Hostworks chalks up record profits

Hostworks chalks up record profits

Application management provider attributes strong result to its annuity business and long-term customer wins

Hostworks has turned around its earnings and chalk up a record $2.3 million net profit after tax in the year to June 30. The figure was based on full-year revenues of $23 million, up from $20.5 million in 2006.

The company recorded just $200,000 in net profits last year, blaming one-off investments into software-as-a-service and ad-serving infrastructure for the lacklustre result. Managing director, Marty Gauvin, attributed this year's improved scoreboard to demand for its online media and business application management services as well as the rising popularity of strategic sourcing.

"We were keen after having several distractions in 2006 to get back to our business," he said. "That has meant signing on more big customers with specific critical application management needs and looking less at diversification in the market has put us in good stead.

"From a competitive perspective, we have a bit of clear air around us. This has meant we have had a good sales year and delivery in terms of getting customers in, and activated."

Gauvin said it had also reached a level of scale where the cost of adding on new customers was negligible. Its ability to retain price points had also contributed to the profit line.

A highlight was the company's contracted annuity revenue, which increased by 35 per cent to $40.5 million. New contracts were valued at $28.6 million, an increase of 34 per cent year-on-year. New customers include SBS, Seek, Ticketek and Wotif. Hostworks also renewed agreements with several key long-term customers such as Southern Cross View and ninemsn.

Gauvin said this year was the first in a three-year game plan to build up business. He forecast a strong 2008 and even better returns in 2009.

"A lot of that is underpinned by the good relationships we have with existing customers," he said. About half of Hostworks' annual business was derived from existing relationships, Gauvin said. "We're not trying to quickly change the nature of our business," he said. "We have something valuable that we want to continue to grow and generate cash and profits."

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