It's fair to say it has been a disappointing year for shareholders of SMS Management & Technology Limited (ASX: SMX). Unfortunately the year just got worse today following the release of the company's AGM presentation.
In early afternoon trade the information technology solutions provider's share price is down 13% to $1.41, bringing its year-to-date decline to a massive 53%.
In August the company released full year results which revealed an 8% year on year drop in revenue to $328.7 million and a 43% plunge in net profit after tax to $9.7 million.
The unexpected loss of a large client transformation project at the start of the financial year was largely to blame, leading to its SMS Consulting division posting a 14% drop in revenue to $234.4 million.
Considering the segment accounts for 71% of total revenue, its underperformance makes a noticeable impact on the company's overall performance.
At the time I pointed out that management had not advised of an improvement in trading conditions during the first six weeks of FY 2017. This led me to believe that a turnaround was not forthcoming and that investors would be better off staying away until today's trading update.
As it turns out a turnaround has not materialised and the company's performance continues to weaken. The deterioration of its sales pipeline and contract wins in the second half of FY 2016 has had a negative impact on the first four months of FY 2017.
As a result management expects first half FY 2017 revenue to be in the range of $150 million to $155 million, with EBITDA of approximately $4.5 million to $5 million prior to significant items.
This will be a drop from last year's result, which itself was down significantly from the same period a year earlier. Half year revenue in FY 2016 was $168.1 million, with EBITDA coming in at $11 million.
Once again I would urge shareholders to keep clear of the company until there is a vast improvement in its performance. Until then industry peers RXP Services Ltd (ASX: RXP) and Melbourne IT Limited (ASX: MLB) may be better investment options.
