SMS paints grim IT consulting picture

SMS paints grim IT consulting picture

ASX-listed IT consulting company, SMS Management and Technology, claims that the last financial year was a “20-year low” for the consulting and IT services market, reporting a massive drop in revenue and a substantial net loss.

The company’s total revenues dropped from $132.8m in 2001/02 financial year to $84.8m for the 2002/03 year, a drop of about 37 per cent.

The company reported a mildly positive EBITDA (earnings before interest, taxation, depreciation and amortisation), but also wrote off about $98 million in goodwill, equating to a net loss of $106.8 million.

Last month, PricewaterhouseCoopers analysts predicted a flurry of asset and goodwill writedowns among tech companies reporting their results for the last financial year, under the assumption that many directors had previously over-stated the market value of their companies.

While its core consulting business performed below expectations, the division did earn positive returns for SMS– while its now divested development arm, METHOD, and its international operations performed poorly.

SMS responded to the downturn with a dramatic restructuring over the last 24 months. Corporate overheads have been halved - slashed from $10.6 million per annum to $5.1 million per annum. The company has also replaced its UK division’s management and divested all non-core businesses.

Chief executive officer, Tom Stianos, moved to reassure the investment community, pointing to the “healthy spread” of vertical industries among SMS customers – with 24 per cent being in the banking and financial services industry, 18 per cent in communications and technology, 14 per cent in utilities, 12 per cent in defence, 11 per cent in government and 6 per cent in industrial and resources.

The company also highlighted the $36.1 million in cash, it still held in reserve.

“SMS remains in a sound financial position,” the company said it a statement to the ASX. “The business is in good shape to deal with an uncertain market, but also well tuned to pick up in demand for its services.”

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