FX Networks result shows reduced sales

Uncertainty re govt plans contributed to reduced result, MD says

FX Networks has posted a reduced profit for the March 31 2010 year. This, says managing director Murray Jurgeleit, is largely due to a pause in buying by dark fibre customers because of lack of clarity in government plans for ultra fast broadband, as well as the rural broadband initiative.

Revenue for the year was slightly up at $25.8 million, compared with $25.1 million the previous financial year. EBITDA was down from $5.4 million to $4.1 million, and before-tax profit from $3.5 million to $1.3 million.

“There was a bit of a wait and see attitude with dark fibre customers,” Jurgeleit says. “That is understandable. We were expecting sales of $5 to $10 million more than we realised.

“However, our core high-speed data business increased 65 percent during the period.”

Another factor affecting the result was the closure of the Government Shared Network.

“There was substantial gap there in expected revenue,” he says. “We then bid and won, with Datacraft, One.Govt, but there was a hole in the middle.”

Jurgeleit says the company made a substantial investment during the year in increasing sales resources through the trebling of its sales staff.

“The fall in EBITDA reflects that.”

The company currently has 85 staff, 45 in the core business and 40 in the construction division, which also does builds for other companies.

“This year our major project is to build fibre from Christchurch to Dunedin,” Jurgeleit says. “We expect to complete that in the November time frame.

“We’re also in the planning phase to build fibre to Northland and Taranaki.”

Total investment to March 31 in the North Island fibre ring and from Blenheim to Christchurch was $55.8 million.

Jurgeleit says dark fibre buyers are now back on stream.

“One.Govt has also grown from the six original government departments to 15. We’re expecting another half-dozen, which are in the provisioning process, to sign up in the next few months.”

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