Accounting software company MYOB has highlighted tough market conditions in New Zealand as a factor in its latest financial report, for the half year to June 30, 2008. MYOB's revenue from continuing operations grew 6% to A$91 million (NZ$111 million) for the half year, EBITDA grew 9% and net profit after tax from continuing operations was up 27% to A$10 million.
However, after the loss on discontinued operations of A$28.3 million, the ASX-listed company reported a net loss after tax of A$18.5 million.
New Zealand posed its own problems for the software publisher, with revenue here down 2%. “As previously advised, the performance of the New Zealand operations has been impacted by deteriorating market conditions and increased competition in the Business Division," CEO Tim Reed said in a statement today. "Opportunities for margin improvement in the New Zealand operations have been identified and management of the Australian and New Zealand business were merged earlier this month. We expect to see the benefit of this initiative through reduced costs, enhanced margins and accelerated earnings growth in the coming year.” New Zealand EBITDA was down 17%. MYOB says market conditions deteriorated and competition in the business sector intensified. "The Business Division bore the brunt of the market changes, with revenue down 7% and EBITDA down 27%. Within this, midmarket revenues were down 9% (new units down 16%), as sales cycles lengthened and client spending tightened," its report says. Competition for Kiwi small business customers saw revenues drop 23%, That sector dropped 12% over the previous comparative period. "However, it was extremely pleasing to see that support and maintenance revenues were up 20%," MYOB notes. The New Zealand accountants sector was up 9% and EBITDA was flat. Iinvestments in sales and support did not flow through to top line growth in new and recurring revenue, MYOB says. Support and maintenance revenue was up 12%, mainly driven by price increases. "However, the launch of the new document management product and the uptake of the Accountants Resourcing service are expected to stimulate renewed improvement in sales bookings in the second half," the company forecasts. "In examining the business closely, the opportunity for significant margin improvement in the New Zealand business has become more apparent. As a result, the management of the Australian and New Zealand businesses has been merged as of this month to capture the benefits of scale and ensure we’re applying our best practices to serve clients in these markets." The initiative will reduce costs and enhance margins, MYOB says, though there will be A$1.5 million in one-off costs as well. MYOB also announced the acquisition of web hosting business SmartyHost for A$7 million. In April, MYOB sold its European operations for A$79 million. "Not only was it an excellent price for the business at around 14.8 times EBITDA, but it has allowed us to concentrate on the opportunities in our home markets of Australia and New Zealand and our developing markets in Asia," Reed said in today's statement. "I am confident that we will reap real benefits of this management focus over the next 12 months as we further optimise our business.”