NEW STRATEGY PAYING OFF FOR DATA#3

DATA#3 (ASX: DTL) has posted a 30.4 per cent increase in net profit after tax to $13.8 million in FY16, driven by a big jump in revenue from its cloud-based services in a sign that its change in strategy is paying off.

Today's result was above guidance that the company issued in late July and Data#3 shares are trading up 3.25 per cent this morning, which builds on the 10 per cent increase the company registered after July's update.

CEO Laurence Baynham (pictured) says, "The FY16 results reflect the company's strategy of transitioning from primarily a product centric approach to an increasingly service centric approach in a rapidly changing IT environment.

"We are currently on track with our strategic plan, which contains three long-term objectives, being to deliver sustained profit growth; to grow services revenue with an increase in annuity and an increase in margin; and to grow cloud services revenues."

Revenue from the cloud was up 110.5 per cent to $98.93 million. The focus on services resulted in an overall revenue increase for that sector of the business of 16.9 per cent to $187 million, but the company's product revenue also contributed strongly to the result, up 12 per cent to $793.95 million on the previous year.

Data#3 has reported three earnings upgrades in 18 months and this is the fourth consecutive half-year reporting period of growth for the company.


Data#3 headline results:

• Revenue is up 13 per cent to $983.2 million
• Gross profit up 13.2 per cent to $146.6 million
• Net profit before tax up 28.2 per cent to $19.5 million
• Net profit after tax up 30.4 per cent to $13.8 million
• EPS up 30.4 per cent to 8.98 cents per share
• Strong balance sheet with minimal debt
• Total dividend up 27.0 per cent to 8.0c per share.

Baynham remains cautious, saying business conditions will be challenging in FY17, with traditional technology investments remaining flat.

"However, we are seeing digital technologies leading business transformation in both commercial and public sector organisations. Data#3, together with the consulting team at Business Aspect, are well positions to enable this transformation and capture new investment."
The financial goal for FY17 is to continue to deliver earnings growth and returns to shareholders, says Baynham.