Ebola hurts Australian reseller's joint venture

The Ebola crisis has impacted Australian reseller DWS, with a joint venture collapsing after its Canadian partner was unable to pay the bills.

Publicly listed DWS announced to the ASX "a one-off extraordinary write-down" of its investment in a joint venture with software firm Borealis. DWS claimed that the Canadian partner had not met its financial obligations for the entity, launched as Borealis DWS Consulting Services early last year.

According to DWS, Borealis blames its inability to pay on "the financial impact of the Ebola virus on its software projects at mine sites in West Africa".

DWS claimed that its Québec-headquartered partner was subject to official insolvency protection in its home country, so the local joint venture entity will seek to liquidate the Australian subsidiary of Borealis.

"[Borealis DWS Consulting Services] will work with the liquidator in an attempt to recover monies owed," read the DWS announcement.

CRN could not find any record of winding-up proceedings against the Australian subsidiary of Borealis nor evidence that the Canadian parent was in insolvency protection.

DWS chief executive Lachlan Armstrong declined to comment on the Borealis situation beyond what had been announced. CRN also sought comment from Borealis, Borealis Australia, and Borealis chief executive Jules Paquette but had not received a response at the time of writing.

DWS updated its earnings forecast as a result of the write-down, saying the EBITDA for the first half of the 2015 financial year would be in the range of $7 million to $7.5 million, down from $7.75 million to $8.5 million forecast at the annual general meeting last month.

The company generated $9.47 million of EBITDA in the first half of the 2014 financial year.

In August, CRN reported that both revenue and profit were down for the 2014 financial year in "difficult" trading conditions. In November's AGM, Armstrong updated shareholders with the news that business in Victoria, South Australia and Western Australia had underperformed in July and August.

"However, I am pleased to report that utilisation and profitability improved in September, and has been maintained in October and November. We have been adding billable headcount across the business during Q2 and we also have new recruits lined-up to commence early in the new year," Armstrong said at the time.

At the AGM, chairman Danny Wallis outlined some of the trends impacting customer buying habits, including the demand for on-demand cloud services over on-premise infrastructure and the growth of mobile. He revealed some of the "tactical initiatives" that DWS is taking to "minimise the effect of external pressures".

In the last year, DWS restructured its sales teams in Queensland and Sydney; signed a deal with US-based Jacobs for the provision of resources to Telstra; launched a cloud computing practice; and expanded its offshore business unit in Manilla.

DWS was established in 1991 by Wallis and targets the enterprise market with Microsoft, IBM and AWS technologies. The Melbourne-headquartered solutions provider has branches in Sydney, Adelaide, Canberra, Brisbane and Perth.