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Managed services bolster Cirrus’ bottom line

Managed services bolster Cirrus’ bottom line

Gross margins for the division increased by 22 per cent

Credit: Cirrus Networks

Publicly listed IT solutions integrator Cirrus Networks saw its managed services business blossom during the year ending 30 June, with revenue growing by 20 per cent compared to the prior 12-month period.

The company’s managed services revenue saw a lot of action in the second half, growing, half-on-half, by 17 per cent, to $6.3 million.

Not only did the company’s managed services revenue grow, associated gross margins for the division increased by 22 per cent, from $3.7 million in FY19 to $4.6 million in FY20, a result of the company’s strategic focus on growth through higher margin service.

Professional services revenue, meanwhile, was up 11 per cent, year-on-year, to $17.3 million. Revenue for that business segment was flat in the first half, at $7.8 million, but experienced significant growth in the second half, of 22 per cent to $9.5 million.

At the same time, gross margin for the company’s services business more broadly continued its growth, achieving a key strategic milestone in FY20 in contributing 50 per cent of total gross margin — $8.4 million — compared to 46 per cent in FY19. 

However, product revenue in the second half contracted to $31.5 million from $34.5 million in the first half, mainly as a result of supply chain delays and customer impacts caused by COVID-19. Despite expectations that product revenue would be flat for the year it actually ended up delivering a 5 per cent improvement, year-on-year.

Broadly, the company’s pre-options earnings before interest, tax, depreciation and amortisation (EBITDA) for FY20 was $3.6 million off the back of revenues of $95 million, representing an 8 per cent uplift from FY19. 

These results represent a turnaround from the first half, with Cirrus Networks weathering a 280 per cent year-on-year fall in after tax profit for the six months ending December 2019, clocking a $234,666 loss for the half year as it worked to ramp up its increasingly important managed services business.

This year marks the end of the Cirrus Networks’ five-year strategic plan, in which IT solutions and managed services have played an important part. 

The company told shareholders that the full-year result was driven by solid revenue growth across all income streams while improving margins with no increase in overhead costs. 

Overall gross margins were up 10 per cent, with the most significant contributor being the 22 per cent lift in managed services gross margin. 

According to Cirrus chairman Andrew Milner, with over 70 per cent of consolidated revenue for the company currently derived from customers in the resource, not-for-profit and federal government sectors, the company has been fairly well insulated from the effects of COVID-19 to date. 

“The trading environment remains volatile however, and the company is ready to respond to any further pandemic-related impacts,” he said.


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