UPDATED: Commander cuts 600 staff in business review
- 30 January, 2008 10:50
ASX-listed integrator, Commander (ASX: CDR), has confirmed it will shed 600 staff and pull back from IT hardware sales in a bid to resurrect the company's profitability.
The business turnaround plan was announced on the ASX on Wednesday and follows a strategic review. The restructure is expected to cost $17 million.
As previously reported in ARN, Commander plans to cut nearly one-third of its staff, from 2000 to 1400. Redundancies will largely come from its IT hardware and support areas, although management numbers will also be reduced.
The retrenchments are expected to save Commander $65 million per year.
"I am saddened that it has been necessary that so many staff leave the business but in taking this action I believe we are setting a robust platform for the remaining staff and further growth," CEO and managing director, Amanda Lacaze, said in a statement.
Another key element of Commander's plan to improve profitability is to stop standalone IT hardware sales. The resale of high-volume, low-margin hardware created significant back-end costs, tied up operating capital and caused logistical problems, the company said.
Lacaze said IT hardware sales represented up to 50 per cent of total revenue, but less than 10 per cent of gross margins. She estimated half of these sales could be wiped off its books as part of the restructure.
"We will work with vendors to ensure customers have alternative options for procuring those products," she said. "There may be arrangements which may not involve us having warehouses all over the country or consuming working capital."
However, there will be some areas where low margin business is retained as part of a total offering to managed services, Lacaze said.
The company has also flagged plans to sell off non-core businesses and will announce the first sale within the next month. The decision comes after Commander opened a dataroom late last year to weigh up potential purchase offers. Commander is now going back to interested parties, which are understood to include Optus, SP Telecom and AAPT.
Lacaze said non-core assets included its recruitment arm and mobile broadband subsidiary, PBA (iBurst). There are no plans, however, to offload its whitebox business, Ipex.
The funds from any asset sale will be used to pay off pressing bank debts, which have also been pushed back. Commander will now pay just $3 million out of its $10 million repayment due on February 28, with the remaining $7 million up on October 31. The $115 million debt, due to be paid on October 31, has also been extended by 12 months.
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