BlueFreeway loses CEO and CFO, announces a refocus on core strategies

David Heath
Wednesday, 30 January 2008 14:21

IT Industry - Market

Following a less than stellar year where the share price plummeted from around $2.15 in mid 2007 to yesterday’s close of $0.60, BlueFreeway today announced the resignations of Chief Executive Officer Richard Webb and Chief Financial Officer Ken McDonnell, indicating in its ASX announcement that there will be a “reassessment of the company’s strategic direction.”  Following this announcement, shares dropped an additional 35% to $0.39 during the day.

BlueFreeway is, according to their website “an independent global digital and interactive marketing communications company,” growing through the acquisition of synergistically aligned companies to create a widespread internet media player.

Mr Greg Daniel, interim Executive Chairman was quoted in today’s ASX announcement, “it became apparent to the Board that the costs associated with building and servicing the blu portal, centralised sales force and 24/7 support had grown substantially faster than we felt was sustainable in the short term given the level of centralised sales.”

Reading between the lines, this appears to be suggesting that while the portfolio companies were performing well within their niches, the integrated, centralised organisation was making few sales on top of a high costs structure, draining the overall profitability of the organisation.  This is borne out by further comments from Mr Daniel in the announcement: “On a consolidated basis, the combined portfolio companies have grown their EBITDA, excluding the corporate overheads costs, by over 50% in the first half of FY08 over the previous corresponding period.”

In a clear indication of some heavy and rapid cost-cutting, Mr Daniel also noted that “the Board has moved decisively to reduce corporate overheads and refocus the business on the 25 portfolio companies which are growing strongly.”

Richard Webb and Ken McDonnell, along with a number of other BlueFreeway employees were previously employed by Citect Ltd, prior to and immediately after Citect’s acquisition by Schneider Electric in 2006, effectively moving to BlueFreeway as a unified management and support team.

If I was in that team, I’d be a little nervous right now!