Integrators face fierce competition in uncertain market

Integrators face fierce competition in uncertain market

ASX-listed integrators have mimicked the uncertain economic climate, with a mixed bag of results for the first half of the financial year indicating fierce competition in the days ahead.

Leading the pack of results this month with a surprisingly strong showing was Northern Territory-based, CSG, which cited a revenue increase of 45 per cent year-on-year to $85 million, and net profit after tax of $11.1 million, up 36 per cent. CSG’s form came on the back of acquiring Commander’s managed services business and education player, CingleView, last year.

Following close in its footsteps was SMS Management and Technology, which posted a 17 per cent net profit increase, reaching $12.1 million. The Melbourne-based integrator is debt-free with an increase in cash holdings to $20 million and $128 million in new contracts over the last six months.

According to a statement, it has re-jigged a five-year plan to include short-term measures aimed at reducing fixed and operating costs by $5 million during the third quarter. But the company also culled its headcount by 167 in the past six months to 1234.

Fellow integrator, Oakton, cut 90 staff to end the year with a headcount of 1199. But the similarities with SMS end there, with the company reporting a 48.7 per cent slump in net profit to $6.41 million. The figure included write downs of $4 million and redundancy payments of $1.2 million. Revenue, however, was up 3.6 per cent on the corresponding period last year, hitting $98.09 million.

The poor showing was attributed to reduced Federal Government demand and the impacts of the global financial crisis. ComputerCorp also recently blamed slower sales across Federal Government and WA for a drop in its half-year revenue – it recorded an operating loss of $1.1 million, compared to a net profit of $600,000 in the first half to December 31, 2007.

However, since the start of February, reports have filtered through that Federal Government spending is on the rise again.

ABN Amro Morgans senior analyst IT&T, Nick Harris, claimed those providing essential IT services into the education and government sectors – like CSG in the Northern Territory – will most likely continue to have good results as activity in these sectors won’t slow down.

“You’d certainly expect that if the economy goes pear shaped, then the Government will keep spending. Even though it has been a difficult area to be in, going forward government exposure will be a good thing for companies,” Harris said.

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