Restructure takes its toll on Salmat as revenue drops $47m

Marketing services company Salmat has managed to lift its earnings before tax by 47% despite an ongoing restructure wiping $47m from its revenue stream.

salmatThe review of its products and services portfolio launched last year saw the company drop a number of services it saw as either underperforming or non-strategic, with the direct impact of the restructure costing Salmat $38m during the 2016 financial year.

Salmat reported revenue of $450.8m, down from $498.1m in 2015, with the net loss after tax amounting to $6m – a 93% improvement on the loss of $98m in 2015.

It also reported underlying earnings before interest, tax, amortisation and depreciation of $19.6m, up 47.3% from the previous year.

Chairman Peter Mattick said the revenue hit was the price of streamlining and refocussing the business.

“The past financial year has seen a great deal of change within Salmat, at the fundamental level of how things are done, what services we offer and how we track and report our progress.” Mattick said in the shareholder review.

“While this has impacted revenue in the short term as expected, we are already seeing indicators of progress towards our medium term goals.”

Mattick said that the focus of the business had been to simplify and grow.

“Up until now the majority of the work has been internal facing,” he said.

“However the recently launched new branding and marketing program will support the shift to a more external focus driving and supporting sales growth with a clearer message about Salmat’s unique value proposition.”

CEO Craig Dower said that Salmat had gone back to basics to make sure its operating model was the right one and there was now a focus on working in areas where there were stronger margins.

“Having transformed the cost base we have seen earnings grow,” he said.

“We are now targeting new revenue that will contribute to both the top and bottom line. Our new business growth is at stronger margins than the businesses we have exited.”

Among the underperforming and non-strategic parts of the business included door-to-door and kiosk sales, eLearning and “resource intensive” bespoke software development.

“These were ramped down during FY16, freeing resources to focus on more profitable revenue in the future,” Dower said.

Media and digital sales revenue dropped by 13.1% to $254.9m, with Dower saying the slide was a result of discontinued digital and field sales services – in particular kiosk-based field sales – as well as reduced discretionary spend by retailers.

Salmat also saw nearly 45% of its letterbox distribution contracts come up for renewal during the period, with the business successful in renewing all of its major catalogue contracts.

Its contact business saw sales revenue down 3.9% to $194.9m, with new wins outweighed by lost and discontinued contracts.

However he said that a number of new wins had come in too late to have an impact on the 2016 figures.

Dower said the outlook for 2017 was positive with the results of the restructure playing an important part.

“We’ve streamlined our operations, reviewed every part of the business to improve our practicies, processes and thoroughly reviewed the product and service offering to ensure that we are participating in the fields where we can be the market leader,” Dower said.

“This has been at times a difficult process, but it has been essential for Salmat’s ongoing sustainability.”

Dower also highlighted that Salmat’s underlying earnings before interest, tax, amortisation and depreciation had now grown for four successive quarters.

Salmat shares closed at 51 cents, up one cent on the previous day’s trading and above the 52-week low of 40 cents.


Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella newsletter now.



Sign up to our free daily update to get the latest in media and marketing.