Kinetic IT returns to higher profits despite growing pains

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Kinetic IT returns to higher profits despite growing pains
Michael North, Kinetic IT

Kinetic IT's revenue growth flattened out in 2017 as it grappled with challenges stemming from two years of rapid growth, though the company managed to return to "historical ratios of profitability".

The Perth-headquartered IT firm reported revenue of $181.6 million for the 2017 year, a 1 percent uptick from the $179.8 million it generated in 2016.

However, 2017 also marked "a return to historical ratios of profitability".

Kinetic IT posted net profit after tax of $14.7 million in 2017, a margin of 8.1 percent. It was a solid improvement over last year's NPAT margin of 5.1 percent.

According to Kinetic IT's annual report filed with corporate regulator ASIC, its 2017 results "reflect the group’s strategic focus of transformation and maturation of the business across the period".

It was Kinetic's slowest year in recent times, and came as the company sought to bed in major contracts, including a deal with Qantas worth up to $45 million and an IT outsourcing contract with Victoria Police worth at least $164 million.

The IT provider also completed its long-awaited computing overhaul for 800 schools for the Department of Education Western Australia, which helped Kinetic secure a CRN Impact Award earlier this year.

Kinetic has grown steadily to essentially double in size over the course of four years.

It grew 27 percent to $103.2 million in 2013, jumped another 16 percent in 2014 to $120.4 million, then another 5 percent in 2015 to $125.9 million.

Kinetic's massive 42.8 percent growth in 2016 took the company to $179.8 million and helped it to the No.26 spot in last year's CRN Fast50.

In early 2016, chief executive Terry North stepped down and handed to reins to his brother, Michael.

Of the 2017 result, North said: "At the start of the financial year, we set out to achieve a significant level of transformation across the business to ensure we have the stability and flexibility for future growth.

“We’re extremely proud of the results delivered across this period, including an uplift in business plan performance, increased operational stability and further advancement of Kinetic IT’s product strategy.

“Our market is constantly evolving and we’ve put in the work to see us well-positioned for significant new business across our pedigree and new service offerings.”

According to the 2017 annual report, "Following the rapid growth experienced in FY15 and FY16, the group underwent a planned period of consolidation with uplifts to financial stability, operational excellence and corporate governance remaining the core focus.

"Overall, the group has performed above expectations, overcoming residual challenges stemming from the growth period to achieve balance across the business and making significant progress against the group’s company strategy."

The company's geographic revenue mix also changed, impacted by the slowdown in Western Australia's resources sector.

"While total revenue generated on the west coast decreased by 5 percent, key stabilisation activities, and the increased uptake of services on the east coast, led to an improvement in regional profitability and a subsequent increase in revenue by 12 percent for this market."

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