Oakton restructure pays off

Oakton restructure pays off

The decision to focus on its portfolio of services has helped boost the annual profit margin of Oakton by 42 per cent.

According to its annual financial statement, the ASX-listed IT services company recorded a net profit of $7.7 million, on sales revenue of $44.26 million.

Chief operating officer, Neil Wilson, said the company's decision to divest its underperforming products division had allowed it to reduce operational costs and raise its profit levels.

The company sold its products arm to software company, The Distillery, in July last year. As part of the deal, Oakton was awarded a three-year, $5.5 million services contract by the Canberra-based company.

"In our 2004 financial year we ran as a services company only, which is our strategic direction," Wilson said.

"We've clawed back to the level of profit we expected."

Oakton provides a plethora of services, ranging from IT strategy and consulting, to delivering, implementing, upgrading and supporting software packages. It has significantly added to its services capabilities in recent years through various company acquisitions, including Microsoft Solutions business partner, Aston IT, in May last year.

As part of plans to remarket itself as an end-to-end IT solutions provider, Oakton spent the last year merging all 10 of its previously independent services divisions into one.

This unified business model was also now raising profit levels, Wilson said.

"We now have all of our services running under the one brand: we have one organisation model, with one selling operation and one back office," he said. "For our customers, this means they have one account manager to deal with for all of our services. This is a much simpler model, especially for us to operate our business on.

Prior to integrating the businesses, each services unit had traded as a separate entity, focused on selling its own product rather than cross selling solutions, Wilson said.

"Last year we recorded 223 customers, with an average of 1.7 services per customer," he said. "Our goal is to increase this ration significantly. We are aiming to get this up to four services each."

Alongside its existing client initiatives, Oakton would also look to expand its customer base further through its Sydney business, Wilson said.

Strong sales growth in Sydney had been one of the cornerstones of its higher profit level in the past year, he said.

"Sydney currently represents 35 per cent of Oakton's total sales," he said. "Our goal is to see Sydney sales match those in Melbourne in the next two years."

Wilson didn't rule out the possibility of the company strengthening its national presence through future company acquisitions. He named Queensland and Canberra as potential areas for growth.

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