Data#3 Limited Riding High With Strong Expected FY19 Results

  • Jul 15, 2019 AEST
  • Team Kalkine
Data<sup>#</sup>3 Limited Riding High With Strong Expected FY19 Results

Data#3 Limited (ASX: DTL) unveiled its profit expectation on the completion of the year-end audit. A leader in business technology solutions, Data#3 Limited predicts its consolidated net profit before tax for the 2019 financial year (FY19) to be ~$26 million, compared to FY18 actual $20.4 million and $22.4 million in FY17.

The estimates were announced after finalisation of Discovery Technology Pty Ltd results in which Data#3 owns 77.4% holdings.

The company further reported that the consolidated FY19 net profit after tax (NPAT) excluding non-controlling interests is estimated to be approximately $18 million. This reflects an increase of around 28% compared to FY18 and approximately 17% ahead of the previous record FY17 result at the backdrop of the growing technology market.

Listed on the ASX in 1997, this Australian IT sector player Data#3 Limited is expected to come up with its full-year results and the final dividend announcement on 21 August 2019, as per the management’s expectation.

1HFY19 Results:

For the six months ended 31 December 2018, Data#3 Limited reported solid profit growth, at the top end of the previous guidance range. This translates to a 126.7% increase in net profit after tax (NPAT) to $6.1 million, with earnings per share of 3.99 cents per share compared to 1.76 cents in 1HFY18. Net profit before tax increased by 123.3% to $9.0 million in 1HFY19.

DTL 1HFY19 Revenue (Source: Company Presentation)

The company’s bottom line performance reflects an impressive revenue of $644.4 million in 1H FY19, up 17.7%, including $142.7 million public cloud revenues (+65.7%). Besides, the total revenue also comprised of $532.2 million product revenue, up 19.2%; and $111.4 million service revenue, up 11.3%. However, operating expenses also increased slightly by 2.8% to $12.0 million including staff costs’ growth of 9.4% to $62.1 million.

Data#3 Chief Executive Officer & Managing Director Laurence Baynham stated: “The current period result demonstrates the inherent strength and relevance of its solution offerings in an evolving market, and the company is delighted with the rapid growth in its cloud-based business.”

On the back of increased profit and solid cash flows, the board declared a fully franked first-half dividend of 3.60 cents per share that marked an increase of 125% on the previous corresponding period, depicting a payout ratio of 90.2% of net profit after tax.

The growth outlines the industrial shift to digitalisation that has fuelled the overall information technology spend in the market. In the given landscape, Data#3 experienced an increase in large project activity and a steady pipeline of opportunities. It represents the customers’ trust in Data#3’s world-leading vendor technologies harnessed on a foundation of over 40 years of the company’s experience.

DTL 1HFY19 Gross Profit (Source: Company Presentation)

Total gross profit increased by 14.7% to $82.3 million, and total gross margin decreased slightly from 13.1% to 12.8% reflecting a shift in sales mix. Product gross profit increased by 36.3% to $43.2 million and services gross profit decreased by 2.3% to $39.1 million, primarily due to the reduction in Managed Services from the decommissioning of the Data#3 Cloud.

Mr Baynham added: “The strong first-half performance and pipeline of opportunities for the second half gives confidence that Data#3 will achieve its full-year financial objective, being to deliver earnings growth and improved returns to shareholders.”

The success story of the company also includes its association with the sports clubs MCC/MCG in their digital transformation journey. Data#3 built scalable, secured Wi-fi infrastructure, real-time customer’s information system to improve customer experience and data & analytics to improve service levels inside and outside the stadium.

Further, Data#3 confirmed a robust balance sheet with no material borrowings.

Data#3 and Industry:

Looking forward, the company eyes a market wherein digital transformation remains at a high priority in business strategy. The company believes that the overall IT market growth is fuelled by digital transformation.

Data#3 high-end security solutions are the primary contributor to the company’s growth as cyber security is perceived as its customers’ number one priority. At the same time, its data and analytics solutions drive competitive differentiation in the IT industry while cloud provides the platform for automation, artificial intelligence, blockchain and many more innovative technologies.

DTL further believes that it has the right strategy to underpin sustainable growth in long term shareholder returns.

About the Company:

Data#3 was founded in 1977 as an information technology company, which presently delivers an integrated array of solutions spanning mobility, cloud, security, data & analytics and IT lifecycle management. Its services segment includes consulting, procurement, project services, managed services and resourcing.

Data#3 Solutions (Source: Company Presentation)

Headquartered in Brisbane, Data#3 is recognised as one of the top players in Australia’s business technology sector. It has more than 1100 employees and 15 facilities across Australia and Fiji that includes 9 offices, 3 integration centres, and 3 data centres. The company reported $1.2 billion in revenue in FY2018.

The market capitalisation of the company currently sits at $383.4 million with 153.97 million shares outstanding on market on the Australian Securities Exchange.

Stock Performance:

DTL shares are currently trading near to its 52-week high of $2.630. The stock last traded at $2.550, up 2.41%, with the price to earnings multiple of 21.900x on 15 July 2019.

Over the past five years, the stock has grown 250.70%, including an upside of 53.70% recorded in the past 12 months. The short-term performance of the stock underscores a positive price change of 37.95% and 22.66% in the past three months and one month, respectively.


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