STW reports ‘disappointing’ first half but insists ‘tough decisions’ will deliver future growth

stw logoSTW Communications Group has described the first six months of the financial year as “disappointing” after underlying net profit after tax tumbled 22.5 per cent to $15.1m.

The result, which saw organic revenue fall 4.2 per cent, comes on the back of a turbulent 2014 which saw profits fall and its share price collapse amid dismal performances from a number of its divisions.

The first half of this year has seen the the group consolidate a number of its agencies including rolling moon Communications and Shift into media agency Ikon.

STW’s share price fell a further 11 per cent to 63 cents this morning at time of publication, less than half what is was this time last year. It gave the company a market capitalisation of $276m.

Last year’s stuttering performance sparked a strategic review – now complete – which saw it merge a number of businesses and create a new management structure designed to take a firmer grip of its subsidiaries and instil “financial discipline” across the business.

Chief executive Mike Connaghan said of its first half results: “We knew the first half of 2015 was not going to be easy as we lost some big client mandates in 2o14.

“But while we made significant progress in winning new business and our win/loss record has improved, it has not bridged the gap to make up for significant client losses last year.”

While total revenue in the six months to June 30 climbed 3.3 per cent to $194.4m, Connaghan said the growth was driven by acquisitions while organic revenue fell 4.2 per cent.

Mike Connaghan July 2014 (2)

Mike Connaghan

He added: “We have made some tough decisions in the first half of the year to restructure the business for STW to meet the challenges faced in the current trading environment and to position STW for future growth.

“This has led to STW incurring a number of one off costs that have further impacted the weak reported half year result.”

The business incurred non-cash impairment charges of $78.9m and costs associated with the strategic review “and other one-off costs” of $9.6m.

Connaghan, who in June revealed the group was in the process of reducing its number of businesses from 80 to 50, said he remained “entirely confident in our strategy”.

“The first half of the year has been disappointing. However, the tough decisions we have made and costs incurred will begin to deliver benefits in the second half of the year,” he said.

“The expected 2015 full year profit will still be behind our 2014 result but certainly the trajectory is headed in the right direction. By 2016 we should see the full benefit of the cost out program associated with the strategic review.”

Part of the review saw the creation of a 14-strong executive committee to keep tighter control of its businesses, some of which Connaghan admitted has “let down” the wider company.

The new structure, now in place, will help STW “drive efficiencies, take advantage of our scale and leverage the incredible resources and talent the STW Group has at its disposal”.

“It is tough but our strategy, the business the clients and the talent in the group will see us through and return STW to growth,” he said.

Steve Jones


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