Data#3 Limited (DTL) Earnings Call Transcript

Thank you for standing by, and welcome to the Data#3 Limited FY '21 Results Briefing Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Laurence Baynham, CEO and Managing Director. Please go ahead.

Jane, thank you very much, and good morning, everyone. Thank you for joining the FY '21 results briefing. I'm joined by Brem Hill, CFO, that many of you will be familiar with. Move on to what the agenda is for today. And the agenda is that I'll provide an overview, operational and also the financial highlights overview in terms of FY '21, and a little bit of history in terms of our business. We'll then move into some of the more detailed financial performance, which Brem will describe. I'll then cover the FY '22 looking forward strategy, a little bit about winning new customers and then summarize. So on that note, let's get started on Slide 3. And really pleased in terms of the FY '21 financial highlights to confirm that we've got a range of financial figures all heading in the right direction. From a revenue perspective, just a touch on the $2 billion, up 20% for the year. Gross profit, $194 million, up 3.6%. Net profit before tax, $36.9 million, up 8.4%. Net profit after tax, $25.4 million, up 7.5%. The basic earnings per share at $0.1651, which again is up 7.5%. And pleased to announce that dividends per share, $0.15 dividends per share and that is up 7.9%. I'm pleased to announce that the Board have approved a payout ratio of 90.9%. So what's driving some of these things, and we'll spend a little time in terms of what's driving the financial performance in FY '21. On Slide 4, if we go into some of the high-level stats here, we've been in the business for quite some time, those of you who are familiar with us. I'll go through the next slide in terms of the history of the business. But today, we're 1,200 people across locations, predominantly operating in the larger corporate and public sector environment. In particular, the sectors, which tend to dominate in our customer segments are health care, education and also the resource industry as well. What we've also got and continue to see climbing is our recurring revenues. It's always pleasing that we've got a large percentage of our revenues at the beginning of the financial year continuing to take place and that's at 62%. Some of the nonfinancial items that I'd like to just point out in terms of FY '21. We were successful in winning an external award for our people after an external audit by HRD to win Employer of Choice award for employers over 500 employees. This is across all sectors. So it's particularly pleasing. We've managed to succeed in winning this award in some form for the last 6 years. So we've had a good deal of consistency there. Likewise, the Microsoft Azure Expert Managed Services Provider Certification, a bit of a mouthful, but it's -- there are very few partners that actually have this certification in the market, in fact, 4 in Australia. It's one that we've strived to secure, and in fact, we managed to renew the certification a couple of weeks ago for FY '22. And we see that as a differentiator, providing services around the public cloud business that we continue to grow. In addition, we've also -- we were successful in winning another global award with Cisco from a range of around 60,000 partners globally, and it's one of their largest segments, which is the commercial partner of the year. It's particularly pleasing for any Australian company to win global award on this stage in the IT industry. But we're certainly very pleased and our team are very pleased to receive that. And the last point in the right-hand corner, Brem and I debated whether to put this in or not, but we -- not only Data#3 have been around for quite some time, but the executive team within Data#3 has been around. That's obviously got some advantages, and Brem and I have been with the business for quite some time, and then likewise the executive team have as well. So we see a good deal of stability and consistency. Moving on to Slide 5. I'll talk around the company history. And way back 40-plus years ago in '77, established. And you can see here, and those of you who are familiar with the business may find this chart somewhat interesting in terms of some of the geographic growth that we've been able to achieve. We've also plotted out some of the headcount growth over the years. Back in '97, one of the first IT organizations to list with a market cap of -- a huge market cap of $14.9 million. And we've managed to continue to grow the business. One point that I'd like to point out, the 2014, the Business Aspect and Discovery Technology were really the last acquisitions that we made. Up until that date, we had a growth strategy of organic and acquisition-based. Probably since that date, we've been all organic in terms of our growth. And in that period of time until present, we've more than doubled our revenues, in fact, increased our revenues by 125%. So the organic growth strategy in gaining market share is certainly paying off from that perspective. And then the market cap, just -- we've also been able to grow that 610%, so to grow the market cap of the business sixfold during that short period of time. Moving on to the next one. Next slide is around our customers. And of course, customers are certainly core to -- really core to our business and core to everyone's business. And what is pleasing to see is that we've got a trend, an increasing trend and record customer satisfaction results. It's probably even more important in FY '21 with the challenges that we faced in many different ways, and many organizations have faced this challenge in FY '21. But growing our customer satisfaction was particularly pleasing in FY '21. Moving on to the next slide, on Slide 7. So in terms of what's driving the growth with our customers and why our customers are continuing to be satisfied, probably the biggest growth driver that we're seeing in the market is digital transformation at the highest level. And we see it as also the #1 business driver going forward, digital transformation, in terms of growing the Australian economy. Digital transformation is #1 in our surveys for both technology and in business requirements for our customers. And our role in digital transformation is around the foundation layer. So if you see the layer at the bottom in the dark blue is around -- and the solutions that we provide for the foundation of digital transformation to enable digital transformation to take place is multi-cloud, modern workplace, security, data and analytics and connectivity. And these are our core solution offerings. And once we -- once our customers have these in place and the foundation layer in place, it will then enable digital transformation to take place in all the cooler technologies, which take -- tend to gain some of the headlines such as artificial intelligence and Internet of Things and 3D printing and blockchain, for instance. That enables a lot of the digital transformation to take place. But we see a continuing runway of increasing our business in the foundation layer. Going into Slide 8 and going into these solutions in a little bit more detail in terms of what we do in each one of these. We've laid out in Slide 8 some of the offerings that we have in each one of these solution categories. Like, for instance, in multi-cloud, we're not only in public cloud but also in private cloud. And we'll go into a little bit more detail in what that means later in the presentation. Likewise, in Security, a range of different offerings that we have. But probably the more important aspect of this is that we provide a range of integrated solutions and a full life cycle as possible. And by life cycle, what we mean is the services that we provide in terms of advice and guidance at the start of a solution with our customers in terms of consulting, moving through to the design and implementation of the project services. And that's -- once we complete the project, we then provide the support services and that, of course, is the ongoing recurring revenues based on support contracts. So our aim is to provide as full of life cycle or as full of service life cycle as possible for each one of these solutions. Moving on to the next slide. Looking at the business through a different lens, not just in terms of our solutions, but if we look through the vendors, and vendors -- the larger vendors here -- Microsoft, Cisco, HP and Dell are some of the largest vendors in the world in the IT industry. And in fact, in the customers in which we operate, we believe that they account for something like 70% of our customer spend. So we invest a good deal of time and effort and investment, in particular, around these vendors, and our positioning is to be the best and be the best in the market for our customers. And be the best is not always being the biggest. However, what I'd like to say is that we actually are -- in FY '21, for the first time, we collectively -- across Microsoft, Cisco and HP, we were the #1 partner for each one of these vendors within our region. And this is the first time that we've been able to achieve that across all 3. And of course, we've been Microsoft's largest partner for quite some time. Dell have been a recent level of investments and continue to grow rapidly. And you can guess where our aspirations are with Dell to be complete. It's also would be remiss if I don't mention. We've got something like 400 other vendor partners as well and some really great emerging technologies that come on board very quickly, which our customers are demanding and becoming more and more important as part of overall solutions that we provide to our customers. And of course, our customers don't come out to the market saying that they just want a Dell technology, for instance. Our customers look to solve their business problems through technology solutions, which, in fact, usually provide the integration of a range of these vendors and a range of these vendors' technologies. And that's the true value of Data#3 that we can provide the integration and the assurance at an enterprise level for the integration of these technologies across these vendors. So a major competitive differentiator for us. Going into Slide 10, and then talk a little bit about the operational overview for FY '21, looking backwards on Slide 11. The IT -- even though the little icon shows the graph going up, in fact, the IT market in which we operated in FY '21 was flat at best. Some analysts believe it went backwards by a few percent as well. So again, that made it all the more pleasing in terms of our overall results. In a relatively stagnant market, we were able to achieve growth. The other external factor, which we've been dealing with in terms of the IT industry, and we're not alone in this in terms of dealing with the global chip shortage as well. The IT industry is competing with the likes of the automotive industry for supply. And that's -- we were able to overcome through our great relationships that we have with our vendors and also working with our customers to get continuity of supply. Last but not least is the pandemic. And of course, the pandemic has provided us -- thrown as many different challenges, but it has also, in the IT industry, accelerated digital transformation without a doubt. And in its basic form, the work from home and the collaboration, we will be one of the larger providers in the country, providing collaboration for the large government and large corporates in the country. And of course, if we look back at FY '21 and some of the external factors, we didn't have a vaccine this time last year, and business confidence probably wasn't at its highest. So there were a number of things that -- or challenges that were thrown at us during the financial year and many others in the market. Pleased to say that we did overcome them. And if we go to Slide 12 and some of the operational highlights, we had particular growth in the cloud market and not just in public cloud. Public cloud tends to take a lot of the highlights, and it's very large in terms of revenues in just under $800 million in public cloud, the majority of which is in the Microsoft arena. But in addition to that, we've also grown the private cloud business where our customers build their own cloud, utilizing public cloud-based -- like technologies. And that has grown very rapidly for us as well. And in many respects, our customers actually operate not just in a singular cloud environment, operate in multiple public cloud environments and also multiple private cloud environments. And they can become complex to manage. And that complexity is, again, that is -- plays to our strengths and our advantages in terms of how we help our customers achieve that. Moving on to the services aspect in terms of the operational highlight. What we've also been able to achieve is an investment in our Managed Services business, where we've invested in new platforms, new technologies, which is supporting a range of the foundation layer for digital transformation, so in particular, supporting the public cloud growth and the multi-cloud growth. What -- in addition to that, we've -- in FY '21, we've also seen a profit turnaround in our consulting business with Business Aspect. It was particularly pleasing to see a turn -- quite a significant profit turnaround. And in addition, with our services, our strategy has been and continues to be growing our Services business, but it's purposefully -- it's very purposefully growing our Services business by improving our gross margins. Now our Security growth is one of our -- probably one of our best kept secrets in terms of the overall market. We've always been involved in security. However, the business is now over $100 million in FY '21. Internally, within our business, we operate as a business unit. And the -- that's $100 million, even though it represents 5% of the overall part of Data#3. If we looked at other security organizations in the market, it will compare pretty favorably with many other security organizations. What we've also been able to do is increasingly work with the Business Aspect consulting perspective to provide a more -- a more fuller solution for our customers. Last but not least, some of our investments have been -- in FY '21 have been in customer experience. And customer experience not to be confused with customer satisfaction. And the customer experience is viewed very much over the long term and over the life cycle with our customers. It measures every touch point that we have with our customer and relies heavily on the data and analytics that our customers provide and that we gather on behalf of our customers. And once we analyze that data and analytics, we are able to provide better service and better value and increase value in terms of what customers are looking to achieve from their business perspective with their technology investments. We see this as a really important investment and strategy for us going forward. Again, I'll cover that in some more detail in FY '22 in the strategy. And we were also recognized pleasingly with Cisco as a global leader in customer experience. That's particularly pleasing because Cisco themselves are actually seen as a global leader in the IT industry for customer experience. So suffice to say, we believe we're on the right track with some of those operational highlights. From FY '21 financial performance, I'm now going to hand over to Brem Hill, our CFO. Brem, over to you.

Thank you, Laurence, and good morning, everyone. I've put together 9 slides that cover our financial performance in more detail and which, I hope, will give you a better understanding of Data#3's key financial drivers. So I'll start with Slide 14, which shows our sustained revenue growth that's equivalent to a compound annual growth rate of just over 14% over the past 6 years. The revenue mix has changed over this period, and I'll expand a bit more on the mix in the next slide, but we're particularly pleased with the very strong growth in our public cloud-based business as shown on the chart on the right-hand side of the slide. Public cloud revenues increased by 36% to $791.6 million in FY '21 and now comprises 40% of our total revenue. As mentioned by Laurence earlier, approximately 62% of our total revenue is recurring, and that's derived from term-based contracts with government or large corporate customers fulfilling essential IT requirements. Data#3 comprises a broad portfolio of IT businesses, and Slide 15 shows the revenue generated by the different functional areas and different business units within the group. The chart on the left splits total revenue into 3 broad functional areas, which is infrastructure, software and services. This chart clearly shows the change in sales mix over the time with strongest growth in software, which is where most of our public cloud revenue is recognized. The table on the right of the slide gives a breakdown of revenues by individual business unit and the change as compared to FY '20. And each business unit, except People Solutions, grew revenue and increased market share in FY '21. It is important to note, however, that there are significant interdependencies between these different business areas, as our solutions typically comprise a combination of these elements. I thought it would be helpful to provide a revenue breakdown by geographic region as well. So the pie charts on Slide 16 show the shifts that have occurred from FY '20 to FY '21. In FY '21, revenue increased in all regions except for Queensland and Fiji. We've deliberately diversified our revenue base with a particular focus on growth in the ACT, New South Wales and Victorian regions, and it's pleasing to see the increase in their relative proportions of our total revenue. Next is the earnings and dividend trends, which is shown on Slide 17. We're pleased to report a solid profit result with steady growth compared to the particularly strong FY '20 performance, delivering another record profit and maintaining the growth trend. We think this is a commendable outcome considering the difficult environment and operating conditions in FY '21 compounded by lockdowns and delivery delays caused by the global chip shortages. As highlighted by Laurence previously, the basic earnings per share increased by 7.5% and total dividends increased by 7.9%, representing a payout ratio of 90.9%. The fully franked final dividend of $0.095 per share will be paid on 30 September with the 16th September record date. Our next slide shows the P&L statement. The numbers might be a bit hard to read, so I've summarized the key points on the slide. As mentioned previously, our total revenue increased by 20.3%, and this is almost entirely sales revenue, which is labeled revenue from customers -- from contracts with customers on the P&L statement. The balance is other revenue, which decreased from $2.1 million to $941,000, and that's mostly comprised of interest revenue. Looking at the expenses section of the P&L, the first 4 line items represent cost of sales. So if you deduct those items from the customer sales figure, you get the total gross profit, which increased by 3.6% from $188 million to $194.7 million. The total gross margin decreased from 11.6% to 10% due to changes in the revenue mix. The next item on the -- of expenses in the P&L is labeled internal employee and contractor costs, and that comprises our internal staff costs, which increased by 3.4% from $133.8 million to $138.3 million, and that increase is due entirely to headcount growth. The remaining items comprise other operating expenses, and the total of those items decreased by 8.1% from $22.2 million to $20.4 million in FY '21, with the largest savings being travel and rent. The return on equity was a very strong 45.1%, which is essentially the same as the previous year. So while revenue growth is obviously important, we also placed a lot of emphasis on gross profit. And the left-hand chart on Slide 19 shows the gross profit trend. As I mentioned before, total gross profit increased by 3.6% to $194.7 million, and the gross margin decreased due to changes in revenue mix. We've always managed our internal staff costs and operating costs very closely, and the chart on the right of the slide shows the trend for these internal costs and how they compare to the total gross profit. Our internal cost ratio, which is worked out by -- is a sum of staff and operating expenses expressed as a percentage of gross profit, that is one of our key internal measures for operating leverage. So this ratio decreased from 83% to 81.5% in FY '21, demonstrating further improvement in leverage, and that was mostly achieved in the Services business unit. Over the past 7 years, the internal cost ratio has decreased from 89% to 81.5%. The balance sheet on Slide 20 may also be a bit difficult to read, so I'll run through the key points. We have a very simple and strong balance sheet with no borrowings. The traditional fourth quarter revenue spike inflates the current trade receivables and current trade payable balances and typically generates large temporary cash surpluses at year-end at 30th of June. The cash balance decreased from $255 million to $204 million because the temporary cash surplus at June 30, 2020, was unusually inflated by sizable early customers receipts prior to year-end. A more representative view is the average daily cash balance, which was $126.6 million in FY '21 compared to $81.3 million in FY '20. The key trade receivables measure is average days sales outstanding and that was 27.7 days in FY '21, down from 29.7 days in FY '20. This is an excellent result and clearly demonstrates the effectiveness of our ongoing focus on collections and credit management. Our inventory holdings are also relatively low, and they decreased from $21.2 million to $13.9 million, and this is comprised of product held in our warehousing and configuration centers, pending delivery to customers for projects that were in progress at year-end. The fourth quarter revenue spike skews the working capital at year-end. So I thought the working capital analysis on Slide 29 would help explain the seasonal impact. The chart shows the changes in the working capital components reported at 30 June and 31 December over the last 4.5 years. The key point that I wanted to illustrate is that the underlying working capital position remains stable and positive despite the significant seasonal fluctuations between the reported period ends. We have a very efficient working capital model, and the working capital cycle is typically negative or very short. So our business is effectively self-funding. This is due to our low inventory levels, which are comprised of allocated stock, our relatively short collection cycle of around 28 days and favorable trade terms offered by our key suppliers, which range from 30 to 60 days. Lastly, Slide 22 shows the cash flow statement and summarizes the key points. The seasonality that I spoke about in the working capital analysis has a significant impact on the operating cash flows due to timing differences in the collections from customers and payments to suppliers around 30th of June each year. As I mentioned before, the June 30, 2020, cash balance was unusually inflated by sizable early collections, and the associated supplier payments occurred early in FY '21, and that has what caused the operating cash inflow to outflow swing from FY '20 to FY '21. Our cash conversion is typically strong, albeit that the operating cash flow can vary significantly purely due to seasonal swings. But if you take the longer-term view, say, a 7-year period from FY '15 to FY '21, the total free cash flow of that period was $221 million and the total net profit after tax was $121 million. So that gives a cash conversion of 182% for that period. Other points to note are the relatively low levels of capital expenditure and the typically high dividend with the historical payout ratio of approximately 90%. So at that point, I'll hand you back to Laurence to complete the presentation. And many thanks for your interest in Data#3 and for joining in this briefing.

Okay. Thanks very much, Brem. We can move on to strategy now. And then if we go on to Slide 24, at the very highest level, in terms of our strategy, our focus, unsurprisingly, is around our customers and, in particular, ensuring that our customers succeed in their business goals. And enable -- to enable us to do that, we invest our time and effort and our focus on the left-hand side of the diagram, around our people, our solutions and also making our organization more efficient. When we do that, we wrap that together with our solutions framework to deliver success for our customers. And when our customers are successful, we in turn then become successful as well with exceptional performance. And that's the theory at the highest level, and we've stuck with that for a little while. Going on to Slide 25, the highlights of our FY '22 strategy. Of course, across our portfolio, it's a relatively large portfolio as a group. I thought I'd pick out 3 of the highlights and give you an understanding of where some of our focus areas are but also, more importantly, where our investments are for FY '22. Firstly, around customer experience. And the customer experience is -- as I described before, is not just about customer satisfaction, it's a long-term view. And it's not transactional. Historically, we may well have provided a project and done a really good job at providing and delivering a project and then come back maybe 3 years later to do a similar exercise with an upgrade. Gone are those days. We now stay with our customer. We stick with our customer from start to finish. We measure every touch point along the way in terms of customer experience, and we measure the data in terms of what the technology solution is providing our customer along the way. We see it very much as a long-term and a life cycle approach. What I'm also pleased to say is that in FY '22, we'll be seeing joint investments with 2 of our major partners and -- with Cisco and with Microsoft going forward into our systems and our people in terms of investments to keep plowing down the path of improving the overall customer experience and to getting better outcomes for our customers over long periods of time. Secondly, from a Security perspective, we -- again, it's one of the unsung heroes within the Data#3 business. From an internal perspective, of course, like many organizations, we have a high priority of keeping our own business very safe as well. And so we do have a great team of people that are protecting our own business. From an external perspective, we see an increasing market opportunity. We've brought together elements of the Security business from an external focus and brought it under one singular executive leadership. And we're looking to combine the go-to-market and extend the solution offerings that we have with security across Business Aspect and Data#3. And lastly, on the accelerating services, we've completed the reinvention, if you like, of our Managed Services business to complement the -- in particular, the solutions that we are now bringing to market, and we see this as a natural extension of some of the project work that we -- that is taking place in the -- particularly in the multi-cloud environment. What we're also seeing and continuing to see is an increased profit turnaround in our consulting business. And of course, the vendor programs, which something that we pay particular attention to, being the leading partner with each of the larger vendors with Microsoft, Cisco, HP and Dell. Increasingly, the incentive programs are around providing better services and better outcomes for our customers as they adopt the technologies from each of these vendors. And the measurement of these services is increasingly important. Each one of these actually -- customer experience, security and accelerating services actually complement each other as well. So they are somewhat integrated. Moving on to the next slide. I'm just going to touch on winning new customers and what that actually means to us as well because winning new customers is obviously important as we continue to grow organically in a market. And Slide 27 is one which just shows -- this is an average customer revenue by years on all of our active customers. So it does average out. And we tend to start with a relatively small spend and then increase the -- what we are providing, the solutions that we are providing across our portfolio, and extend that out over a longer period of time. The analytics that we're getting now from our investments in the customer experience platforms and systems that we've got in place are now allowing us to see a much better view of the -- what's important to customers and where some of the returns are back to us as a business as well. So this slide is -- continues to be an ongoing one for us and an ongoing focus for us. Moving on to Slide 28. I'll now work on the summary and outlook for FY '22. Of course, if -- a presentation wouldn't be complete without talking about the pandemic. And we're still -- as everyone is well aware, with most of the country under lockdown at the moment, pandemic is still very much with us. Likewise, supply chain constraints are still very much with us and will be in FY '22. What I can say is that we have demonstrated in FY '21 our ability to overcome a range of the challenges and by working very closely with our customers and with our vendors. In addition to that, we've also got the benefit of a fast start for FY '22, which is a $3 million backlog, which we would have normally recognized without some of the supply chain constraints for some parts of our products, in particular, the end user computing. So we've had -- we are realizing and currently realizing that backlog as we speak in terms of our start to FY '22. The outlook in the market and the IT market contrasts quite sharply with the FY '21. Gartner predicts that the Australian IT market will grow by 4%. Now that growth rate is far larger than we've ever seen before. And it now pushes that -- predict the IT market in which we operate to over $100 billion. Our positioning in this market, we believe, is actually -- has never been better to capitalize on these opportunities. As I mentioned before, digital transformation is the singular biggest driver and at the highest level. And we believe that we are exceptionally well positioned to capitalize on this growing market. Last but not least is around the accelerating services, and Services, as we've described before, complement a range of our other strategies, be it in security or in the multi-cloud environment. In addition to that, as Brem stated, we are seeing continued growth and continued growth in margins with our Services business, and we're looking for increased growth around our Services business to improve our overall gross margins. Moving on to Slide 30, before we wrap up the Q&A. This is a quote from the market release, and needless to say, we are confident for FY '22, particularly with the fast start. However, at this stage, we really can't be more specific to provide any further commentary or guidance. So at that note, in fact, just before we hand over to Q&A, I'll just point out that there is something else included in this release, which is in the appendix and it's a video, which, hopefully, you'll enjoy or, hopefully, you'll find interesting. It's a video that includes our new tag line for FY '22, and that's delivering the digital future. So hopefully, you enjoy that. We won't play it in this presentation, and we'll go straight to Q&A. Thank you.

[Operator Instructions] Your first question comes from Nick Harris from Morgans.

Laurence and Brem, great cash conversion, again. Brem, I know this is a kind of a long-term conversation we've had, but if we look at your cash balance and, just for argument sake, use that $126 million of average cash balance and then kind of overlay the concepts you talked about with positive working capital, do you have a view on how much of that is, I guess, surplus that you -- and part 2 to that, would you ever consider capital management for your buybacks, special dividends or even reassessing M&A or investing more heavily in [indiscernible] cybersecurity division or other divisions?

Yes. Thanks, Nick. Look, the real answer is the, call it, surplus cash or residual cash does fluctuate throughout the year because of the seasonality, and it even fluctuates within a month. So if I'd looked at what really is free cash, it's probably in the region of $15 million up to $20 million. So it's not a huge amount. And yes, we are reinvesting continually in our business, expanding things like the security practice. So we -- if an acquisition -- suitable acquisition came along, we do have some capacity to fund that. But as Laurence mentioned, really, it's -- predominantly, the strategy is organic growth and investing back in the business.

Yes. And Nick, just to add to that, it's not exclusively organic. We're consistently looking at the market and talking with potential opportunities as well and evaluating them. However, we've got pretty strict criteria in terms of acquisitions. And to date or for the last little while, we haven't seen something which would not only complement our solution offerings but provide the level of return on investment that we would expect.

Obviously, you've got a fantastic, if not one of the best, ROEs out there. So it does make sense to keep investing in your business. I was just trying to understand your mindset. Can I ask 2 other questions, please?

Sure.

Yes. Laurence, you talked about, I guess, the manufacturing chip shortage. Just trying to get in my head a bit of an idea of how you're seeing it. Obviously, it sort of dragged on last year or the time to deliver kind of got pushed out. I'm just wondering, do you think it will be sort of broadly stable, like, the drag-out has washed through now and, therefore, it's not going to stretch again? Or is it possible that things actually take even longer in FY '22 to get delivered than they did in FY '21?

Yes. It's a good question. The answer is, it actually depends on the product sets. We're experiencing -- for the majority of -- actually, let me step back. It doesn't affect the large parts of our business, which is software and our Services business. So that's -- the supply chain is almost irrelevant for the majority of our business. So on the infrastructure business, we're actually providing physical hardware to our customers as part of an overall solution. The end-user computing, in particular, PCs is the one which is coming under pressure in terms of delivery time frames pushing out. And we see that and the prediction is -- from a global perspective and from our vendors is that we see that really remaining with us in FY '22. So for the foreseeable future. And what we are doing is managing our way around that and our relationships with the vendors and with our customers. We are finding creative ways of overcoming the shortage. And what we also are seeing is that the shortage, as you would expect in any market, where there is a shortage, it actually is bringing forward buying as well. So customers are looking to secure -- looking to secure particularly end-user computing over others.

And just my last question was just on the security side. Obviously, it's a massive priority for most people. Just wondering if you could elaborate a little bit on the security side of your business. Can you give us some real-world examples of what you do? You -- obviously, you're selling firewalls on behalf of Cisco, but you're also running security operation centers that are monitoring and responding. And maybe talk a little bit about who your competitors are in that space.

Sure. Probably didn't want to go into a huge amount of detail, but we do a wide range, as I described on -- which slide was it? On slide -- going back Slide 8, we've got a range of different offerings there under the overall solution category. And what we've been doing for many years is providing a good deal of consulting advice at a business level around governance because a lot of cybersecurity issues isn't so much about solving the technology problem. The technology problem in a lot of respects is some of the easy components. It's actually how -- it's the people and processes and the governance within an organization that is probably the one that requires a good deal of attention. And that's where our Business Aspect team combined with the Data#3 team provide a more complete solution for our customers rather than just providing a point technology solution. So it could be just in firewalls. It could just be in the identity or access management. But increasingly, our business is providing an overall advice, guidance and implementation and support of the security. So it's widening and continues to widen. One thing that I will point out, Nick, though, in -- particularly in the Managed Services and Support services business, we're not in the business of taking over someone's customers' cybersecurity risk. So that's one thing that we will not be doing. We'll be helping them, but the risk will not be passing.

Thanks very much, Laurence. And maybe, I guess, [ it's more ] consulting rather than running operational centers. I understand you don't take customer kind of risk. But yes, maybe if you could just finish with some comps and then I'll start asking questions.

Sorry, Nick, maybe I should what?

Sorry, I was just saying, could you just finish with a couple of the competitors just to give us an idea of who your cybersecurity business kind of competes against, and then I'll stop asking.

Sorry, the competitors, we didn't answer that question. There are many -- the competitors are so fragmented. So they range from the large multinational globals, which are competitors in many respects. So -- and then it goes all the way down to the boutique, highly specialized, security-cleared organizations of maybe 5 or 6 people, working in Canberra operations. So it's -- it varies, and the industry is very fragmented.

The next question is from Frank Villante from Celeste Funds Management.

Could you give me some help in trying to understand what your gross profit margin would have been in FY '21 if $3 million of contribution hadn't rolled into FY '22?

Brem, would you like to handle that? Frank, thanks for that question.

Look, Frank, I don't have the actual numbers there, but it would have actually boosted the gross profit, but in margin terms, would not have made a significant difference because, typically, those devices are at relatively low margin in terms of percentage contribution. So yes -- but definitely, we would have seen our gross -- the reported gross profit figure increase quite materially, had we been able to book those transactions? The $3 million that we call out there, that's the pretax profit impact estimate of that delay.