Despite posting another decline in revenues and profits yesterday, the head of IT services company Melbourne IT has ruled out sweeping job cuts as a way to return to profitability. Instead, the company is set to add staff in the coming years.
Melbourne IT posted a fall in revenue for the 2011 financial year to 31 December, down 5 per cent from $189.9 million in 2010 to $179.8 million. The company's net profit after tax also fell. The company made $13.5 million for financial year 2011, down 16 per cent from its financial year 2010 result of $16.1 million.
The company took big hits in its enterprise services division and in its domain resale business. Company chief Theo Hnarakis cited a significant drop in project work that contributed to the poor result in the enterprise services business, adding that moving forward, the business would look to increase its fixed contract work to ensure measurable, ongoing profitability.
Melbourne IT is still working to offshore its level one technical support operations to Manilla, carrying an overall cost saving to the business of around $500,000, Hnarakis said yesterday. Despite this offshoring, however, the company chief said that Melbourne IT finished with a net increase in staff for financial year 2011, and plans to increase staff again by the end of financial year 2012.
"On a full-year basis, Melbourne IT actually increased staff by over 20 — about a 4 per cent increase in the workforce. All it really means is a change, where some roles will be done offshore, where we don't think it needs to be a core competency internally, but that then allows us to take some of the discretionary ability and invest in areas where we do want core competency. That's sales, marketing and product development.
"We've budgeted for, again, a 3 or 4 per cent increase in staff [by end of financial year 2012]. We've budgeted to maintain our training budget at over $1 million a year, so we, as part of the growth profile in particular in our enterprise services division we believe that we'll see continued growth in staff numbers at Melbourne IT," Hnarakis told ZDNet Australia yesterday.
Meanwhile, in a week full of IT services results, SMS Management & Technology and Data#3 have also released their half-year earnings to 31 December 2011.
SMS Management & Technology achieved 16 per cent growth in revenues on the previous corresponding period, bringing them to $169.5 million for the half. It said it had added over $200 million in new contracts to its pipeline over the half.
Earnings before interest, tax, depreciation and amortisation (EBITDA) didn't grow as revenue did, only increasing 3.8 per cent to $21.8 million for the half. The company put this down to having too many people, due to an influx of 457 workers from the UK and Ireland, which it has addressed by a slow-down in recruitment.
However, the additional recruits it had taken on were "highly experienced" who would be "invaluable to SMS's future success", according to SMS Management & Technology.
Staff numbers grew by almost 13 per cent to over 1700 during the six months, but the slowed recruitment would lead to a decline in the second half of the financial year, the company said. SMS Management & Technology was aiming to reduce operating costs by $2 million by streamlining operations.
Data#3 increased its revenues by 15 per cent to $435 million, which it said was driving by software, management services and recruitment sales. Hardware and project services had declined, however, due to market conditions.
EBITDA was $10.3 million, down 11.2 per cent on the previous corresponding period, which Data#3 said was due to an extremely strong first-half last year.