BWM’s Telstra loss hurts improving Photon balance sheet

In its latest half-year financial results, Photon Group announced that is debt free with a cash balance of $32m – but the performance of its Australian agencies was “significantly lower” than last year, largely due to BWM’s loss of Telstra.

On the group’s balance sheet for December 31 2011, revenue from its Australian agencies – which include BMF, BWM, Naked and The Leading Edge – was down 6% to $139.4m. EBITDA fell by 38%.

BWM lost the $10m-15m Telstra account in May 2011, which led to eight people at the agency being laid off. Photon also highlights “three smaller agencies” for performing poorly over the last six months.

However, Photon has wiped out its debt from the sale of its field marketing and retail sales businesses. It has closed Counterpoint and Yield Media in the second half of 2011.

The restructure was instigated by CEO Jeremy Philips, who has left the company. He has been replaced by the company’s head of Australian agencies, Matt Melhuish, the co-founder of BMF.

In a statement on the ASX, Melhuish said of Photon’s future strategy:

Photon is an excellent position to consolidate our operations in their core markets, while selectively exploring geographic expansion. Our business is centred on strategy, insights and ideas.

We are debt free and have some of the very best businesses and talent in the marketing and advertising industry. As we now turn Photon’s efforts squarely towards growing our businesses, I believe the company’s future is bright.

Enhanced digital capabilities need to be at the core of everything we do and this is a core skill we will continue to develop at all of our businesses. A set of simple robust systems need to support all our businesses in finance, IT, human resources and legal. Some adjustment to the incentive plans will also be required to enhance motivation and unlock discretionary effort.

Of Photon’s $32m in free cash, $16m will be used to pay off costs from the restructure as well as earn outs.

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