DATA#3 LIMITED — Interim / Quarterly Report 2003

Mar 17, 2003

Operating performance in this helf was the strongest ever first half result. We expect the second half to be at least as strong, and the payment of an interim dividend is indicative of this."

The Data'd Team The power throughout capture some of the Ceteral lsan Ara

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This business performance is achieved through Data#3's expertise as an IT solutions. company and our focus on applying that expertise to provide value for our customers from their B investment with:

• . Business solutions delivered through application software
• . The design, implementation and management of reliable technology infrasteacture
• . Cost effective procurement of IT hardware and software products, and
• · Sourcing the right IT people.

Applying this expertise in its broadest sense delivers a total solution to our customers' business and technology needs.

Overall, revenues for the first half of the current financial year totalled \$84.4 million compared to \$83.5 million in the corresponding previous half. Product revenue decreased to \$67.3 million from \$70.8 million and services revenue increased from \$12.55 million to \$16.95 million.

Our plan for the carrent financial year acknowledged this probable decrease in product sales, the need for growth in services revenues, and strengthening in earnings across the various businesses. Trading for the six months to 31 December validated these elements of the plan and continued the improvement experienced in the last financial year.

Data*3's reported profit for the first half was impacted by the loss associated with the resolution of Powerlan (Qid) Pty Ltd's (Powerlan Qid) receivership and administration. The core operating £BITDA result for the half of \$3.04 million prior to the Powerlan Qld loss compares with \$2.46 million in the corresponding period. of the previous year and is an excellent outcome given the potential distraction of the Powerlan Qld loss and significant shifts in profit contribution over the previous corresponding period.

The agreement struck with the receivers and the administrators to Powerlan Old has been applied mindful of the need to provide shareholders with the best possible outcome in this half, and a future free of its legacy, in this report we have set out full details and implications of the resolution, having taken its financial impact in full in this half and therefore benefiting from any additional business that flows from the contracts now held by Data#3 in the second half and beyond. This report also identifies Data *3's first half financial results prior to accounting for the loss related to Powerlan Qld so that shareholders have a clear picture of our saderlying performance.

Gross margins varied by month dependent on revenue mix, but overall showed a slightly positive trend over the half year.

The cash impact of funding the loss which resulted from Powerian Old reduced cash inflows. However, strong cash management saw aged debtors balances and days sales outstanding reach our full year targets by 31 December.

The estimated net profit after tax prior to the loss associated with Powerlan Qid was \$3.614 million as compared to a profit of \$1.336 million in the corresponding period of the previous year. The net profit after tax after accounting for that loss was \$66,000.

The Application Solutions business recorded 10% revenue growth overall and an 87% improvement in operating contribution over the previous corresponding period. Growth in services revenue over the previous corresponding period was 55% due to expansion of our Navision business in Victoria with the acquisition from Stockford Limited in July and growth in SAP services. However license sales reduced by 44% and while the first half was an improvement on the previous corresponding period, there is still a way to go to meet our performance objectives.

The major share of revenue remained within Technology Solutions and its Managed Services business at \$64.1 million, up from \$50.2 million in the corresponding previous period.

Product and services revenue was \$54.7 and \$9.4 million respectively against \$41.2 million and \$9.0 million previously. The increase in services revenue was due mainly to significant growth in our Central Queensiand operation where we have around 50 staff, and in Brisbane, which offset reductions in NSW and Victoria.

in terms of divisional performance, the Queensland business and the specialist national divisions of software licensing and enterprise infrastructure performed well ahead of targets, developing several new business relationships and leveraging the relationships with existing customers.

Performance of the New South Wales and Victorian businesses improved significantly over the previous corresponding period contributing to the 'balanced' earnings' objective and there remains considerable opportunity for further improvement. For Technology Solutions overall, with the increase in services revenue and continuing focus on expenses, performance was substantially ahead of that in the corresponding period of the previous year.

Procurement Solutions contributed \$11.3 million of product revenue in the current half compared to \$27 million in the corresponding previous half. Two factors contributed to this significant drop - reduced purchasing by one major customer primarily due to uncertainty in the early stages of the merger of Compagand Hewlett Packard, and the inability to operate the Queensland Desktop Services joint venture for almost iffree months given the Powerlan Old receivership and administration. However, the business maintains a proactive 'new business' focus. through a combination of aggressive pricing and continued investment in and reliout of our internet based customer procarement system, CustomerNet, which is now deployed in over 82 proarisations. Key performance indicators for the logistics and warehousing function continued to improve with decreasing cost per transaction and castomer order texn-around time over the corresponding previous period.

Even diven competitive pricing and a continuing lack of opportunity in the labour market, revenue from the Recruitment Solutions basiness increased from \$2.0 million in the corresponding previous period to \$2.9 million due to consistent management focus, considerable improvement in New South Wales and an increase in the number of permanent placements over the previous corresponding period. This resulted in an operating profit and also contributed to the objective of strengtheeing earniegs across all basieess areas.

Excluding legal expenses associated with the Powerian Qid receivership and administration, the Corporate Services functions of board, finance and accounting, hizman resources, intereal systems and corporate marketing reduced costs by 6% from that in the previous corresponding period. A significant proportion came from a reduction in borrowing costs.

Impact of Powerlan Old's receivership and administration

The lane 2002 Annual Report noted that the administration and receivership of Powerfan Old, Data⁸3's koint versture partner in Oueensland Desktop Services (QDS) and Queenstand Software Services (QSS), was an event occurring after the reporting date and that it would effect results in the first half of the current year.

The financial effect of this event includes a loss of \$2.141 million, which is reflected in this first half result. In determining this amount, a net receivable of \$3 million has been included in the financial results for the half year. This is considered to be a conservative estimate of the recovery based on preliminary estimates provided by the Powerlan Qid administrators of a total possible recovery. ranging up to \$2 million. Any additional fonds that may be recovered from the administration process in excess of the current \$1 million net receivable will provide further mitigation against the current period loss if they are received.

While further costs will be incurred in the final dissolution of the joint venture partoerships they are not expected to be material. In addition Data*3's results in the second half will reflect the entire contribution from the contracts previously held by the joint venture partnerships.

Consulated statement of increase and the means to the information of the company (1) 2

Sales revenue

• Products

• Services

Other revenue

Intai revenue

EBITDA | Earnings before interest, tax, depreciation and amortisation}

Profit from ordinary activities before income tax expense

Net profit after income tax

Earnings per share

Dividends per share

Consolidated Stationsport

Total Current Assets	31,355	30,214
Total Non-Current Assets	8,300	8,246
Total Assets	39.655	38,460
Total Current Habilities	29,843	28,343
Total Non-Current Habilities	1,879	2,250
Total Liabilities	31,722	30,593
Net Assets	7,933	7,867
Total Equity	7,933	7867

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Mink came industry statistic indicate the Australian market for it improved starcinally in the second quarter the consensus & that trading conditions will remain difficult throughout 2005 with a resovery occurring in the 2004 financial Cicario anto in warb evant that afternormal proverty however ws Data? 3 has recorded its strongest ever January and the outkook for the second half peals to the value design and constructed and a structure of state of the state of the ity magnetizer and will nearly energy referency to desticate the flature.

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A RESERVED A CONTRACTO DE LA CARDINALE DE LA CARDINALE DE tems and conditions of our reactorship with SAP, perticularly as it releves to selec margin. We will look to optimise our position with a focus to increase contribution from CAP to frequenting.

with the exqualition of Navision by Microsoft, there could be a period of market uncorporu in relation to product dratedy that may affect oditivans futases påles Our intention is to mitgate this by walking with our Couldment is giften zakkonal kesetti itan iren erodat kapleristratiko anti itu. Readas reada

We expect Application Solutions performance in the second half to improve un that in the the protative traduction the increase in profitability from Savings tova velm

for Technology Solutions and Managed Service, the Key Sacces, diviors are a vastrustavis števiaas juudametris mitteliaas vuonna mittelining and transity businesses and the Dunaristand Postern with be probled by the additional pontribution from the contract orationaly held by the QCS joint venture We also expect continued improvement in relative performance^ntin New Bouti .
Wales and Victoria and Jaftel Rwssheht in our ACT business in the first half mparatonsiya nda sashi

Competitive pressures will coolinue to effect margins even given that activity levels. are high and it is reasonable to expect some growth in the number of integration. projects undertaken by our customers and in outsourcing.

We see our customers focusing on projects concerning security, server consolidation, storage management and business continuity, and we are aligning our skills and sales strategy accordingly.

We expanded our software licensing team in the first half orimarily to capitalise on immediate opportunities created by the continued consolidation of our competitors and to align with Microsoft's growth objectives within the small to medium basiness sector. In the second half we expect a very strong performance given the additional contribution from the contract previously held by the QSS joint venture, and we will continue to re-engineer our sales strategy so that we are stronoly placed for the 2004 financial year.

For the balance of the current financial year, we expect to see continued strong performance from Technology Solutions. We are planning to align all basiness elements in this division with the opportunities that we expect to emerge in the next financial year.

For Procurement Solutions, we expect financial performance in the second half to be similar to that in the first. The key success factors for the future are enhancement of our direct coverage sales model, securing an increasing number of preferred supplier agreements with our castomers, and continued adoption of CustomerNet broadly across our customer base to reduce costs and improve efficiency.

In Recruitment Solutions we see opportunities to improve performance in the second half and beyond through figther organic growth and a continuing shift in the mix between contracting and permanent placements. We will also look at opportunities for expansion on the back of our Technology and Application Solutions businesses.

Data's has proven to us that they understand our business needs and have heen ahle to croside professional expertise in delivering real business solutions in sausty our IT requirements."

Craig Mhaley, Manager - Information technology Thue of Yana Banner

'Data'3 has worked with BCC to lower the cost of deploying ane (f equipment whilet imoroving the quality of delivery. We selected Dala'3 as a key supplier and they have been successful in helping us both reduce our costs and improve the quality of our services. They have proven to bo very flexible by partnering with us to deliver efficient and seamless if services across Council.

Jude Munic, Chief Executive Otheer Siraas (A) Comer

"After a thorough evaluation process, we ia manage au selected Bata A implementation of a mySAP Retail enterprise solution end to and. Data 3 was able to assemble a fotal solution including svecioiisi cansuitonis inirasiracture, and assistance with complementary applications. Partnering with Data'3 has added significant value in this industryleading project.

Peter Birtles, Chief Financial Officer Super Cheap Auto Phy Ltd

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