Hurt by client losses - “Disappointing” results for STW

Rachael Micallef
By Rachael Micallef | 20 February 2015
STW CEO Michael Connaghan

STW CEO Michael Connaghan has called the group's 2014 full year financial results “disappointing”, as it posts a 7.8% drop in underlying net profit after tax (NPAT) to $45.6million and announces it is undertaking a strategic review.

The group's full year financial results recorded EBITDA of $87.6 million, down 5%, however revenue increased by 10.1% to $442.9 million.

In STW's results presentation, Connaghan said the group experienced “a very tough year” in 2014.

“We wanted to come here today and make no bones about the fact that we were very disappointed in our performance,” Connaghan said. “The earnings slide of 7.8% is just not up to our standard.”

He said the financial results were impacted by a soft final quarter of the year as a result of “clients delays and deferrals” in December.

Connaghan also said key client losses during the year in its more traditional areas of business, grouped as “brand” and “media management” had an impact on its financials as well as subdued demand in the industry. Losses for the group as a whole this year included big names such as the creative work for Myer, Vodaphone and St George, the digital work for Panasonic and the media work for Diageo and Coke.

Connaghan said in a market as small as Australia, losses that big are hard to replace.

“If you look at our client losses they're big and they hurt,” he said.

“We're always in a battle for market share but unfortunately 2014 was the the year that we were on the wrong side of the battle, particularly in the traditional businesses.”

“It's in our more traditional business of brand and media management that we struggled to grow in 2014. We went backwards, but this is unfortunately where we struggled the most with our win loss record of clients.

“But it is pleasing on the other side of the ledger digital data and the shopper and retail we have solid growth in 2014.”

However Connaghan said the group has already commenced a strategic review as it looks to improve future performance.

“We're aware it's not good enough and that we were taking measure to make it better,” he said.

We have a full strategic and structural review under way from which we believe we will not only gain significant cost savings and efficiencies but it will enable us to better help our companies with more collaborative better efforts make better margins and continue to be the dominant player in our region and our industry.”

As a result of the strategic review and limited insight from the 2015 months to date, Connahgan said the group would not be providing specific full year growth. It expects to see year-on-year growth but it “would not predict anything more than low single digital growth in NPAT at the current time.”

Big wins for the group over the year included media work for Flight Centre, creative for Lion Nathan, Qantas and Jenny Craig and digital for Kmart. The group also successfully defended media for CBA, creative for BMW and the creative, digital and media work for Westfield.

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