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ASG cuts 50 staff, takes $15m hit
The West Australian

Shares in ASG Group sunk after the IT services company announced about 50 job losses, $14.9 million in writedowns, a fall in first-half EBITDA and the departure of its chief financial officer.

The news was delivered within the context of a strategic review which the company said would improve profitability, cash flow and operating performance, deliver $8.0 million in cost savings on an annualised basis and increase the company's focus on "New World" cloud computing services.

Chief executive Geoff Lewis said the strategic review had found that changes were required to focus the business, drive efficiencies and to improve profitability.

"We remain convinced that the trends towards New World computing are real and are gathering momentum," he said.

"However, we also acknowledge that our approach to the implementation of the necessary changes within ASG and its business development activities to support a dual strategy of New World Computing and traditional managed services has been too ambitious and needs to be adjusted.

"Those areas of our sales initiatives, which have not been successful, have been reassessed."

The review had resulted in the loss of 50 full-time equivalent contracting and in-house staff.

The company would take a $14.9 million hit on the writedown of legacy assets, contract negotiations and other non-recurring items.

ASG said the market for traditional IT services growth remained weak and the company had not achieved sales success commensurate with the effort expended in the segment.

"In contrast, Industry analysts see a continuation of the strong growth in New World services," the company noted in a statement.

"The strategic repositioning will see ASG increasingly focus its sales and marketing expenditure on "New World" computing solutions.

"ASG's investment and focus in transforming its customers' businesses through "New World" computing solutions has enabled the company to negotiate over $25 million (annual) in Cloud services revenue since June 30 last year."

The company also announced the resignation of its chief financial officer Stuart Whipp, who would leave the company immediately to "pursue other interests".

ASG said it expected to report first-half EBITDA of $13 million before writedowns and non-recurring items, compared with EBITDA of $14.36 million in the previous corresponding period. However it said the figure was in line with previous guidance.

It predicted full-year revenue growth of 10 per cent.

The company expects to report its audited, first-half results on February 26.

ASG shares were off three cents, or 4.84 per cent, to 59 cents at 8.30am after touching an earlier low of 52 cents.