STW’s Net Profit Drops 22.5%, CEO Calls It “Disappointing”

STW’s Net Profit Drops 22.5%, CEO Calls It “Disappointing”

Marketing and communications network STW has released its half yearly results from the half-year ending June 2015.

B&T Magazine
Posted by B&T Magazine

The results show revenue for the network is up 3.3 per cent to $194.4 million, up from $188.3 million from the same time last year. However the network reported a loss of $73.4 million with the underlying net profit after tax dropping 22.5 per cent to $15.1 million.

STW went through a significant strategic restructure in early June, creating a new executive council where each area of STW will report into the appropriate EXCO (executive council) member in an effort to provide deeper insights into the company. The strategic review included the creation of a new management structure (EXCO) as well as number of business mergers, consolidations and divestments.

At the time, STW CEO Michael Connaghan (pictured above) said he was confident in the new strategy. “The new initiatives will allow us closer insight, enable better optimisation of group resources and importantly help us to drive organic growth and deliver value to all stakeholders. STW Group is well placed for future growth.”

In the release statement about its half-yearly results this morning, Connaghan said the results were disappointing, however they knew the first half of the year was going to be tough.

“STW’s underlying net profit after tax of $15.1 million is down 22.5 per cent on the prior period,” he said. “We knew that the first half of 2015 was not going to be easy as we lost some big client mandates in 2014. 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.

“STW’s revenues have grown by 3.3 per cent to $194.4 million, however, this growth is driven by acquisitions and organic revenue has declined by 4.2 per cent.

“We have taken 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 reported result includes non-cash impairment charges of $78.9 million, and costs related to the strategic review and other one- off costs of $9.6 million. The one-off costs relating to the strategic review have largely been incurred in the first half of the year.

“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.”

Looking at the full year though, Connaghan believes there’s light at the end of the tunnel.

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

“We remain entirely confident in our strategy. We now need to focus on the speed and intensity of our execution. The new structure with the executive committee in place will allow us to help 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.”