Data#3 defies IT downturn to post solid profit growth

Information technology group Data#3 has started the year with a bang, revealing 10% profit growth in the first half of the 2008-09 year and predicting that profit growth will continue despite several companies scaling back IT spending.

Information technology group Data#3 has started the year with a bang, revealing 10% profit growth in the first half of the 2008-09 year and predicting that profit growth will continue despite several companies scaling back IT spending.

But the company has warned that sales in its recruitment solutions business are slowing as the wider economy continues to contract.

Data#3 reported a preliminary pre-tax profit estimate of $5.8 million for the six months to 31 December, a 10% rise on the previous corresponding period. The company, which is still finalising its accounts, expects revenue for the period to be up 45%.

Managing director John Grant says the results are extremely pleasing, given market conditions.

“Firstly, you go back to our AGM disclosures to the market – our predictions are essentially on track with those. They’re spot on to where we thought we’d be. We’re pretty pleased.”

But while the company remains confident of beating its 2007-08 results, the slowdown in the recruitment solutions side of its business is weighing on the company.

“We’re not downgrading. What we’ve said consistently is that the sector has been under pressure. Certainly from our point of view our revenues in that area were very flat and that’s had an impact on profit,” Grant says.

“But we need to have representation, so we’ve maintained the business in the three locations which it has operated in. We’ll watch what happens over the next six months.”

Grant also says despite the company’s positive figures, the information technology industry is under a lot of pressure.

“The market as a whole is quite depressed. Government plays an enormous part, is a huge buyer, and governments are going through a consolidation period of IT expenditure. So I think the fact that government has stepped back is disappointing in a lot of ways, because they should be leading by example.”

But Grant says Data#3 hopes to use the downturn as on opportunity to gain some ground in the market.

“Our particular point of view on this is that we’ve got to find enough opportunity to compete aggressively and beat out their share. We’ve got a very large investment which we’ve been increasing to make sure we can compete as much as we can and win as much as we can. Our strategy is just to carve out a bigger share of the market.”

The company board will announce final first half results and the interim dividend on 23 February.

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