Melbourne IT ponders selling business units

The company is in discussions with a number of parties, particularly large offshore companies

ASX-listed Melbourne IT (ASX:MLB) is looking into possibly selling off some of its business units after experiencing tough market conditions.

The company’s Board has undertaken a review of its corporate structure and the portfolio of businesses, and will be conducting discussions with a number of parties, particularly large offshore companies, Melbourne IT said in a statement to the ASX.

“Our belief is that by undertaking a formal strategic review, shareholders will benefit from unlocking the intrinsic value of our businesses, customers will benefit from more focused execution and operations, and staff will benefit from increased investment specific to the needs of each business division and its customers,” the company said.

Lazard and King & Wood Mallesons have been appointed as financial and legal advisers.

In a statement the company said it was experiencing disappointing trading results and a number of project delays that were expected to come through in the second half of 2012, won’t materialise until next year.

It stated it was experiencing aggressive competitor activity on the pricing front within its SMB eBusiness solutions segment and its For The Record (FTR) unit was impacted by ‘significant reductions and holds’ in US Federal and State government spending. FTR’s profitability depends on a small number of large transactions each year.

Queensland government budget cuts and tight business spending was impacting its hosting unit, but its expecting the Enterprise Services division to perform better than last year.

The Digital Brand Services division (DBS) is performing strongly, but delays in ICANN’s rollout of its new gTLD program and correlating changes to the new naming system until 2013 iimpacted on its growth expectations in 2012, to modest levels.

Due to this, Melbourne IT’s earnings before tax for 2012 will be lower than 2011 by about 10 per cent, mainly due to the FTR division’s volatility.

Consolidated net profit will likely be in line with last year.

Despite the challenges, Melbourne IT expects the recent changes in management within its business divisions along with a sustainable lower cost base, ICANN’s new gTLD program, will contribute to revenue growth and profit from 2013, particularly within DBS.

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