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Ashley Completes Strategic Review; Downgrades FY16 Profit Guidance

Ashley Completes Strategic Review; Downgrades FY16 Profit Guidance
Dec 07, 2015 By Imran Valibhoy Tags: ASH

Ashley Services Group Limited (ASX:ASH) reduced its FY16 EBITDA guidance to a range of $ 7-9 million. The company also provided various strategic measures after reviewing its business operations.

Future focus areas:

Ashley provides training, labour hire and recruitment services. The board announced a few key focus areas after completing its recent strategic review of business operations. The company will focus on integration of its operations and diversification of its training revenues. It will expand its existing corporate training portfolio and develop its international business.

Changes in training business:

The company announced that changes in federal government and state funding in relation to training of unemployed workers continue to have a detrimental impact. The training division has been restructured to concentrate on largest markets, namely New South Wales and Victoria, where the integrated business model is most effective.

The company will maintain a reduced presence in Queensland, South Australia, Western Australia and Tasmania, which negatively impacted its earnings.

FY16 guidance downgrade:

Ashley has announced that it incurred an EBITDA loss of $0.6 million for the quarter ending 31 October 2015. The reported loss was due to a significant reduction in training revenues within the job seeker market along with an increase in its operating costs. A significant investment of $2.5 million was made in sales, marketing and compliance to diversify its training revenue streams.

The board expects to revive its second half profits as it aims to eliminate losses from underperforming operations worth approximately $3.5 million. The company seeks to increase profits in its NSW business as a result of the availability of smart and skilled funding. The company also amended its delivery models to suit the needs of students and employers.

Ashley has reduced its EBITDA forecast for the financial year ended 30 June 2016 to be between $7 million to $9 million. The company also reduced its Net Profit after Tax before Amortisation of Acquired intangibles (NPATA) to be in the range of $3.5 million to $5 million.

ASH last traded at $0.22 as at 11 AM and is down 86% for the year.

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Imran Valibhoy Author: Imran Valibhoy Dec 07, 2015

Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.

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