Westcon reports revenue growth amidst profit decline in FY2025

Westcon has reported its financial results for the year ended 28 February 2025, revealing a year of revenue expansion accompanied by a notable decline in net profit.

The company, a distributor of networking, security and storage products, posted increased sales across multiple channels while contending with elevated operational and tax expenses that weighed on profitability.

Total revenue for the year rose to NZD $818.7 million, up from NZD $805.2 million in the previous financial year.

The increase was largely driven by higher sales of goods, which contributed NZD $743.5 million, representing a 6.2% increase year-on-year. This growth came despite a decrease in revenue from software and maintenance services, which dropped from NZD $32.9 million to $NZD 25.7 million.

Other income saw a slight dip from NZD $1.2 million in FY2024 to NZD $847,682 in FY2025, which contributed marginally to the company's overall income picture.

Despite the revenue uplift, profit before income tax fell sharply to NZD $6.6 million, down from NZD $8.9 million the year prior.

The net profit for the year was NZD $4.8 million, compared to NZD $6.3 million in FY2024 - a drop of approximately 24%.

Expenditure and Operational Costs
Cost of goods sold increased from NZD $768.1 million to NZD $779.1 million, in line with the revenue uptick.

However, the company's gross margin remained under pressure, with higher distribution and administrative expenses recorded at NZD $21.2 million and NZD $8.6 million respectively. Notably, employee benefits expense rose modestly to NZD $7.5 million.

Depreciation and amortisation costs grew to NZD $1.9 million from NZD $1.7 million in the prior year, reflecting investments in new equipment and lease assets. Finance expenses also increased slightly to NZD $1.2 million.

Financial Position
As at 28 February 2025, the company's total assets stood at NZD $140.4 million, up from NZD $127.6 million in 2024.

This growth was underpinned by a rise in trade receivables and inventories, which may indicate stronger demand or extended credit terms.

Total liabilities increased from NZD $103.1 million to NZD $116.1 million, driven mainly by an increase in lease liabilities and related party payables.

The equity position improved slightly, with retained earnings closing at NZD $30.5 million, compared to NZD $27 million the year before.

Cash and cash equivalents saw a substantial rise to NZD $12.2 million, compared with NZD $5.6 million at the end of FY2024. Net cash from operating activities reached NZD $26.3 million, reflecting improved working capital management, despite pressures on profitability.

Dividends and Related Party Transactions
The company declared dividends of NZD $3 million, unchanged from the prior year.

Westcon NZ maintains several intercompany transactions with related entities, notably with Westcon Group Pty Ltd and Datatec Financial Services NZ Ltd.

Purchases of goods from the parent entity totalled NZD $209.8 million, consistent with historical figures.

Outlook
While revenue growth remains a positive indicator of market demand, the decline in net profit signals potential cost pressures or margin challenges.

The company has managed its cash flows effectively and improved its liquidity position, but it may need to address rising costs and operational inefficiencies to maintain profitability going forward.

There were no subsequent events disclosed that materially affected the financial position as of the reporting date.