IT services vendor ITnet Plc. reassured investors that it was confident of getting full compensation for its cancelled 83 million pound ($149 million) contract with the UK Cabinet Office, as it announced a loss in the first half of 2004.
In the six months ending June 30, 2004, the Birmingham, UK-based company made a net loss of 11.9 million pounds ($21.4 million) compared to a profit of 5.5 million pounds ($9.9 million) in the year-ago period, on revenue that rose 15% to 104.6 million pounds ($188 million).
The company said that the loss was due to an exceptional provision of 24.4 million pounds ($44 million) for the impairment of the data center assets and related exit costs contracted, and subsequently cancelled by the Cabinet Office in June.
ITnet is currently taking legal advice on its claim to compensation, and chief executive Bridget Blows said she is confident that the company would recover all costs in meeting its obligations under the terms of the contract.
Shares in ITnet rose more than four percent to 190p in morning trading on the London Stock Exchange following the announcement, which also reflected a generally strong performance across the company’s main business lines.
Revenue from UK government agencies rose 19% to 53.7 million ($97 million), accounting for 51% of the company’s sales in the first half. It announced several major contracts in this sector during this period including contracts with Birmingham City Council ($11 million), Borough of Southwark ($3.4 million) and Colchester Borough Council ($2.9 million).
ITnet’s sales from the commercial sector increased 16% to 44.8 million pounds ($81 million) during the first half, representing 43% of total revenue. ITnet also announced a new, two-year, 7.4 million pound ($13.3 million) contract extension with former parent company Cadbury Schweppes. ITnet will provide the food and beverage manufacturer with desktop and server management, and disaster recovery services, with the aim of reducing the cost of supporting Cadbury’s midrange environment by ten percent.
Sales from infrastructure services grew 23% to 64.8 million pounds ($117 million), with desktop sales up 47% to 36.3 million pounds ($65.3 million). The company said that revenue from SAP implementation and management services rose 65% in the first half driven by deals with Glasgow City Council and Travelodge, and that revenue from business process outsourcing increased 14% during the same period.