Investments see Hostworks profits slide

23.08.2006
Australian company Hostworks has recorded a fall in net profits from A$1.5 million (US$1.1 million) to A$200,000 million in the year to June 30. The slide comes off the back of a 20 percent in rise to A$20.5 million.

Managing director, Marty Gauvin, blamed the fall on investments the company made in new ad-serving and software-as-a-service capabilities.

"When new business grows very fast, costs can be hard to anticipate," he said. "We were building new ad systems one after the other - the first to handle initial growth, then a second to meet demand.

"These costs are one-off. We expect to see profitability return to the levels we have previously experienced in the current financial year."Gauvin attributed its revenue growth to applications hosting business through new or extended contracts with Big Brother, Seek, Ticketek, ninemsn and Wotif.com.

"A couple of years ago, everything we did was customized," he said. "We have added more productized offerings, such as ad serving and applications hosting, which give us something to sell to those we have already sold services to."

Another major area of opportunity was the large outsourcing market, Gauvin said. Where big customer deals previously sat at A$3 million to A$4 million, Hostworks had secured several contracts worth upwards of A$10 million per year.