Fluctuating dollar negatively impacts Melbourne IT results

Strong Australian dollar wipes off an estimated $2.5 million in pre-tax earnings

Melbourne IT indicated the fluctuating Australian dollar negatively impacted earnings before tax wiping off about $2.5 million in its full year results ending December 31.

Overall, earnings before tax went down 9 per cent to $21.2 million. Net profit also took a 4 per cent dip to $16.1 million compared to $16.8 million in the previous corresponding period.

“Given this adverse currency impact and the operational expenses [OPEX] impact of the transformation investment of $1.7 million, Melbourne IT’s underlying profit would have been up approximately 7 per cent on a like-for-like basis,” Melbourne IT CEO and managing director, Theo Hnarakis, said in a statement to the ASX.

“Foreign exchange headwinds and a slower sales recovery in the US and Europe than we predicted, have delivered a lower revenue and EBIT result for 2010, however the final result is in line with the updated guidance issued in October last year.

“Our ability to maintain net profit above the $16 million level is pleasing given what was a challenging year.”

Revenue also decreased 5 per cent to $189.9 million. The company indicated 61 per cent of its revenue derived from IT services rather than domain names. Its enterprise services business signed 139 new customer contracts in 2010 including BP Australia, Victorian Electoral Commission and Urban Pacific.

Melbourne IT expects this unit will continue to carry its 2010 momentum into 2011, especially under the leadership of recently appointed executive general manager, Peter Wright.

“Market conditions varied considerably across our businesses in 2010,” Hnarakis said. “In Australia, there was a strong demand for outsourced IT services among enterprises and government while at the other end of the scale; there was clear evidence that small businesses were very price conscious, lending weight to continued commoditisation of base services such as domain names and email services.”

Hnarakis said 2010 was the first year of its transformation project, and it was on track and on budget with the first stage, which is set to go live in New Zealand in the first quarter this year. The Australian operation is expected to go live at the end of the fourth quarter.

He expected cost and revenue benefits to be modest in 2011.

“However, we expect to see a significant return accruing to our company from 2012, once the Australia and New Zealand operations are fully integrated,” he said.

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Tags: dollar fluctuations, Melbourne IT, Victorian electoral commission, foreign exchange rates, BP Australia, Urban Pacific
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