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Melbourne IT warns of lacklustre 2010

Melbourne IT warns of lacklustre 2010

Company announces a profit growth in 2009, but warns of a relatively flat 2010 in preparation for a strong 2011

ASX-listed services provider, Melbourne IT (ASX:MLB), has forecast a lacklustre 2010 as it invests for 2011.

It also posted an 8 per cent rise in revenue from $186.2 million in 2008 to $200.1m in 2009. The company’s net profit for the full-year to December 31, 2009 was $16.m, up from $16.2m last year.

According to Melbourne IT CEO, Theo Hnarakis, much of the rise was thanks to an excellent fourth quarter in 2009 and significant cost-cutting, especially after lacklustre results and a drop in profit in its half-year results.

“It’s been a tough year...we didn’t pay bonuses to staff and executives, we cut a lot of costs, we invested a lot in the infrastructure, and we had to endure a GFC in particular in Europe and the US,” he said. “But we’ve survived and we’ve delivered a comparable result to 2008.

“Quarter four 2009 was definitely our strongest quarter for the year. We saw clear signs of the market improving and we saw our strategic initiatives start to pay early dividends.

“Enterprise services and digital brand services [DBS] are both performing strongly and will continue to do so.”

Hnarakis said the year ahead would be one of transformation as the company changed its focus from domain registrations to digital brand management. It hascompleted its integration with VeriSign’s acquired Digital Brand Management Services (DBMS) business.

“The DBS division, which will be core to our growth strategy going forward. We expect continued or sustainable growth at the current rate we saw in the second half,” he said. “We delivered something like $4.9 million in the second half and we believe we can maintain that rate for the full year, which will give us a very strong trend for the division.

“However, we are very much in the embryonic stages of this industry and we want to take every opportunity to grow market share and aggressively become the market leader.”

Hnarakis said spending some of the profits on the division itself to help fund growth was a plus because Melbourne IT would not have to take on more debt.

“We expect the 2010 pre-tax profit will continue to be strong. The worst is behind us," Hnarakis said. "However, due to the investment and the $4 million operational expense impact that we expect in 2010, the net growth will be modest.

“The investments we put into 2010 will position us very strongly for a fantastic 2011 and we expect net profit to substantially improve in 2011.”

Shareholders responded positively to the report, with Melbourne IT shares closing up 11.32 per cent to $1.77 .


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