Photon sees 45% drop in profits after Geekversity debacle

Photon has suffered a 45% drop in profits thanks in part to the poor performance of its internet company Geekdom and now ditched get-rich-on-the-internet operation Geekversity, the company revealed to the market today.  

Documents lodged with the ASX reveal that Photon’s profits after tax returned to shareholders for the last six months of 2009 were just under $2.9m, 44.96% down on the same period a year before. Revenue was down by nearly 10% to $300m.

Photon’s media release instead used a different calculation, pointing to EBITDA profits being $37.3m, down 7% on the same period a year before, when one-off costs such as the divestment of Geekversity are excluded.

Photon is the largest media and marketing company on the ASX and owns a string of well known Australian agencies.

In a presentation to analysts, Photon said the results were affected by “softer economic conditions, strong Australian dollar and underperformance of the Internet & E-Commerce division.”

The company also said that the worst was behind it, with a lower cost base and “good economic activity”.

Geeversity was divested from Geekdom at the end of last year resulting in losses of $5.6m within Photon’s Internet & Commerce division. Geekversity asked students to pay in the region of $20,000 to be taught how to make money through internet traffic, but it struggled in the face of a rising noise from unhappy customers and a low number of sign-ups.

In its presentation, Photon said the Internet & Commerce division is set for a better year following the successful long running battle to fully acquire domain company Dark Blue Sea. It cited the “opportunity to leverage the portfolio of other 400,000 domains owned across the division to create online advertising revenue streams”.

It said that the division is also benefiting from the relationships its agencies such as BMF and BWM have with clients to win digital briefs for other parts of the group.

The company’s Strategic Intelligence Division, which includes Naked, Bellamy Hayden and The Leading Edge had a better year, in part because the division axed 13% of its staff. It said that Naked (headquartered in London) plans to launch a second US office, in Chicago.

The Integrated Communications & Digital division performed best for Photon. Agencies include BMF, BWM and AdPartners.

The company also said it was “exploring international mirco-network (sic) structure to take our best of breed agencies to international markets.”

Photon’s Specialised Communications division, mainly consisting of PR agencies such as Mark, Frank and City, saw profits grow, partly thanks to 12% of staff being axed.

Photon’s share price only dipped slightly on the figures, which was in line with an update it issued at the end of January.


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