ASX-listed distributor, itX, (ASX: ITX) has exceeded initial earnings forecasts and reported a 25 per cent rise in half-year net profits.
According to an ASX statement, the company recorded a half-year net profit of $3.5 million off revenues of $81.6m in the six months December 31, 2009. The results reflected year-on-year increases of 25.5 per cent and 20.9 per cent, respectively.
Gross profits were also up 18.2 per cent to $5.2m in the six-month period. itX will be issuing a shareholder dividend of $0.275 per share.
itX managing director, Laurie Sellers, attributed the strong result to buoyant software sales in its distribution business, accelerated by virtualisation take-up. The distributor’s virtualisation vendor list includes VMware, Citrix, Oracle, Vizioncore and DataCore.
“Two things have helped – we’ve taken 50 per cent of the VMware market, and the virtualisation industry as a whole has grown, taking VMware along with it,” Sellers told ARN. “Those two elements in combination have provided a healthy injection to our revenue.”
Sun hardware, prompted by several new large-scale projects, and 20 per cent growth in the company’s Briell Marketing business unit, were other key performers, Sellers said. The Sun sales were despite uncertainty around Oracle’s acquisition of Sun, along with a tighter local server market.
“Towards the end of the half, there seemed to be more confidence in the market, and building and larger projects kicked off, which resulted in big orders,” he said. “We also have a healthy backlog from December, so that will result in bigger than usual sales in January.”
Back in late November, itX predicted its half-year 2009 profits would be 20 per cent higher than those of first-half 2008, or about $3.4m. At the time, Sellers said the distributor had not seen a massive decline in hardware or software orders despite the tougher economic conditions.
“There are signs there that the economy will improved in the second half – people will hopefully release their spending and invest in projects which will result in hardware and software purchasing,” he said.
itX also retains $11.2m in cash, which it expects to put towards niche distribution acquisitions this year. itX has made an acquisition roughly every 12 months.
“We’ve been looking for investment opportunities, but in the last six months, it has been difficult to find opportunities,” Sellers explained. “I think it’s because some businesses have suffered difficult times, so the profits are lower than their expected run rates, but they don’t have the lower expectations of the business’ value. But we can’t pay higher multiples because the business seems to be having a bad year – there are no guarantees.
“We’re patient and will wait for things to normalise, but we’re primed and ready.”