Datacom boosts profit 43% as strong NZ growth offsets weaker Australia, Asia

Monday 1st September 2014

Datacom Group, the privately-held IT services firm, boosted annual earnings by 43 percent as gains in New Zealand offset a weaker Australian market and reduced Asian revenue after the sale of a call centre.

Profit after tax was $51.4 million in the year ended March 31, up from $36 million the previous year, the Wellington-based company said in a statement. Sales rose 1.3 percent to $881 million.

"The group maintained a 10-year compound annual growth rate of 12.5 percent for revenue and 11 percent for profit," chairman Craig Boyce said. "This result demonstrates the sound strategic direction of the company and the long-term financial stability of the Datacom Group."

Datacom employs 3,776 people across New Zealand, Australia, Malaysia and the Philippines, providing software engineering, payroll, and IT services. The company is looking to capitalise on its presence in the New Zealand market, particularly in the education and local government sector, where there is an increasing move towards outsourcing IT services and cloud-based services, Jonathan Ladd, chief executive told BusinessDesk.

"There is a move to outsource more rather than to insource, so there is more work coming into the market and we continue to pick up on that," Ladd said. A shift to the cloud requires "application software skills, and we have that, which is unlike many of our competitors in the infrastructure space, so it gives us an advantage in that respect."

"There is an increasing Software as a Service demand, and that is behind our investment in intellectual property in targeted sectors such as local government, education in things like payroll, and Software as a Service," Ladd said.

In March, Datacom bought Origen Technology, a Tauranga-based supplier of software and services to local government, for an undisclosed sum, as part of strategy to capitalise on growing demand in the sector and further expand its scope of services.

"We bought a business which was already thriving and had a large segment of New Zealand local government market already working with its product," Ladd said. "We combined it with our own software properties that we were already selling into local government and all our expertise to both put the thing into a cloud-base and also add further software around it and last, but not least, to Australianise it."

Sales for its local operation, Datacom New Zealand, rose 12 percent to $466 million, as its core businesses grew while its payroll business increased total payee base more than 12 percent, it said.

Revenue in its Australian and South East Asia operations fell 8.6 percent to $415 million, reflecting a depressed IT project spend and smaller income from its Asia unit after it sold its Asian call centre for $25 million last year.

Ladd said weaker Australian sales were "because the manufacturing and resources sector has contracted and there was uncertainty around the election which caused people not buy on their discretionary spend, and a fair bit of our business in Australia is still around discretionary spend."

Datacom appointed Theresa Eyssens as chief executive of Datacom Systems Australia. Eyssens previously worked for IBM, leading the natural resources industry sector team across Australia and New Zealand, managing the IT company's clients within the mining and oil and gas industries.

In December 2012 New Zealand Post sold its 35 percent stake to the New Zealand Superannuation Fund for $142 million, ending a 23 year relationship. NZ Super Fund has since boosted its holding to 37.5 percent.

The company has customers across the globe, with services in about 10 languages Ladd said. Long-term the company would look to expand its software services further.

"As we increase our presence in selected verticals like education and others as and when we've proven the products and the service in our Australia and New Zealand markets then we will seek as appropriate to expand it into markets further afield," Ladd said.

BusinessDesk.co.nz

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