Systems integrator SMS Management and Technology today reported a 15 percent drop in net profit to $12.9 million for the first six months of fiscal 2013, threatening to end a three-yearly run of uninterrupted growth.
Revenues were down 14 percent to $144.8 milion, dragged down, the company said, by the slowdown of two significant customers.
SMS also blamed underperformance in the transport and ICT sectors for the decline, citing “client focus shifting from expansion to cost control, capital project referrals and slow decision making on new initiatives”.
CEO Tom Stianos told CRN the company had anticipated a slowdown in two of its major clients, one based in Asia, at the start of the year, but a slew of new contracts meant the company would not rely so heavily on a small amount of clients over the next six months.
“The business has been remarkably resilient outside of those two clients. There’s no question the market is tough, but the business has been resilient in other areas, which says despite those conditions, we’ve been able to perform well," Stianos said.
“The situation in Hong Kong is very unique. We’ve only been there two years, and our very success was our exposure. That doesn’t exist anywhere else. And what’s happening now is we have good inroads into five other clients, and we’ve got a much better foundation on which to build.”
He said a number of new projects within defence, telecommunications, health, state government and banking were in the pipeline but declined to comment due to client confidentiality.
SMS also supplies IT services to telcos and other companies in the technology sector. This part of the business contributed 15 percent of the company's total sales, down from 19 percent for the previous corresponding quarter, while transport also fell from 10 to 6 percent of overall sales over the period.
Revenue from financial services, health and utilities sectors all grew with the former contributing the biggest portion of sales at 22 percent. The company has no debt and $29.3 million cash in the bank.
Acquisitions imminent
Last year the company announced it was on the hunt for potential purchases. Its last acquisition was over two years ago, and Stianos said SMS M&T was currently in advanced discussions with two players in the IT sector over potential buyouts.
He declined to provide details but said both were in similar fields; specifically services with some cloud offerings. He said should the deals go through, they will be announced in the next few months.
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