Dreamscape Networks (ASX:DN8) plans to close at least two of its offices and consolidate other parts of its operational footprint, as it works to minimise mounting costs.
The publicly-listed domain registration, hosting and online solutions provider told shareholders on 13 February that it expected its adjusted pre-tax earnings (EBITDA) for the first half of the 2018 financial year to be in the range of $2.8 million to $3.2 million.
The latest forecast is well below the $5.2 million earnings the company notched up for the same period the year prior.
“The decrease in the underlying result is due to an increase in 1H18 costs (relative to 1H17) and continued weak conditions in the Australian domain and hosting pillars,” the company told shareholders.
“The lower earnings have been amplified as a result of the corresponding period costs reflecting Dreamscape as a private company and therefore not including any comparative costs as a public company.
“Personnel, marketing and administrative costs have increased by approximately $2.5 million relative to 1H17,” it said.
Specifically, in FY17 the company said its focus was on building its customer support team and, as a result, marketing spend was at a historically low level.
Marketing costs in 1H18, however, included costs associated with initial marketing of the company’s Crazy Domains business’s brand in South East Asia.
Meanwhile, personnel costs have increased by approximately $900,000, with key marketing and other appointments being made to drive long term growth across South-East Asia and Australia.
In a bid to minimise the impact of rising costs, the company said it has accelerated the consolidation of its offices, and has recently announced internally the proposed closure of its Perth and Dubai offices.
“The operations in these two offices will be integrated into a new centralised head office in Singapore before 30 June 2018. The benefits from the office consolidation and simplification of Group structure will flow from FY19,” the company told shareholders.
In addition to the centralisation of the head office in Singapore, Dreamscape Networks expects to see a reduction in current cost duplications when three of its most recent Australian acquisitions, Net Logistics, Enetica Group and Quadra Hosting, are fully absorbed into the company’s infrastructure.
This process will be completed by 30 June 2018, with benefits to flow from FY19, the company said.
The company said that, while the Crazy Domains brand in Australia continues to increase its total .au domain market share, the industry as a whole has been flat – a seemingly continuing trend.
This is perhaps one of the reasons why the company has been working to transform itself from a domain name player and web hosting provider into a fully-fledged online solutions provider – a transition made possible by its recent acquisitions.
In October last year, Dreamscape Networks spent $4.45 million buying the entities and business assets of Sydney-based Enetica Group, in a deal that included Web City, Enetica and Host1.