Melbourne IT revenue up after Netregistry acquisition

But transaction costs and $8.9 million impairment charge dent profits

Melbourne's IT's acquisition of Netregistry Group contributed to a 16 per cent year-on-year revenue jump to $59.6 million for the first half of 2014, the company said today.

In February, Melbourne IT paid $50.5 million to acquire Netregistry. Today, Melbourne IT CEO Martin Mercer said he was pleased with progress integrating the companies.

Mercer said the “impact of the restructuring undertaken in the second half of last year and the contribution from NRG is evident in the solid underlying performance of the business.”

Melbourne IT said it expects to save more money from the integration of NRG than it had projected.

“As the integration of MIT and NRG progresses our view of the synergies available has increased. We can see our way clear to achieving up to 50 [per cent] more savings than originally forecast with the majority of this upside being realised in 2016.”

However, the domain registry service also reported significantly reduced profits, in part due to the NRG acquisition.

Melbourne IT had a net profit after tax (NPAT) of negative $4.6 million, down from a positive $3.9 million NPAT in H1 2013. The figure was so low due to $1.34 million in transaction costs from the NRG acquisition and a separate $8.59 million non-cash impairment expense for abandoning legacy software.

Not including impairment and transaction costs, Melbourne IT’s NPAT was $4.9 million, up 32 per cent year-on-year.

No further transaction costs are expected in the second half, it said.

The legacy Melbourne IT business grew revenue by 1 per cent this half, compared to the second half of 2013 from a combination of 9 per cent growth in the enterprise services division and a 1 per cent decline in the small to medium business (SMB) solutions division.

Melbourne IT predicted revenue will soften in the second half of 2014 in its SMB division.

“Partially offsetting this is the continuing acceleration in our Enterprise Services Division and the savings from disciplined cost management,” it said.

Mercer has said previously he wants to return the SMB division to growth by 2016.

“In the next two years, the SMB business will return to growth as we drive revenue gains from a combination of increased share in our core business and a growing contribution from new products and services,” he said in in a statement released to the ASX in late May.

The NRG acquisition will play a big role, he told Computerworld Australia in June. Combined with NRG, the company has 800,000 customers.

“When you put Netregistry [Group] together with Melbourne IT’s existing SMB business, we have a substantial [SMB] business now,” said Mercer.

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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Tags enterpriseSMBsacquisitionfinancial resultsMelbourne ITNetRegistry GroupDomain Name Serviceregistry services

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