IT services play Data#3 says full-year profit is expected to fall 9 per cent despite record numbers in the second half of 2018.

The shares were down 4 per cent at $1.61 at in early Wednesday trade.

The cloud computing provider (ASX:DTL) offers project management, security and IT services management and has offices across Australia.

Data#3 is expecting $20.4 million profit before tax compared to last year’s $22.4 million, mnagment told investors on Wednesday morning.

The result includes a record net profit before tax of $16.4 million for the second half of 2018.

However, these numbers should shake out to a net profit after tax of around $14 million, down 9 per cent on 2017.

The result will depend on the final 2018 numbers from wifi and analytics business Discovery Technology, in which Data#3 owns a 77 per cent stake.

Discovery would post a drop of $1.4 million in profit-befre-tax afte the business was hit by a customer exiting a five-year contract. That dropped contract is the subject of legal proceedings, the company said.

In 2017, Data#3 posted a net profit after tax of $15.3 million.

In February, the company told investors it had seen a challenging start to the year, caused largely by customer delays and supply chain slowdowns seen in November and December 2017.

The profit after tax for the first half came in at $2.7 million. Data#3 paid a 1.6c dividend in the first half, compared with 3.35c at the halfway point of 2017.

Data#3 (ASX:DTL) share price, past 12 months.

The share price is down around 7 per cent over the past 12 months.

Management told investors this morning the numbers “represent solid performance in the core Data#3 business” after a challenging first six months.

The company’s audited financials will be released to market on August 22.

Data#3 isn’t the only ASX company to downgrade profit expectations as we head into reporting season. ASX-listed New Zealand fuel play Z Energy (ASX:ZEL) also warned investors this morning it was expecting full year earnings guidance for the 2019 financial year to end up between $420 million and $450 million for the year, down from a predicted $450 to $485 million.

Meanwhile, toilet paper maker Asaleo (ASX:AHY)’s profit downgrade yesterday crumpled its share price by more than one third.