Melbourne IT delivers strong performance again in 2007
Board declares 7 cent fully-franked final dividend

• 5th consecutive year of growth in revenue & profit for global IT services firm
• Driven by organic growth and first full year contribution from WebCentral
• 2008 performance forecast to exceed 2007

Melbourne IT Limited (ASX:MLB) has continued its track record of strong financial performance announcing today its result for the full year ended 31 December 2007, reporting a 49% increase in revenue to $154.4m and a 141% increase in earnings before interest and tax (EBIT) to $20.1m year on year. Net profit after tax (NPAT) in 2007 increased 118% to $13.9m.

"For the 5th year in a row we have achieved strong double-digit growth in revenue and profit. The 2007 result reflects continuing organic growth from our five key divisions as well as the impact from a full year contribution from WebCentral. It illustrates our ability to innovate and successfully evolve our business into a global IT services company. In recognition of this performance, the Board has declared a fully-franked final dividend of 7.0 cents, which will be payable on 4 April 2008," said Mr Theo Hnarakis, Melbourne IT CEO and Managing Director.

"Another component of Melbourne IT's ongoing success is our commitment to accelerating growth through mergers & acquisitions. In this respect we have been very pleased to be able to show that we can successfully manage a larger acquisition such as the WebCentral Group."

Basic earnings per share grew 73% to 18.15 cents against the previous corresponding period. Operating cash was up 117% to $24.6m and deferred gross margin was also up 4% year on year to $21.8m. The strong operating cash flow has enabled the Melbourne IT Group to retire the final $3.0m of debt ahead of schedule in the second half of 2007 - reducing debt from $12.0m at December 2006 to nil at 31 December 2007. The company's net cash position is $17.9m, which positions the company well for further M&A activity.

"This is another strong result for Melbourne IT, but we are not complacent. As always, there are challenges ahead, including the strength of the Australian dollar against the US dollar, commoditisation of domain names & small business hosting, and competition for scarce IT resources. We are focused on the future and on maximising the opportunities that our global reach, our brand, our product range and our expertise in the internet present."

Mr Hnarakis also said, "In 2007 Business & Consumer, Corporate & Government and Reseller results were particularly pleasing." The year on year results for Business & Consumer, Corporate & Government, Reseller and ForTheRecord include WebCentral Group's contribution to Melbourne IT from 11 September 2006 onwards.

Business & Consumer Division

The Business & Consumer (B&C) division increased revenue by 36% to $41.3m for the year with contribution margin growing 110% to $11.2m.

"B&C has delivered another strong result in a competitive & commoditised market. This division's consultative sales approach is continuing to prove effective and scalable. The recent launch of our eBusiness Centres in Australia and New Zealand will further consolidate B&C's value proposition of 'Making sense of the internet for small business'," Mr Hnarakis said.

Reseller Division

Melbourne IT's Reseller division delivered 23% growth in revenue in 2007 to $60.4m, while its contribution margin increased 82% to $7.8m. This result was achieved notwithstanding the appreciation of the Australian dollar against the US dollar during the period.

Corporate Brand Services Division

In 2007, revenue in the Corporate Brand Services (CBS) division was up 22% to $17.1m. Its contribution margin was down 9% on the previous year to $0.86m as the company invested heavily in acquiring new customers, entering new markets, improving systems and processes and building a market-leading digital brand management business. For example, Melbourne IT invested approximately $400k integrating IDR Management Services (acquired in January 2007) and opening an office in Copenhagen. We expect revenue and profit performance in this division to improve in 2008.

"CBS has again displayed pleasing growth in 2007, acquiring 140 new clients throughout the year including Saab AB, N M Rothschild & Sons Limited, CSC Denmark, Fuji Xerox, Harvey Norman, Toshiba Australia and Fairfax."

Corporate & Government

The Corporate & Government (C&G) division achieved revenue of $23.3m in 2007 and contribution margin of $2.8m. During 2007, C&G signed 131 new clients, including Zinifex, Golf Link Partners and the Victorian Department of Planning and Community Development. In addition, a significant contract was renewed with Flight Centre.

"In late 2007, we recruited a new General Manager, Mr Phillip Wilson, to lead Corporate & Government, which is one of our fastest growing divisions," Mr Hnarakis said. Mr Wilson joins Melbourne IT from KAZ Technology Services, where he was most recently Acting Regional Sales and Client Director for the NSW region. During a career spanning 25 years, Mr Wilson has developed capabilities in program management, systems design and integration, ITIL service delivery, commercial management and contract negotiation.

For The Record

ForTheRecord (FTR) achieved $10.6m in revenue and $0.7m in contribution margin during 2007. FTR increased the number of solutions sold to clients in 2007 to more than 3,200. FTR had a number of operational challenges in 2007 which are now being addressed. The management team has been restructured and in January 2008, the company appointed a new Executive Vice President for FTR, Mr Gunnar Light, to reinvigorate this division and build a strong platform for future expansion. Mr Light joins Melbourne IT after seven years at ATCi (Antenna Technology Communications, Inc) where he held the role of Managing Director Worldwide Sales and Marketing. Mr Light is focused on driving profitable business growth and his expertise in sales & marketing, channel management and strategic alliances will support ForTheRecord's expansion into new vertical and geographical markets. We expect FTR's flat performance for the second half of 2007 to continue through 2008. The full benefits of these changes and performance improvements are anticipated to flow through from late 2008.

Board

Chairman of Melbourne IT, Mr Robert Stewart, announced that Melbourne IT Director, Dr Mark Toner, has advised the Board that he has decided not to seek re-election at the forthcoming AGM in May 2008 to enable him to continue the growth of his consulting practice. The company will, therefore, be looking to appoint a new Director in the course of the next few months. Dr Toner joined the Melbourne IT Board in 2001 when it's market capitalisation was about $50m and has made an extremely valuable contribution to Melbourne IT's growth into an ASX300 company over the last seven years. He Chaired the Human Resources, Remuneration and Nomination Committee during this period leading the development of company's HR policies and processes and assisting in introducing new sales methodologies. On behalf of the Board and staff of Melbourne IT, Mr Stewart thanked Dr Toner for his dedication and outstanding service.

Outlook

"We have started 2008 well and will continue to invest in systems, processes, infrastructure and our staff to create sustainable growth and support our international expansion. From an M&A perspective, we have identified several companies in both the corporate brand management and hosting markets that could add scale to the Melbourne IT Group and we are confident that we will execute on one or more of these opportunities during 2008. In light of this, Melbourne IT will be reactivating its Dividend Reinvestment Plan, effective immediately," Mr Hnarakis said.

"Despite volatility in the share market, we continue to focus on the fundamentals to successfully manage our company. Melbourne IT has an experienced management team, talented staff and an excellent customer base. The company is in an extremely strong financial position with healthy operating cash flows and more than 85% of the Group's revenue coming from annuity sources. Consequently, we expect to outperform the 2007 result in 2008."

About Melbourne IT

Melbourne IT Limited (ASX:MLB) is a world leader in the supply of domain name registration and other online solutions with a strong commitment to the delivery of high value internet services and web-based solutions to organisations of all sizes across the globe. Melbourne IT was listed on the Australian Stock Exchange in 1999 and has a network of offices in locations across the world.

www.melbourneit.com.au