Slower government spending hits ComputerCorp revenue

Slower government spending hits ComputerCorp revenue

ASX-listed integrator blames slower Federal Government and WA business, as well as tough market conditions, for 19 per cent revenue fall and operating loss in first-half

ComputerCorp has blamed slower sales for a drop in half-year revenue

ComputerCorp has blamed slower sales for a drop in half-year revenue

ASX-listed integrator, ComputerCorp (ASX: CZP), has blamed slower sales across Federal Government and Western Australia for a drop in half-year revenue.

In an earning guidance statement, the company reported revenue for the six months to December 31 would reach $73 million, including contributions from Coretech, which ComputerCorp acquired for $2.4 million in April. Excluding Coretech, the result represents a 19 per cent year-on-year drop.

It also expects to record an operating loss of $1.1 million, compared to a net profit of $600,000 in the first half to December 31, 2007. Full financials will be released later this month.

CEO, Robin Rindel, said the global economic crisis, along with the fluctuating exchange rate, had taken its toll on customer spending. ComputerCorp’s ACT revenues have been slashed by 56 per cent, and in WA by 15 per cent. The two states account for 75 per cent of total revenues.

According to Rindel, the launch of the Gershon Report also saw some Federal Government agencies hold back on projects outside of critical areas.

“There are a number of projects expected to come online between now and the end of the financial year, so who knows what we’ll see going forward,” he told ARN.

Rindel wasn’t surprised WA revenue had dropped given the state’s reliance on resources.

“Across the board, we have experienced a downturn in recent times – and states feel it at different times. It was the middle of last year when NSW resellers felt it because more multinationals and financial agencies are located there,” he said. “But the digital revolution has helped and our Coretech and education businesses performed in line with expectations.”

ComputerCorp’s education practice, which was bolstered by Coretech’s relationships, expertise and custom-built software offerings, as well as its recent purchase of Melbourne-based integrator, Paragon Systems, is expected to represent up to 25 per cent of total revenue long-term.

ComputerCorp also continues to invest in managed and professional services and recently restructured the division into three areas of focus: Solutions development, a services-oriented sales team, and service delivery. Over the past 12 months, it has hired several dedicated managed services personnel including former Leading Solutions staffers, Roy Pater and Andre Herbst.

The company expects to report a 28 per cent increase in services revenue over the first-half of the year, or 10 per cent excluding Coretech. A year ago, services represented less than 10 per cent of total revenue.

Rindel was confident ComputerCorp would bounce back and improve profitability over the next six months by further diversifying business across different states, improving the ratio of product and services sales, and keeping an eye on costs.

“We’d like to get our services business into the mid-teens of total revenue in three years’ time and have a better balance between the product and services business,” he said. But while there were no redundancies planned in the short-term, Rindel wouldn’t rule out staff cuts if the downturn continued.

“On the product side, things have been tight. With where our business is now, I don’t think there’s a need for redundancies. If the market conditions further deteriorate, then we will reassess.”

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