Inabox to cut 10 percent of staff after Hostworks acquisition backfires

Inabox will cut 10 percent of its workforce as it looks to recoup $2 million in annualised cost savings after its Hostworks acquisition backfired.

The company today announced a number of measures that it expects will help save more than $2 million in annualised costs. Inabox had 300 total staff as of October 2017. Job cuts will impact Inabox staff across the board, including at the executive level.

As well as job cuts, Inabox will offshore its monitoring and maintenance function, merge two of its operations centres and centralise engineering field force management around the country.

Inabox said the changes were likely to be completed by the end of December, with some staff staying on until February next year.

The initiative is expected to cost Inabox $700,000.

"The board and senior management team have spent considerable time over the last few weeks reviewing every part of the business and we are confident that these changes will materially improve profitability and our operating cash flow in H2 FY18 and beyond," said Inabox chief Damien Kay.

"We regret the impact of the changes to the staff who are affected and will be ensuring that they are offered support throughout this period."

Inabox acquired managed cloud hosting provider Hostworks for $7 million earlier this year. However, Inabox revealed last month that Hostworks' poor performance would have a significant negative impact on the group's overall financial performance.

Hostworks was initially expected to contribute $21.8 million in revenue and $3.5 million in earnings, but Inabox downgraded that outlook to just $15 million in revenue and negligible earnings.

Inabox also announced that it negotiated changes with its financial arrangements with the Commonwealth Bank of Australia, allowing the company to extend its overdraft facility. Inabox will use the new facility to support growth initiatives and fund costs associated with the cost reduction plan.