Buoyed by strong fiscal, SMS M&T eyes further acquisitions

Consulting, technology and systems integration company, SMS Management & Technology (M&T) has posted a 10 per cent increase in revenue to $335.8 million for the year ended 30 June, 2012.

The company’s EBITDA (earnings before interest, tax, depreciation and amortisation) grew by five percent to $44.3 million, while the consulting side of the business grew its EBITDA by seven per cent.

SMS Management & Technology (M&T) CEO, Tom Stianos, says that he is “happy with the results,” adding that the company is continuing its yearly trend of growing its top line.

“More importantly, we’re growing at a faster rate than the services market,” he said.

While the company did take a six month break last year from acquisitions to focus on consolidating its position and improving utilisation, Stianos says that SMS M&T is now “definitely on the acquisition trail.”

“We intend to find companies that are going to add capabilities to what we do, so we don’t want o buy companies that we’re already strong at, or adding markets or access to clients,” he said.

If the right criteria are met, Stianos confirms that SMS M&T will look into making further acquisitions in the next 12 months.

“With cash in the bank, we’re not a company that needs a lot of capital invested,” he said.

Stianos points to research conducted by various analyst firms that the growth of the local services space is approximately at three per cent, but SMS M&T grew ten per cent this year and 23 per cent last year.

“And this is after we didn’t do any acquisitions in the last 12 months,” he said.

“If we look at the contribution from last year’s acquisitions, that give us about eight per cent growth organically, which is still double to the rate the industry is growing at.”

As such, SMS M&T is in the position where it know it is gaining market share, no doubt helped by the fact that it finished the year with an excess of $30 million in the bank.

The consulting business, where 93 per cent of SMS M&T’s profit comes from, grew by 7.5 per cent even though it had costs associated with establishing the Asian business and a fall in revenue from the finance sector.

“Despite that, we still managed to grow profit,” Stianos said.

The name of the game now, according to Stianos, will be to maintain growth of the company over the next 12 months.

“The main focus is to increase earnings and not growth for growth’s sake,” he said.

The other goal is to maintain the company’s history of having a "reliable performance" in earnings per share and also dividends.

“We have a policy of paying between 65 to 75 per cent of net earnings as dividends, and while it is perhaps not as generous as rates that go to 80 or 90 per cent, it is very dependable,” Stianos said. “If you pay 90 per cent one year and nothing two years later, that’s hardly consistent.”