ASG Group hires UBS to review strategic options after depressed share price

ASG Group hires UBS to review strategic options after depressed share price

May explore sale and lease back of its datacentre facilities

ASG Group (ASX: ASZ) announced that it has hired investment bank, UBS, to review strategic options for the company in light of its recent depressed share price trading and strategic developments in the Australian IT services space, according to a filing with the Australian Stock Exchange.

In an announcement with the ASX, the company said it may seek a potential sale and lease back of its data centre facilities to boost its balance sheet flexibility.

“With the major part of our Cloud development expenditure now completed, emphasis will be given to optimising free cash flow and applying this to appropriate dividend and to programmed debt reduction,” the company said.

Executives at ASG were not immediately available for comment. The company did not disclose further details about the strategic review.

ASG is a provider of IT business solutions including management and consulting services, business intelligence among other services.

Its share price last closed at $0.63 a share down from a peak of $0.94 in May this year. It currently has a market capitalisation of about $108 million.

In its filing, the company said despite the volatility in its share price, it is confident about its outlook in FY 2013 and for securing new business and expects to exceed the revenue growth for FY 2013, beating market estimates.

“We are seeing heightened levels of activity across our client base in relation to transitioning existing systems toward Cloud supported solutions,” ASG CEO Geoff Lewis said in the statement. “Identifiable cost savings and general efficiency gains are the main drivers of this activity and we believe ASG is uniquely positioned as the only domestic Australian supplier to address this demand given our significant recent investments in Cloud services.”

ASG said it has $363 million in active opportunities of new contracts and renewals, which includes about $123 million in Cloud services. Its Cloud services business is up 14 per cent from 30 June 2012. About $85 million of the active opportunities are classified as being, short-listed, due diligence or final negotiations.

With $123m, or 34 per cent of existing tenders around Cloud-services, the company’s board and management expect significant returns from its investments in Cloud services technologies as a logical extension of ASG’s managed service capability, the company said.

However, its development spending is expected to slow compared after the peak in FY 2012, according to the announcement.

“Our business development expense in FY2012 was almost 40 per cent higher than for the previous year. Most of that increase was aimed at positioning ASG at the forefront of Cloud services growth,” said Lewis. Recent Gartner analysis forecasts Australian Cloud Services spending growth at a 17 per cent CAGR from 2011 to 2016 and we have ideally positioned ourselves to ride this growth wave.”

For FY12, the company posted $150.3 million in revenue down slightly from about $153.3 million from the previous financial year. Its earnings before interests, taxes, depreciation or amortisation, or Ebitda was up 2 per cent to about $29 million from $28.1 million.

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