Salmat has seen its profit margin almost completely annihilated after two major client losses put the squeeze on its catalogue business.

Profit for the catalogue and marketing giant was down 98 per cent for FY2014 to just $800,000 after riding high at $40.1m a year ago.

Its total revenue fared a little better at $452.8m, 3.2 per cent down on last year. Underlying EBITA was $8.6m, a fall from last year’s $25.8m, including $9m of operating expenses from a ‘group transformation strategy’.

Catalogue volumes fell overall by four per cent to $4.8bn, as two major discontinued catalogue contracts left a gap in sales.

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The slide in consumer marketing revenue was somewhat alleviated by new sales of $30m, with increased catalogue volumes at the top tier and small and medium business level – meaning that underlying volumes, excluding the two lost key contracts, rose by more than five per cent.

Salmat also plans to cross-sell to a new group of mid-tier clients brought in by its acquisition of e-commerce business Netstarter.

The company says it is seeing a ‘significant increase’ in the number of clients taking up its Universal Catalogue system, a combined online and offline approach. It intends to continue to divert other media spend to catalogues in FY15.

Salmat chief executive Craig Dower claims the company is making progress with its growth strategy.

“While initiatives such as the Reach platform migration have taken longer than expected, other milestones have been achieved on time,” he says.

 “We are looking forward to the next stage, where we start to see the growing sales pipeline increasingly converted to booked business in the second half.”

Email and SMS consumer marketing solutions fell 11.7 per cent to $746m, while the overall sales revenue for its customer marketing solutions – which includes the catalogues segment – declined 0.6 per cent to $259.2m.

Customer engagement solutions fared less well with revenue dropping 6.5 per cent to $187.9, thanks to a discontinued energy business as well as some contact centre closures and contracts that moved offshore.

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The company is in the first of a three-year transformation to make better use of incoming technology platforms in an ‘intensive investment and building phase,’ which includes new hosted data centres and an expansion of its Reach cloud platform.

Demerging its BPO division (sold to Fujifilm) cost the company some $5.9m, and the acquisition of Netstarter and 50 per cent of Philippines-based outsourcing company MicroSourcing hit the bottom line.

Pressure from the ACCC also saw energy retailers pull out of the door-to-door business, while delays in the implementation of Reach saw a lag in revenue.

Salmat says it aims to become a technology platform centric business, allowing it to capture opportunities in ‘emerging high growth digital communication and commerce channels.’

Dower says the benefits of its transformation efforts should start to flow from 2015. He expects top line growth for FY15, with anticipated sales growth in the order of 15 per cent.

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