ASX-listed integrator, Data#3 (ASX: DTL), says it is on track to improve its first-half financial performance despite a slowdown in customer spending.
At its Annual General Meeting this week, chairman, Richard Anderson, reported the Queensland-based company’s first quarter result was ahead of plan and forecast an exceptional first-half result. Data#3 expects revenue to rise by 50 per cent year-on-year.
However, Anderson warned it was experiencing restraint in customer investment and higher levels of market competition, which were placing pressure on pricing and margins.
“The 2009 year presents us with the most significant change we have had in our operating environment for man years,” Anderson said in his address.
Data#3 managing director, John Grant, said recruitment and general hardware procurement had been the top two areas of its business hit, with commercial customers the most restrained.
“The volume, business as usual spending on PCs, servers and so on has been affected,” he said. “We have been fortunate in that the Queensland whole of government contract we are part of is being ramped up again.
“Projects are also being deferred – it’s taking a long time to get decisions. That’s expensive, because you end up having people on the bench you’re not getting the most return out of.”
Grant claimed the affect of the recent Gershon Review into Federal Government spending was also taking its toll on integrators working in the ACT market or with a government-centric role, but said Data#3’s diversified services and customer base would help it ride out the storm.
Like most of his peers, Grant predicted further consolidation across the IT industry as the pressure on profitability increased. Last week, Data#3 and UXC both announced staff cuts resulting from the economic downturn.
Grant didn’t rule out Data#3 assuming an active role in consolidation through acquisition.
“We’re not a prolific acquirer – having said that, we have growth plans for markets in which we operate in now to expand our position,” he said. “We believe there’s still viability in the procurement business model from a reseller point of view by adding value with associated services like configuration or supply chain. So we’re going to continue to grow that.”
Managed services, datacentre and cloud computing were other emerging areas of opportunity for Data#3, Grant said.
“We have got to and will play a part in this area. We are still figuring out the model,” he said. “We are a fast follower and are led in part by our vendors, but will also chart our course with what customers are demanding.”
Another area of sustainable growth was the software licensing space, Grant said. Data#3 has experienced strong organic growth over the past year, accelerated by its decision to pick up 48 ex-Commander licensing staff in Perth and Melbourne.