Melbourne IT reports drop in revenue and rise in profits

CEO says partner success in Australia and abroad has been better than expected

ASX-listed Web hoster, Melbourne IT (ASX: MLB), has recorded a 6 per cent drop in revenue and an 11 per cent rise in net profits. The result comes despite a strong Australian dollar and weak Northern Hemisphere market impacting on the figures.

Its 2010 first-half financial results saw revenue drop to $98.1 million compared to $104.4m in the same period in 2009. But net profit after tax rose from $6.3m to $7m in the same period and operating cash increased by 74 per cent from $8.1m to $14.1m.

“Our second half profit will be stronger again. Our full year 2010 will deliver a strong underlying profit growth, however absorbed over $3m of transformation costs our final profit results will be in line with 2009,” Melbourne IT CEO, Theo Hnarkis, said.

According to Hnarkis, the growth of partners, which included those from overseas, contributed $4.3 million to the bottom line and exceeded expectations.

“Our partner division has had a remarkable first half despite the slowdown of major partners,” he said. “Profits actually increased…despite our forecast that we’d be down this year.

“We continue to add new partners right through the Northern Hemisphere and add new services to existing relationships…the second half should be somewhat down on H1 but it will still be very strong for the full year.”

But despite the rise in Northern Hemisphere partner numbers, Hnarkis said it was Australian resellers that were recording better growth.

“If we break out the performance of our international partners against our Australian partners, our Australian market is up by 5-10 per cent whereas our international partners are down,” he said.

Hnarkis said brand management for companies and their websites would explode thanks to the planned increased liberalisation of domain names. It would either force major brands to get on board to protect their trademarks across a whole range of domains or risk having them misused by rivals.

“There’s no question that we are well-positioned to take advantage of the complexity to come from the introduction of a new range of domain names early to mid-next year in addition to managing the corporate names of a lot of major multi-nationals around the world,” he said. “We’re positioning Melbourne IT to once again deliver sustainable net growth for the future because we’re making the right investments today.”

The CEO said he expected new domains such as .CO to be taken up by consumers now that the sunrise period for brands to reserve their names. But added the controversial XXX domain would probably not offer significant returns for his company.

“Our focus is really around the mainstream brands that are protecting their IP on the Internet,” he said. “Being opportunistic and taking advantage of individual names, be it XXX or anything else, really isn’t our focus.

“If our large corporate customers choose to protect their IP in these extension then naturally we’ll represent their interests.”