IT service company ASG Group expects revenue growth of at least 40 per cent next financial year despite turnover falling 5 per cent in FY10 and today posting a record full year net profit after tax of $12.3 million.
IT service company ASG Group expects revenue growth of at least 40 per cent next financial year despite turnover falling 5 per cent in FY10 and today posting a record full year net profit after tax of $12.3 million.
The company reported an underlying pre-tax profit of $21.6 million, a 6 per cent improvement on last year's results, while revenue fell to $120.8 million after deliberately slowing the business development arm of its operations.
ASG Group managing director Geoff Lewis told WA Business News he was very pleased with 2010 considering, at the company's annual general meeting in 2008, he indicated the company was "going to slow the business right down from an expenses perspective."
"And business development is major part of our expenses so we said we'd look at that aspect of the business," he said.
"What that meant was we didn't win as many contracts in 2009 as we have had previously so there was a bit of a slowdown in that aspect of the business, that's why the revenue was a bit softer."
Mr Lewis explained that revenue on the higher margin services side of the business actually grew last financial year, from $112 million to $116 million, while the lower margin product revenue fell from $14 million to $4 million in FY10.
"Product revenue, the hardware and software, that's a very low margin, sub-10 per cent," he said.
"We don't go and actively look for that.
"The services revenue is approximately 30 per cent gross margin."
With $626 million worth of project work in the pipeline, secured largely this last financial year with various public and private entities including Western Power, Department of Prime Minister and Cabinet, Department of Treasury and Vodafone Hutchison, Mr Lewis expects nothing but smooth sailing in the short term.
"To be brutally honest, we wouldn't come out and forecast a 40 per cent increase in revenue and say we're going to maintain similar EBITDA margins if we could see anything that was negative," he said.
"In fact quite the opposite with $630 million of pipeline and a track record of winning contracts over the last 12 months you'd have to say we're in great shape and things are looking really positive for 2011 and if we win some organic contracts this year then 2012 will be even better."
And he's equally as confident about securing future lucrative contracts thanks to ASG's strong product lines and even stronger relationships formed with public and private outfits alike.
ASG declared a second half dividend of 5 cents per share, bringing the full year dividend to 6.5 cents per share, fully franked which is an 18 per cent increase on last year's record distribution.
Mr Lewis said the company's $10 million data centre currently being constructed in Bentley's Technology Park will be fully occupied by the time it opens in April next year.
"Launch of the new Data Centre in Perth is a key point of differentiation for ASG and is expected to lead to growth in new, multi-faceted contracts secured by the company," he said.
Full company statement below:
IT services provider ASG Group (ASX: ASZ) today announced a record full year net profit for the year ending 30 June 2010, maintaining its track record of delivering earnings growth and creating a strong platform for growth in FY11 and beyond.
Net profit increased by 9% on the previous year to $12.3 million, while revenue down 5% to $120.8 million.
EBITDA also climbed strongly to $21.6 million, representing a 6% increase on the previous year while basic Earnings Per Share (EPS) increased 3.5% on the prior full year period to 8.8 cents per share. ASG Group maintained a solid cash position with a record net operating cash flow of $15.9 million (FY09: $13.4 million) and $6.8 million in net cash at 30 June 2010.
The Company declared a second half dividend of 5.0 cents per share, bringing the full year dividend to 6.5 cents per share, fully franked. This represents an 18% increase on last year's record distribution. During FY10, ASG Group executed a number of strategic growth initiatives, including three major acquisitions, commenced the construction of a Data Centre and entered the SAP market, all of which establish an outstanding platform for continued earnings growth in FY11.
ASG Group is confident in the FY11 outlook and expects to maintain its strong operating margins on an expected revenue increase of at least 40%.
ASG Group Managing Director Geoff Lewis said the financial performance was very pleasing in a year of high internal investment and reiterated the future earnings growth afforded by the Company's three strategic acquisitions.
"We are very pleased to deliver solid growth in EBITDA, our key profit measure, despite experiencing the delayed effects of weak economic conditions and internal decisions to reduce expenditure during 2008 and 2009," said Mr Lewis.
"Strong cash flow was again a feature of FY10, with Directors seeing fit to increase the full year dividend by 18% to 6.5 cents per share, signaling confidence in the future profitability of the Company and driving higher returns for shareholders.
"ASG recorded margin improvement in FY10 - this expansion is expected to continue due to a shift into higher margin segments such as Cloud Computing, Software as a Service and Business Continuity."
"In FY10 we have established a growth platform through three EPS accretive acquisitions, each of which expands ASG's service capabilities and assists the Company in securing new contracts in high margin growth areas with blue chip clients," he said.
"ASG has invested heavily in areas that will lead to strong revenue contribution in future reporting periods including the construction of a Data Centre, as well as internal investment that will be required to service new contracts.
"Launch of the new Data Centre in Perth is a key point of differentiation for ASG and is expected to lead to growth in new, multi-faceted contracts secured by the company.
"While ASG's growth initiatives have contributed very little in terms of revenue in FY10, we expect to see strong results in FY11 and beyond."
Mr Lewis said ASG expects new contract momentum to continue in FY11 and beyond, underpinned by ASG's expanded services offering, cross sell opportunities and buoyant bid cycle conditions.
"ASG is well positioned to deliver strong revenue growth in the future and we have sufficient confidence in the outlook to provide guidance of at least a 40% revenue increase FY11," he said.
