Hard landing from soft market for Salmat

Contract closures and soft market conditions have been identified as two of the main culprits behind Salmat’s 12.7 per cent drop from last year’s first half earnings, with the company this week announcing a $7 million slump from 2011’s results.

The printing, distribution and digital marketing solutions company this week reported that its earnings before taxes and costs (EBITDA) dropped by 12.7 per cent to $48 million from the previous year’s result of $55 million. However, the company recorded a slight rise of 5.7 per cent on the previous half’s $415.4 million from the end of June 2011.

The first half of 2011’s EBITA result was $48.8 million, while this year’s was $38 million, representing a 22.1 per cent drop for the same period.

Due primarily to the closure of its Telstra CCS contract, Salmat’s Customer Contact Solution division’s revenue was down 25.5 per cent on the previous year to $121.3 million. The company says softer trading conditions and new start up costs were behind the slump.

“This year we are experiencing the double impact of subdued trading conditions and continued investment in transformational change,” says Salmat CEO, Grant Harrod (pictured). “Considering these factors, I’m please to report that our traditional businesses have continued to post resilient underlying results and that our journey to a stronger digital presence is well underway.”

The company’s Targeted Media Solutions division revenue for the half was up on last year’s $121.8 million by 17 per cent to $142.5 million, however this result was impacted by heavy investments in the division’s growing digital businesses, leading to an underlying EBITA result of $18.7 million, 16.9 per cent down the previous year for the same period.

In all, the company has spent $2.5 million on its Lasoo online shopping site, $0.5 million on its Roamz e-commerce site, and $0.8 million on other digital ventures in the first half of this financial year.

Salmat’s Business Process Outsourcing division revenue was down 2.6 per cent from the previous year, to $158.6 million. While overall volumes declined, new business wins saw mail pack volumes increase from 508 million in the half ending June 2011 to 539 million in the current half. Document volumes also increased in the same period.

“Following December and January trading, clients have highlighted growing uncertainty around trading conditions as most sectors experienced reduced demand,” says Harrod. “In light of the deterioration in sentiment, we are adjusting our forecast for underlying EBITA for the full year of $78 to $83 million.”