Melbourne IT CEO to step down

Theo Hnarakis leaving, company experiences 9 per cent YoY revenue decrease

Melbourne IT CEO and managing director Theo Hnarakis. Photo credit: Melbourne IT.

Melbourne IT CEO and managing director Theo Hnarakis. Photo credit: Melbourne IT.

Melbourne IT’s (ASX:MLB) CEO of 11 years, Theo Hnarakis, has announced his intention to step down in 2013 once a replacement is found.

He joined Melbourne IT in 2000 and was appointed CEO in November 2012.

On a conference call with media and analysts, Hnarakis said that most of the challenges he needed to achieve had been completed.

“The board and I have come to an agreement where I am stepping down sometime this year. The process will be that the board will start the review of a new CEO,” he said.

According to Hnarakis, the executive team would also be restructured. For example, the international head of human resources and chief legal counsel roles would be phased out as Melbourne IT focused on the domestic market.

“We are also going to cut 10 per cent of our functional and operating costs by the end of 2013 which amounts to $6.5 million,” he said.

The savings will come from reductions in labour costs ($4.5 million) due to the senior executive team restructure and conclusion of the business transformation project.

He added that over the next two years Melbourne IT will move 90 per cent of its infrastructure to a cloud platform.

“We are in advanced dialogue with many cloud suppliers now but we are fairly confident based on prices given to us, that we will be able to achieve $3 to 4 million in annual savings,” Hnarakis said.

Turning to financial results, the company reported a 9 per cent year-on-year (YoY) revenue decrease to $51.3 million for the six months ending 30 June 2013, compared to $56.6 million for the same period last year.

It also reported earnings before interest and tax (EBIT) of $2.5 million, up 4 per cent YoY.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were down three per cent to $3.7 million.

Sales of the Digital Brand Services and ForTheRecord divisions for $158.8 million resulted in a net gain on sales of $66.4 million in the first half of the six months ending 30 June 2013, contributing to a net profit after tax (NPAT) of $70.3 million.

The SMB Solutions division had a first half revenue of $38.2 million, down 10 per cent YoY and contributed EBIT of $5.1 million, down 14 per cent YoY. Hnarakis said the decline in revenue was due to lower domain name registrations from both direct sales and partners earlier in the year.

“Investments in new products and improving the customer experience should deliver further benefits in H2 2013 and beyond,” he said.

Enterprise Services’ first half revenue and EBIT results were impacted by a decline in one-off government project revenue and legacy product churn. Services revenue in H1 2013 was $12 million, down 13 per cent YoY from $13.8 million in the same period last year. EBIT contribution was $0.4 million, down 69 per cent YoY from $1.3 million.

Non-government contract value for the period was $8.2 million, up 71 per cent YoY, due to 21 new customer wins and 147 new contracts.

Follow Hamish Barwick on Twitter: @HamishBarwick

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