DWS sees $12M revenue dip after striking new panel deals

DWS sees $12M revenue dip after striking new panel deals

Then company’s revenue for the six months ending December fell by 16 per cent, year-on-year, to $61.7 million

DWS (ASX:DWS) has reported a $12 million fall in revenue for the six months ending December 2017, compared to the same period the year prior, citing rate card reductions arising from renegotiated panel agreements.

The publicly-listed IT services firm reported its latest half-yearly financials on 12 February, telling shareholders that renegotiation of panel agreements with “significant clients” has led to the company successfully being reappointed to IT service provider panels, but with lower rate cards.

At the same time, DWS stressed that, as part of the renegotiation of panel agreements, the number of IT service providers were significantly reduced, with the company anticipating that the reduction in IT service providers will lead to greater demand for DWS services, which will ultimately lessen the impact of the reduction in rates.

Then company’s revenue for the six months ending December fell by 16 per cent, year-on-year, to $61.7 million, and its first half earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $13.8 million, a slight one per cent increase on the prior year’s result for the same period.

Net profit after tax (NPAT), meanwhile, came to $10.1 million, a 12 per cent year-on-year increase for the six- month period.

“Whilst our profit performance remained strong, the DWS revenue has been impacted by renegotiated panel agreements and a tight labour market for digital specialists,” DWS CEO and managing director, Danny Wallis, told shareholders.

“In response, we have invested in the business with the appointment of a national sales manager, a national operations manager and additional internal recruitment resources in Melbourne, Sydney and Brisbane to help drive organic growth and meet anticipated higher demand from our clients.

“We thank our staff for their hard work and dedication and our clients for their ongoing support and we look forward to assisting our clients in achieving their goals in 2018,” he said.

The company’s total consulting staff numbers increased to 606 from 596 at the end of June 2017 -- a result of an increase in demand for permanent staff offset by a reduction in client demand for contracting staff, according to DWS.

In August last year, the company reported a 4.9 per cent revenue decline for the financial year ending 30 June 2017. The company reported $137.4 million revenue from continuing operations, down $7.06 million from the previous year.

DWS said at the time that the decline in revenue was due to a number of reasons, including a decline in contractor numbers as a result of a decrease in demand from a “large IT&C client”. 

In February, DWS entered into a scheme to acquire SMS Management & Technology in a deal valued at approximately $124 million.

A few months later, Perth-based IT solutions firm ASG Group made a bid to acquire SMS.  DWS, who spent $749,000 related to the proposed acquisition of SMS, decided to not put forward a counter bid leading to SMS final decision of being acquired by ASG instead.

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