Tough market conditions impact Oakton's bottom line

Tough market conditions impact Oakton's bottom line

Net profit fell 12 per cent to $9.16 million and EBITDA decreased 23 per cent to $14.53 million

Challenging market conditions and a slowdown in Federal Government spending have impacted the bottom line for IT service provider, Oakton (ASX:OKN).

For the financial year ending June 30, net profit fell 12 per cent to $9.16 million, revenue was down six per cent to $162 million and EBITDA also decreased 23 per cent to $14.53 million compared to the previous corresponding period.

In a statement to the ASX, Oakton managing director, Neil Wilson, said market conditions during the 2013 financial year were difficult across most industry sectors with reduced spend, continual project delays and deferrals across most sectors.

“Spend from the Federal Government reduced beyond expectations as the drive for a federal budget surplus became a priority, coupled with the early election announcement of a federal election,” Wilson said. “These pressures led to a significant reduction in contribution from our ACT location, which has materially impacted our trading performance.”

In response to reduced Federal Government demand, Oakton made some staff redundant in its ACT office and Wilson said it would look to a more flexible resourcing model in the short term, if demand exceeds its current expectations.

“We expect an improved performance from this location in FY14, however we don’t see any material improvement until the second half of the financial year,” he said.

Outside of the ACT business, Wilson said its total production effort was up six per cent on the prior corresponding period.

“This reflects growth in market share and a positive endorsement of our transformational strategy of which our offshore facility in Hyderabad and our specialist solution focus is making a significant contribution to,” he said. “We continue to invest in the business to ensure our service offer remains relevant to customer’s evolving requirements and is inline with industry directions, in particular the rapid move to ‘as-a-service’ models in the Cloud across most organisations.

Wilson said transforming its business towards the services model required a significant investment, but it was now well placed to leverage its assets. As a part of this, it plans to raise its market profile and recently launched a new website.

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