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Melbourne IT warns of slowing economic growth

Strong Australian dollar causes some difficulties for its reseller division, but company reports healthy half-yearly results

Slowing economic growth and a tight skills market will make it a challenging year for the IT industry, according to Melbourne IT’s chief.

The ASX-listed Internet services provider (ASX:MLB) has reported a strong half year to 30 June, with 12 per cent growth in revenue to $86.7 million. It also saw a 28 per cent increase in earnings before tax to $11.6 million year-on-year, while net profit increased by 20 per cent to $7.8 millionm.

CEO and managing director, Theo Hnarakis, listed a number of challenges for Melbourne IT moving forward.

“The industry-wide difficulties in retaining IT talent, evidence of a slowdown in the US and European markets will effect our resellers, and generally managing growth around the world are all current issues,” he said.

Additionally, he identified the strength of the Australian dollar against the US greenback as a cause for the lower revenue result delivered by Melbourne IT’s reseller division. Its year-on-year revenues were down from $30.8 million to $30.2 million in the six months to June 30.

Melbourne IT's best performances were across its Business and Consumer, Digital Brand Services and Corporate and Government divisions. The newly-acquired VeriSign DBMS business also contributed $5.9m in revenue as well as pre-tax earnings of $400,000 and operating cash of $900,000.

Hnarakis said the company’s joint venture with Fairfax Digital, Advantate, had cost both partners $100,000 and the overall loss would be $1 million between the companies running into the second year.

Hnarakis said the rapid growth in domain name availability will be a big opportunity for Melbourne IT in the coming months.

“Over the next 2-5 years another 50 domain name extensions will be released. We’re well positioned to take advantage of this,” he said.

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More about: Advantate, Melbourne IT, VeriSign
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