Oakton cut 90 in six months

Australian IT services firm Oakton pared its total headcount back by a net total of 90 staff over the last six months of 2008, the company revealed today.

Clients sought improved pricing arrangements and in some situations delayed their planned consulting and IT investment

Oakton CEO Neil Wilson

The redundancies caused a one-off cost to the company of $1.2 million, Oakton revealed in its regular financial results session. It has also had to write down $4 million on projects it had expected through its pipeline. Revenue for the six months to 31 December was up 3.6 per cent on the previous year to $98.1 million, but both earnings and net profits were down.

The news comes as Oakton yesterday confirmed its COO Steve Parker had left, just a year after he joined the company from the top ranks of local rival Unisys.

The company's chief executive Neil Wilson was not immediately available to comment on the company's issues, but in statements the company blamed the write-downs on the the financial crisis and lower than expected demand from the Federal Government for IT services.

"In particular, the October 2008 to December 2008 trading period has been below expectations as clients sought improved pricing arrangements and in some situations delayed their planned consulting and IT investment," Wilson said.

In October last year Wilson said Oakton hadn't made any redundancies, and was expecting increased government spending to counter slowing demand from the private sector.

The company today was amidst a major review of its operations. Oakton had been expecting its headcount to grow to 1,600, but now had a "contractionary" strategy in place which could see its headcount fall to 1,100, possibly meaning more layoffs in the future. Today it reported having 1,199 staff, including 100 based in India, where it is increasing its presence.

Today's results reveal the rapidly deteriorating market conditions the IT services company has faced in the past six months. Last August, at the outset of the financial crisis, Wilson told investors that its strong results then were evidence that "clients no longer are content with cost-savings from off-the-shelf technologies, or low-cost, volume-based outsourcing deals".

"They are seeking to innovate and gain real competitive advantage ... what once was a discretionary purchase is now viewed as an essential and vital investment," he said at the time.

Today, the company said it would focus on reducing debt, having put in place a new three-year debt facility. At the time of publication Oakton's share price had dropped 16.5 per cent since it released the results today.