No digital saviour for Salmat

Multi-channel direct marketing group, Salmat, has pointed to soft market conditions and heavy digital investments as being central to the company’s 10.6 per cent drop in after tax profit for the financial year ending 2011.

In the group’s annual general meeting held this week in Sydney, managing director Grant Harrod addressed the company’s 1.8 per cent drop in sales revenue and its 10.6 per cent drop in profit to $42.4 million.

Harrod said that acquisitions of new digital businesses and softer trading conditions had dragged down the organisation’s overall figures – a condition that has continued into the next financial year.

“The first quarter of FY12 has been continued softer trading conditions, particularly in the retail segment, which has slowed the momentum of some of our businesses,” he said.

“Given the continued volatility of the macro environment we are inclined to take a more conservative view and anticipate the benefits from our growth strategy will push into the following fiscal period as we deal with softer trading conditions.”

The 2011 financial year saw Salmat spend over $100 million in buying up digital businesses, many from the Photon group. The company’s digital drive culminated with the formation of Salmat Digital and the appointment of Nick Spooner to oversee the new department.

Despite this digital spending spree, Harrod suggested that the new department would not begin to see real profits until the second half of next year.

“The first quarter [of 2012] has generally been soft,” he said. “However, we are expecting an improvement in conditions for the second quarter. We are anticipating the second half will post a stronger performance than the current half.”

At the core of the company’s slump seems to be the drift away from traditional print mailing, with the long-term shift to electronic mail hovering around 2-3 per cent per annum.

The company intends to offset that decline by building up its BPO division and e-solutions business. However, until its new digital acquisitions begin to perform as hoped, the company can expect profits to remain sluggish.

Harrod (pictured) believes that the growth in market demand for digital incorporation into its multi-channel marketing services will translate into greater earnings sooner, rather than later, for the company.

“While our traditional communication channels remain highly relevant, demand for complementary services in the digital space continues to grow as this market grows,” he said.

Harrods announcement this week to shareholders echoes what he said in August when the company’s financial report was published, in which he suggested that, “ongoing volatility in global markets will continue to dampen local trading conditions.”