Australian systems integrator (SI), SMS Management and Technology, has reported a 55 per cent drop in net profits for the half-year ended December 31.
Despite recording a six per cent increase in total revenue from ordinary activities, up $8.7 million to $153.5m, the company’s net profit for the period fell $7.1m to $5.8m.
The Board has declared a fully-franked dividend of $0.05 per share in line with its dividend policy.
According to a statement from SMS to the ASX, the result was in line with the guidance provided at its October 2013 Annual General Meeting.
SMS claims it has been impacted by one-off factors including: a $1.1m write-off of accrued revenue and trade debt on withdrawal from an unsatisfactory sub-contract in Singapore; $0.4m termination costs associated with streamlining the corporate overhead structure; $0.4m due diligence and acquisition-related costs.
New contracts signed during the first half totalled $174.7m, up 10 per cent. During the six months, up-front acquisition payments of $24.6m were made in relation to Indicium ($12.1m) and Birchman ($12.5m, funded by debt).
The SI expects the second half of the fiscal year to benefit from: six-month contribution from its September acquisition of Perth-based MSP, Birchman Group; the merger of WA consulting operations into Birchman; withdrawal from loss-making Singapore sub-contract; reduced Vietnam overhead costs; streamlining of the corporate overhead structure.
“In recent months, the company has observed a slight improvement in business confidence with more clients taking tentative steps with new initiatives,” SMS chief executive officer (CEO), Tom Stianos, said. “However, the macro-economic environment remains what fragile.”
“The business has grown market share, partly through acquisition and party through absorbing reduced margins to shore up sales. While this has had a short-term impact on earnings, it gives SMS a good market footprint for revenue and earnings growth as the cycle turns.”
“This will also provide an opportunity for returning margins to traditional levels over time.”