By Freya Purnell
A move towards offering ‘New World services’ – Software as a Service, Platform as a Service and Infrastructure as a Service – seems to be paying dividends for Australian listed IT services provider, ASG Group.
ASG, which is a Gold SAP Partner, reported an increase in revenue to $79 million for the half-year ending 31 December 2013, announcing its 2014 interim financial results earlier this week. This compares to $75.8 million in the previous corresponding period.
The half year also saw ASG move back into profitability. The company reported EBITDA of $10.7 million, compared with an EBITDA loss of $2.3 million in the previous corresponding period, while profit after tax for the half year to 31 December 2013 was $3.8 million, compares to a loss of $4.6 million for the corresponding period in 2012.
ASG Group CEO Geoff Lewis said the improve result was driven by growing momentum for New World services in an otherwise challenging business environment for traditional IT services companies, and against a backgrond where global IT spend growth was only 0.4{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} for 2013.
“The organic growth we are seeing now is the result of significant investment in our ‘new world’ strategy, which has given us a significant first mover advantage as the IT services market matures,” Lewis said. “We now have completed almost a year of sustainable growth in revenues and margins and have significantly reduced our cost base. We expect similar EBITDA margins to be maintained in the second half.”
During the period, investment of $1.7 million has been made in ASG’s New World SaaS capability in direct response to the needs of existing and new clients. In a statement on the results, the company said these investments have been made in keeping with resulting revenue stream, and “any additional investment will only be made on the same basis”.
ASG is expecting further significant growth from the New World business, and has ruled out technology acquisitions to grab more of the ‘as-a-Service’ pie.
“The pipeline of select opportunities at either proposal or qualification stage exceeds $200 million. Qualified New World opportunities exceed $50 million, and are increasing,” Lewis said.
“ASG does not believe technology-based acquisitions will provide entry into the New World market. The key is in transforming the business model to make yourself relevant by delivering utility-priced solutions directly to business customers. The fact that ASG is already banking organic New World revenues validates this view.”
Last year ASG snagged several significant deals for its New World offering, including an $11.5 million contract with the Department of Environment and Primary Industries in Victoria, and an $11.3 million contract with the Department of Housing in Western Australia.
