Datacom Group profit drops to $20m on higher revenue

Datacom Group, New Zealand's largest home-grown information technology company, has reported lower profits on rising revenue.

Key numbers for the year ended March compared with a year ago:

Net profit $20m vs $37m

Revenue $1.584bn vs $1.483bn

Operating earnings $133m vs $147m

Operating cash flow $75m vs 164m

Datacom grew revenue to a record $1.58 billion last year but profit almost halved as the technology company invested heavily in data-centre infrastructure and AI-ready computing capacity.

Operating cash flow more than halved to $75 million while bank borrowings rose to $131m as the company expanded its domestic data-centre footprint, including acquiring the T4 facility in Auckland to support expected growth in AI-centric business.

Chief executive Greg Davidson said global uncertainty had made customers more cautious about spending.

Demand for AI infrastructure and the Middle East conflict were creating supply chain challenges.

Davidson said supply-chain volatility had reached unprecedented levels.

"This is the most volatile world I've seen for supply chain. It's worse than Covid," he said.

He said the company had attempted to navigate supply chain pressures and rising prices by pre-purchasing components and warehousing stock among other measures.

While that had helped minimise disruption for customers, it had come at the expense of short-term profitability.

Davidson said New Zealand customers remained cautious about spending after a deeper downturn than Australia.

Businesses and government agencies were focused on savings and increasingly scrutinising technology spending.

"We've got very price-sensitive buying. We've got customers really looking for value in what's being delivered."

Despite the cautious environment, Davidson said organisations continued to explore artificial intelligence projects where there was a clear path to productivity gains or other benefits.