build a replacement IT platform for the company. It had been part of a global group. Its performance in ‘09 was considerably better than ‘08 and we think in ‘10 it will continue to improve,” Lord said.

The executive chairman said there would no repeat of its November 2008 redundancies, unless the company failed to make its $800 million turnover target.

Despite the slump in profits, Lord maintained a positive outlook and said the second half 2009 results were an example of its cost-cutting success.

“We don’t expect to repeat a very poor half. We think the first half was the aberration,” he said. “The outlook is positive and we’re looking forward at the moment to the year. But it does always depend on the economic cycle."

At close of market on the day of UXC's profit announcement, its stock was down 2.89 per cent on the ASX.

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