Melbourne IT warns of high AUD impact

Melbourne IT (ASX: MLB) managing director, Theo Hnarakis, has warned that the rising Australian dollar and the 20 June ICANN decision on domain liberalisation may affect the hosting company’s full year results.

Speaking at its annual general meeting, Hnarakis said the high Australian dollar in particular was expected to affect the enterprise services division would contribute to a softer first half compared to 2010.

However, the second half was expected to see stronger growth based on top level domain liberalisation to move from a handful of domains such as .mobi and .xxx style domains to more than 1000 and including domains such as .food, .sydney and .blog.

The year was also expected to see a continuation of investment in the company’s transformation project — some $20 million over three years — aimed at delivering future cost savings and revenue generation opportunities.

The company would also invest in skilling up its staff to grow its capability to source revenues from consulting work as well as spend up in innovation and service development.

The company’s 2010 results include a drop in revenues to $189.9m, down five per cent on 2009’s revenue of $200.1m. Net profits after tax were $16.1m, down four per cent on 2009’s result of $16.8m.

According to the company, US and EU sales for its Digital Brand Services business were slower than expected as markets recovered from the impact of the Global Financial Crisis.

Revenues for the business were $51.1 million, down nine per cent over 2009’s revenue of $56m. New customers signed up during the year include Arnott’s. Kimberley-Clark, Merz Pharma, Betfair Australia and Transurban Group.

In contrast, Enterprise Services revenue grew 23 per cent year on year to $31.6 million, while EBIT contribution grew 59 per cent to $3.5m.

The company attributed the results to service delivery improvements and investment in its hosting platform, investment in its partner channel and 139 new customer contract signings including Victorian Electoral Commission, Thomson Reuters and BP Australia.

The company’s SMB business reported revenue of $42.7m, down from $42.8m in 2009 while its Global Partner Business recorded revenue of $55.8m down from $64.9m in 2009.

As reported by Computerworld Australia Reckon Limited (ASX:RKN) paid $7.3 million to acquire a 4.97 per cent stake in Melbourne IT earlier this month which would allow it to establish a commercial partnership with the company.

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