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Datacom lifts capital spending as demand for IT services persists

Thursday 1st August 2019

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Datacom Group lifted capital spending by about 22 percent and added almost 1,200 staff in the March 2019 year as demand for IT services continues to outstrip wider economic growth. 

New Zealand's biggest IT services provider reported a net profit of $42 million in the year ended March 31, up from $23.5 million a year earlier, on a 2.4 percent increase in revenue to $1.29 billion. Stripping out adjustments for new accounting standards, revenue was up 17 percent. It employs about 6,500 people worldwide, up from 5,332 a year earlier, for an 11 percent increase in the wage bill to $661.9 million. 

Datacom ramped up its capital investment in recent years, spending $67.8 million in the latest financial year, up from $55.4 million in the March 2018 year. It has invested in local government and payroll products, and expanded four New Zealand data centres. 

Chief executive Greg Davidson said demand for IT services is still growing faster than the economy because they offer such a broad array of applications to so many customers. That's encouraged investment in areas such as software-as-a-service, services in demand by customers including cyber-security, and automating existing services. 

"A lot of the spend you're seeing, and the change you're seeing, is actually us ensuring that we keep listening to our customers and keep evolving our services in order to have that future relevance," he told BusinessDesk. "Fundamental to what we are, has to be a company that's willing to learn." 

Davidson said he spent the past day-and-a-half with the board developing new planning horizons for the company to ensure Datacom can meet changing customer preferences. Some areas, such as software development management needs constant refreshing, whereas investments in payroll and local platforms require multi-year horizons, he said. 

Datacom added two new directors to the board today - Air New Zealand chair Tony Carter and Landcorp director Chris Day. 

Chair Craig Boyce said the new directors will help shape Datacom's vision for the next three years. 

"Datacom’s growth has been tremendous, and we want to ensure the company continues to grow in capability and talent and build our valued reputation among customers in the years ahead. Tony and Chris will be valuable additions to the board and I look forward to working closely with them," Boyce said. 

The privately-held company is controlled by John Holdworth's Evander Management, with the New Zealand Superannuation Fund holding a 39 percent stake. 

It will pay $2.90 a share, or $17.5 million, in dividends for the 2019 year, up from $2.25 a share, or $14.7 million the previous year. 

The company had $97 million of bank debt as at March 31, up from $61.5 million a year earlier. Yesterday, the company reorganised its banking facilities with its existing lender, increasing its funding line by $29.9 million, extending an existing facility by a year, and released the security over its City Road property. It has also established a short-term A$5 million facility that matures at the end of September. 


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