ASG Group Limited (ASX:ASZ) CEO, Geoff Lewis Discusses the Provision of Professional Information Technology Solutions ASG Group Limited
(ASX:ASZ) is an Australian IT services company. We’ve got national footprint and we specialise in managed services. We do project services, but laterally we’ve transformed ourselves to the provision of what we term, New World services. New World services go beyond technology. What they’re about is transforming and reforming ICT companies, within client businesses.
The first half 2016 results were in line with the guidance we gave at the AGM in November. Our revenue figures were $88 million, which was in line as I say, with the AGM. Our EBITDA was running at $12.7 million, both operating and declared EBITDA. We had a net profit before tax of $7.6 million.
Results were driven by a number of factors, not the least of which was the continual take-up of our New World offering, and the fact that our managed services for new contracts, started to actually contribute. We have a lag in our managed service revenues, because we will sell and then we would do a transition. But the actual full revenue impact doesn’t cut in until some months afterwards, as opposed to transactional project related services.
The value of the order book is quite substantial. We’ve got about $340 million worth of pipeline that we have either qualified into, or in the process of finalising. We recently announced a contract extension to the value of $112 million for the Department of Education in Victoria. That will take us, if it runs its full length, to being incumbent in that account for close on 16 years, at the end of that renewal.
We do a lot of work recently with Clough Limited
(ASX:CLO) and Cimic Group Limited
(ASX:CIM),in relation to New World transformations of their businesses and their IT. Increasingly what we’re being asked to do is provide global support, as well as the Australian based services. Our outlook for FY16 is exceptionally positive. As we gave indication at the H1 results, our revenue figures will be around about $185 million to $190 million, with a corresponding EBITDA running at a 14.4 per cent margin.
It is again, as we outlined before, a lot of that is contributed to the fact that contracts that were won in previous years, are now contributing fully in this financial year. Similarly the outlook for FY17 is even better, because of the contract wins this year that will contribute in the following years.
One of the biggest trends that we’re seeing is that the clients are no longer interested in buying technology. Technology in its own right has become commoditised; technology has become very much almost per se. It’s business outcomes, its driving business value and it’s driving certainly a return on investment, increasingly happening. What that means is that organisations, particularly vendor organisations, have to be in tune with what this change means. And in turn, change their business model to actually accommodate that.
We made a decision some years ago to actually move to an IP based organisational structure, and an IP based service offering. Organisations such as large multinationals, whether they be the traditional Indian body shopping organisations, or the likes of IBM Corp. (NYSE:IBM) and dare I say it, even Oracle, CSC and SAP etc. With their entrenched business models, finding it very hard to change and make the adaption.
The next 12 months are probably going to be fairly challenging for the industry at large. Revenues from traditional projects will be down. ASG is well positioned, however, because of the locked in revenue that it has through managed services and in turn, the New World scenarios.
Ideally, my personal view for the next 12 months is that we will increasingly have a push into business analytics and intelligence. And exploiting that for our clients, which in turn will drive business change and in turn drive projects. For ourselves and provide value to the clients.
Ends
