Melbourne IT 2010 profit falls 4.5%

Melbourne IT (ASX:MLB) saw its 2010 profit fall 4.5 per cent due to transformation costs and forex losses, and expects these factors to also impact profit in 2011

Melbourne IT (ASX:MLB) has reported a 4.5 per cent decrease in calendar 2010 profit on transformation costs and forex losses.

The company - which supplies domain names, hosting and other online support services – disclosed in its 2010 report that profit fell to $16 million, from 5.1 per cent lower revenue of $189.9 million.

Melbourne IT is conducting a transformation project aimed at expanding into integrated web services and investing further in operational support systems.

When announcing the project in 2010, the company said it was expected to cost $17 million over three years.

Melbourne IT said the transformation is on-budget and on-schedule, but the costs incurred had impacted its results.

Adjusted for these expenses profit actually grew slightly, and EBIT would have declined only 4.1 per cent instead of the recorded 9.5 per cent decrease to $21.2 million.

Using 2009 exchange rates revenue would also have improved 3.1 per cent on a like-for-like basis.

Melbourne IT said it expects its 2011 EBIT to be impaired by $5 million in 2011 as a result of transformation costs, but its underlying EBIT to be up 15 per cent before these costs and the projected forex impact.

MLB shares fell 1.92 per cent on Thursday to $1.855.

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