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​SMS takes 45 per cent earnings hit after difficult year

​SMS takes 45 per cent earnings hit after difficult year

Tough year delivers a 'disappointing' result for SMS Management and Technology.

SMS Management & Technology (ASX:SMX) has reported a 'disappointing' 45 per cent drop in its annual earnings before tax (EBITDA) for the year ending June, to $15.7 million, and a 43 per cent fall in its net profit after tax (NPAT), to $9.7 million for the period.

At the same time, the Australian Securities Exchange (ASX)-listed company recorded an 8 per cent slide in revenue, taking in $328.7 million for the year.

While SMS Management and Technology CEO, Rick Rostolis, told shareholders that the full-year results are in line with the guidance provided in May, he conceded that the company's performance during the year had been disappointing.

“The performance of our SMS consulting business in 2016 was disappointing, impacted by a number of factors that saw a significant slow-down in contract wins and revenue,” said Rostolis in a statement.

The contributing factors cited by the company for the poor performance of its consulting business include the implementation of a national sales and delivery structure in July that caused “significant disruption to sales effectiveness with a resulting deterioration in financial performance”.

The company also pointed the finger at an increased cost investment of $1.5 million in its management services business development, a continued slow-down of the Western Australia market, and termination costs of $700,000 in relation to senior management changes in May.

Former CEO, Jacqueline Korhonen, resigned in May after 15-month stint in the company’s top job. At the time, SMS chairman, Derek Young, said that recent performance had been “disappointing and well below expectations”.

Additionally, SMS reiterated the sudden and unexpected cancellation of a large client transformation project, which it highlighted in its first-half results earlier this year, when it reported a five per cent drop in revenue to $168.1 million for the six months ending December, and an 18 per cent fall in net profit for the period.

“It has been a challenging year for SMS,” said Rostolis. “We have expended considerable effort in recent weeks initiating actions to stabilize the business in order to restore growth. These actions have included an alignment of our sales and delivery teams on a regional basis to drive deeper engagement with clients.

“On a positive note, the growth in our contract recruitment business led to further improvement in M&T Resources,” he added. “We have also expanded our national capability development team to broaden and enhance our service offerings and strengthen delivery management.”

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