Perth company ASG has announced a major restructuring and cost-cutting program after being hit by a downturn in its traditional IT services business and an overly ambitious pursuit of new cloud-based computing services.
It is in the process of cutting 50 staff and contractor positions and is aiming to achieve annualised savings of $8.0 million.
In the current financial year it will achieve net savings of $2.1 million.
The poor business performance has seen ASG’s board write down $14.9 million in legacy assets and capitalised contract establishment costs.
Chief operating officer Dean Langenback will oversee financial and accounting activities pending appointment of a new chief financial officer, after the company announced Stuart Whipp’s departure today.
ASG chief executive Geoff Lewis said his company was still convinced the trend towards “new world computing” were real.
“However, we also acknowledge that out 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,” he said.
“The initiatives we are announcing today will increase the strategic focus of the business and create a more disciplined and economical approach in relation to bidding for new contracts.”
The strategic repositioning will see ASG “increasingly focus its sales and marketing expenditure on new world computing solutions” - with cloud services already raising $25 million in revenue since end of June last year.
The business also disclosed it is continuing to have discussions with a “significant participant in the IT services market” about an “indicative, non-binding and conditional proposal” it received last October.
A half year results notice is expected to be delivered on February 26.
ASG shares, which have fallen steadily since January 30, fell 6 cents to 56 cents after today’s announcement.