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Tuesday, 25 August 2009 08:51

Melb IT first half struggles, but bullish on full-year

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Domain name, rights management and IT services conglomerate Melbourne IT has posted disappointing first half-results against the back drop of global financial difficulties, but is forecasting stronger second half returns.

The company said issues related to the GFC, as well as a number of first half outages in its WebCentral operation had resulted in higher than usual customer churn among the small and medium-sized businesses, which had adversely impacted revenue and new customer acquisitions.

Melbourne IT chief executive officer Theo Hnarakis says the company remained cautiously upbeat about medium and longer term prospects, especially as its 2008 acquisition of the Verisign Digital Brand Management Service business and its investment in customer relationship management system improvements would soon deliver measurable returns.

The company had reported a 21 per cent increase in revenue to $104.4 million for the six months to the end of June, but a decrease in earnings before interest and tax of $9.3 million – a decline of 20 per cent over the year ago period.

Net profit was down 20 per cent to $6.3 million.

“Although our first half has been a tough trading period with customers postponing spending, downsizing domain portfolios and further pricing pressure on domains and low end hosting packages, we believe that we have now weathered the worst of it and there are signs of some markets beginning to turn upwards again,” Hnarakis said.

“The global trading environment has presented our company with challenges in local and international markets. Notwithstanding these challenges, we have achieved another profitable half for our shareholders and are confident that we can outperform this result in the second half of 2009,” he said.

Hnarakis said the company expected a much stronger performance from its newly acquired DBMS business. With the integration of the former Verisign property largely complete, Melbourne IT expected that more company resources could now be devoted to sales and customer acquisition and revenue generation.

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With the worst of the global recession behind it, Hnarakis also said there opportunities for up-selling value-added services to the global database improved. The DBMS business was a strong performer regardless, with Melbourne IT adding 75 new clients during the half, including global brands like Twitter, Coca-Cola Amatil and Societe Generale.

Favourable exchange rate changes had also assisted the retirement of debt related to the May 2008 acquisition of the DBMS business.

The company’s business and consumer division had been impacted by reduced margins, as well as the increased churn that resulted from WebCentral outages. The was exacerbated by Melbourne IT having to devote significant sales resources to customer retention as a result of the outages rather that customer acquisition – an issue Hnarakis says is now largely behind it.

Hnarakis said the company’s outlook is relatively bright and the company is well positioned to take advantage of a return to market growth. He said the company would focus on organic growth, and that there were no mergers or acquisitions on the horizon.

“Although we are operating in challenging times, we are firmly focused on the future and preparing Melbourne IT for its next phase of growth once market conditions stabilise,” he said.

“Melbourne IT has a history of weathering the business cycles and we will continue to leverage our size, our scale, our expertise in the internet and our brand to drive profitable growth.”

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