ASG Group sees six-month 50 percent profit surge

Australian IT services provider ASG Group has seen a half-yearly boost of 50 percent in net profit after tax for the six months ending December 2014, compared to the same period the previous year.
Written by Leon Spencer, Contributor

Australian IT services company ASG has released its half-yearly earnings, reporting AU$5.7 million in net operating profit (NPAT) for the six months ending December 2014, a 49.8 percent surge from the previous year's result of AU$3.8 million for the corresponding period.

The company also reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$11.1 million for the six-month period, representing a 3.8 percent increase on the previous year's result.

ASG saw its revenue for the half grow by AU$1.12 million to AU$80.15 million, from the previous year's revenue tally.

The company said its growth during the six-month period had been due in large part to the swift take-up of its "New World" service offerings.

"ASG is in the unique position of having a strong base of annuity contracts underpinning our revenue stream, complemented by unprecedented interest in our 'New World' offering by clients looking to transform their IT operations," ASG chief executive officer Geoff Lewis told shareholders in a statement (PDF). "Over 80 percent of our new contracts are New World."

Lewis said that the company saw growth in earnings and revenue despite a changeable economic climate.

"The half-year result highlights the underlying strength of ASG's business model in a volatile economic climate," said Lewis. "The outlook for the second half is solid, given that major new contracts have been transitioned from the capital intensive establishment phase to the delivery phase.

However, ASG also reported negative cash flow from operating activities of AU$5.9 million, with the company spending AU$74.8 million in cash payments in the course of operations, while receiving AU$71.7 million in cash receipts in the course of operation.

Meanwhile, ASG made it clear that it is looking at an even stronger EBITDA forecast in the second half of the financial year.

The company told investors that it has a "solid pipeline" in excess of AU$320 million for managed services and "new world" opportunities, which would contribute strongly to its results for both the second half of FY15, and FY16.

This pipeline builds on the AU$145 million revenue base the company currently has locked in for the financial year ending 2015.

"The success ASG is experiencing in these areas contrasts with the continued downward trend in the traditional project services and product areas impacting the pure staff augmentation business mode," the company told its shareholders.

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