New Zealand's largest technology company saw its net profit halve to $19 million in the year to March.
But Datacom Group CEO Greg Davidson says he expects a much stronger result in the current year as Covid positives outweigh the negatives.
Revenue edged up 3.1 per cent to $1.34 billion, a nose ahead of our second-largest tech by revenue, Fisher & Paykel Healthcare.
The IT services firm, whose foundations include the IT operation formerly owned by NZ Post, employes 6500 staff. It is 60 per cent owned by the rich-list Holdsworth family, and 40 per cent by the NZ Super Fund, and draws most of its revenue from Australia, Asia and NZ.
Davidson blamed the profit dip on issues with Datacom's Australian business, now addressed, plus the impact of accounting changes.
The current year has seen one of Datacom's largest customers, Fonterra, shift most of its IT business to India-based outsourcer HCL (a decision flagged earlier in the financial year).
Put it is the pandemic that dominates.
"Covid has changed everything for our customers. It's caused easily the largest reprioritisation of customers' plans that I can remember - far more so even in the GFC," Davidson says.
Some customers are up, some are down.
"We've got organizations that are involved in freight moving goods that are all up.
"We've got organizations in the transport sector, in tourism, or in the whole airport and airline world that are really down and needing us to figure out what minimal services looks like."
Central government customers are more engaged as they ramp up operations to deal with the coronavirus, council customer tend to more strapped for cash.
Notably, April saw Datacom on a drive to hire 2000 more staff in Australia to help bolster call centre operations for federal government agencies including telehealth, plus large corporate customers including Qantas as they were deluged with Covid-19 queries.
"Net of net, we're okay, and I consider us hugely lucky that we kind of got this diversity of customer base and this mix of services."
While some clients are booming, and some lying relatively low, all are accerlating plans to digitise their business.
Shift to short projects with obvious payback
Datacom profit will be up in 2021, Davidson says. "We're certainly planning for it to be a far better year than last year."
The CEO isn't sure about revenue.
"Maybe we'll be able to show some top-line growth," he says.
"One of the things that no one can predict is quite how deep the recession will be.
"What we do see is that everybody's horizons have shortened a bit. A lot of people spent a lot of their budget for the year on helping make remote working happen for all of their teams.
"And they're now only wanting to commit to shorter-term, more obvious payback-type activity for the foreseeable future. So really, it's about us being on our toes."
Payroll services grew in 2020. Datacom now handles that function for 15 per cent of NZ's national payroll, and is angling for similar share across the Tasman.
Datacom's total staff numbers were steady over FY2020.
A global shortage of trained cybersecurity experts has resulted in our partnership with Unitec which aims to fill the security skills gap by offering a one-year vocational diploma in cybersecurity, the first New Zealand-based pre-degree cybersecurity qualification.
Data centre manoevering
Microsoft recently announced plans to build a new regional data centre in Auckland, with the aforementioned Fonterra as an anchor customer.
And the 48 per cent Infratil-owned Canberra Data Centres recently said it planned to open two "hyperscale" data centres in Auckland by the end of 2022.
Davidson said Datacom's had no need to build any more data centre infrastructure in NZ, although its current centres were constantly updated.
And in many contexts, his company partners with Microsoft. As an Azure managed-services provider, Datacom could make hay from the US giant's local data centre.
Shoring-up a balance sheet
Earlier this month, Datacom renegotiated an extension of the maturity dates for its existing ANZ loan portfolio.
An overdraft facility of $40 million and $25 million of term debt in New Zealand were refinanced until July 2021 and 2022, respectively. An AUD$40 million overdraft and AUD$13.5 million of term facility has been extended to July 2021.
Cash and equivalents were $18m as of March 31from the year-ago $42m.
Board and executive changes
Craig Boyce retired after 20 years as director at the end of the financial year, with Tony Carter was appointed to replace him as chairman.
Chris Day was also appointed to director and leads the Audit Committee while former company secretary and CFO Robin Keall (no immediate relation to the author) was
appointed to the board during the year.
At the executive level, Alexandra Coates has stepped up to head the Australian business and Justin Gray has recently moved to Datacom to lead New Zealand's public sector operation. Karl Wright, formerly Core Services leader has been promoted to the position
of chief information officer.