Australian enterprise IT company Data#3 has recorded solid revenue growth in its full-year results despite a challenging market and changing industry dynamics.
The business technology solutions provider recorded revenues of $833.6 million - up 8.1 per cent - reflecting increased product revenues (up 9.0 per cent to $697.3 million) and services revenues (up 3.5 per cent to $134.8 million).
Other revenue, comprised almost entirely of interest income, increased from $1.2 million to $1.5 million.
However, net profit was down 38 per cent to $7.5 million.
Data#3, Chairman Richard Anderson, said 2014 had been one of the company's more challenging years.
"With sentiment towards IT investment remaining flat and in a highly competitive and transforming technology market, Data#3 has done well to deliver revenue growth, albeit at reduced margins," he said.
"Data#3 has continued to enhance its financial position through diligent management of its balance sheet and strong cash flow. Consequently we have been able to increase our payout ratio to 92 per cent.”
According to a company statement, the company was operating in a highly competitive market, and with changes in sales mix within the product and services segments.
"Total gross margin held up well albeit declining from 15.9 per cent to 14.3 per cent, resulting in total gross profit (excluding other revenue) of $118.9 million.
Data#3 managing director, John Grant, said the company was pleased to have been able to return to top line revenue growth.
"But with continued commoditisation of our traditional product centric businesses, margins came under significant pressure over the last 12 months," he said.
"Responding to the changing industry dynamics, we have repositioned the business with investments in managed services and cloud.
"While we have had some notable success to date and customer take up of these new technologies and delivery models is growing, it is yet to reach significant scale.
"On balance, we see our result as a reasonable outcome in a particularly difficult market.”
EBITDA decreased by 34.7 per cent to $12.2 million due to the decline in gross profit combined with increased expenses.
Staff costs increased by 2.9 per cent, driven by general market pressure, higher selling costs in the company’s product related businesses, and the decision to maintain competitive scale in services across all locations.
NPAT decreased by 38 per cent to $7.5 million in line with the decreased earnings.
This represented basic earnings per share of 4.89 cents.
Cash flow conversion continued to remain very high at 391 per cent, with operating cash flows of $29.4 million generated over FY14.
While the company’s balance sheet remained strong with no material debt.
Data#3 declared a final fully franked dividend of 0.03 cents per share, bringing the total dividend for FY14 to 0.045 cents per share fully franked. This represents a payout ratio of 92 per cent which exceeds FY13’s 89 per cent payout.
The final dividend will be paid on 30 September 2014.
Grant said market conditions would remain challenging over FY15.
"However, Data#3 has access to a very large marketplace, and the company is aiming to drive organic growth through continued investment in Data#3's solutions platform and increased sales capacity.
“The formation of a new applications business centred on our investment in Wi-Fi Analytics company, Discovery Technology and our own Schools Information Suite will drive new revenues. Overall Data#3’s goal for FY15 is to increase profit over FY14."