Hostworks Declines in Net Profits

• By The WHIR, August 18, 2006

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Hostworks Declines in Net Profits

August 18, 2006 -- (WEB HOST INDUSTRY REVIEW) -- Australian Web hosting provider Hostworks (hostworks.com.au) is relying on recent capital investments to rouse earnings growth after its net profit plunged by more than 80 percent in the 12 months to June 30. The company blames the fall in after tax profit - from $1.5 million a year ago to just $219,552 - on investments in new products and costs it acquired in partnering for outsourcing contracts.

And while its revenue for the year increased 25 percent to $20.5 million, Hostworks says the profit fall can be attributed to its last minute bid to increase growth by acquiring Queensland dedicated hosting competitor, WebCentral, whose shareholders are due to vote on a long standing $1.53 per share offer from Melbourne IT on August 24.

Managing director Marty Gauvin says that its decision to invest in expanding its consulting and account management team to support its rapid growth and expanding sales pipeline continues to influence profitability in the second half. Hostworks joined with NetRegistry to submit the complex proposal to acquire WebCentral for $1.65, but experts say the two companies have little chance of succeeding. Hostworks says 2006 successes include a $6.1 million, three year managed services contract with Ticketek and a three year agreement with food service organization Compass Group. The company finished the year with $5.1 million in cash, up from $4.5 million a year ago. It said it would make a 1c capital return to shareholders subject to shareholder approval Hostworks' annual general meeting in October.

Tags:  new products  Appro  Hostworks.com.au  Melbourne IT 

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