Annuity generates profit for Hostworks

Annuity generates profit for Hostworks


Hostworks has pointed to an annuity-based business model as the source of newly found profitability.

The ASX-listed organisation has achieved a maiden full-year profit of $510,000 after tax and sales revenues of $7.94 million during the first half of the year, representing growth of 16 per cent year-on-year.

MAnaging director, Marty Gauvin, said annuities were the foundation for a gain against competitors in the managed services space.

"Most people in IT services of any form would have up to 30 per cent of revenues through annuity but we have something like 94 per cent," he said.

Several new contract wins with companies such as Codan and inthemix also aided its move into profitability, Gauvin said.

"Those sorts of wins are contributing to our revenue result quite effectively," he said. "Now that we are paying for our core infrastructure, we can drive through to the bottom line."

In pursuing further growth opportunities, Hostworks would look toward a two-phased strategy combining new services such as managed thin client desktops and SAP management with a growing network of partners, Gauvin said.

"We recognised that certain services we provided for one or more customers were desirable to the rest of the market, so we worked on them to make them replicable," he said. "The second phase is to find channels to sell those services and grow our business."

Hostworks expected to see a noticeable impact from the new services, Gauvin said, with more than 10 per cent of revenues expected to be derived from them by next financial year.

As with many companies in the services sector, acquisition would also be considered as a means of growth, he said.

"We would be keen to look toward the acquisitions of larger companies with revenues more than $3 million," Gauvin said. "The sector is starting to warm up and organisations realise that they need to be of a certain scale or they'll be run over."

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