UXC cost-cutting fails to deliver

More cost-cutting measures could be in store for ASX-listed IT services firm UXC as its executive chairman Geoff Lord admitted today that previous initiatives didn't come fast enough.

More cost-cutting measures could be in store for ASX-listed IT services firm UXC as its executive chairman Geoff Lord admitted today that previous initiatives didn't come fast enough.

UXC chairman Geoff Lord
(Credit: UXC)

Lord said the company's IT services division — UXC Business Solutions, which employs around 1,800 of the company's total 3,500 staff — was the target of cost-cutting efforts that were enacted late last year and has failed to deliver savings the company had hoped for.

Despite significant contract wins, such as the $30 million announced today for UXC's energy and carbon business, Field Solutions, the IT services arm suffered a shortfall which dragged the company's revenues down 5 per cent.

The problem for UXC, according to Lord, was that the raft of measures introduced in September and October last year were too slow.

"It has become evident that we have not reduced the costs in the business quickly enough in response to rapidly changed market conditions. This has now been, and is continuing to be, addressed," Lord said in a statement to the Australian Stock Exchange today.

Lord told ZDNet.com.au that those initial cost-cutting exercises had temporarily worsened UXC's position.

"When you actually cut labour costs, for example by reducing people to three or four days, putting people on annual leave, or you actually move them from full-time to contract [positions], then there is a cost in doing that," Lord said.

"We didn't do any of that until late September and October, when it was clear that revenue was going to be down by about 5 per cent, so our cost reduction didn't start until then," he added.

UXC director of finance, Mark Hubbard in November admitted the company had cut around 12 staff, and expressed concern that some work in the company's pipeline may be deferred as customers responded to worsening market conditions.

Still, Lord today said UXC expected to fare better during the second half of 2009.

"We think our second half will be strong and the outlook is very positive," he said. "We still think we will get around $700 million for the year, which implies that part of that downturn in first half we would pick up in the second."

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