Transcription of Finance News Network interview with SMS Management and Technology Limited (ASX:SMX) CEO, Jackie Korhonen
Carolyn Herbert:SMS Management & Technology is a leading Asia Pacific consulting, technology and managed services firm, employing 1,700 professionals in offices throughout Australia and Asia. The company helps its clients improve their business performance by designing, building and operating business and technology projects, end-to-end.
I’m Carolyn Herbert and joining me at The CEO Sessions in Sydney is the Company’s Managing Director and CEO Jackie Korhonen.
Jackie Korhonen:Thank you Carolyn.
Carolyn Herbert:Jackie for investors who aren’t familiar with SMS Management & Technology, can you give us an introduction to the company?
Jackie Korhonen:Yeah, sure Carolyn. So we’re an IT services company, we’ve been in business now for 29 years. For about 15 years we’ve been listed on the ASX, as you mentioned we have offices all around Australia in Perth, Adelaide, Melbourne, Sydney, Canberra and Brisbane. We also have offices in Asia, in Hong Kong and Singapore and we’re just about to open an office in Manilla for a delivery location.
We have about 1,700 professionals also we have a wide range of partners and alliances that we work with. And we provide clients with the full range of IT services from consulting to implementation and management services. We also have a history of making acquisitions and we’ve had some successful acquisitions that support our strategy and complement our organic growth.
Carolyn Herbert:And now to your full year results for FY2015, what were the highlights?
Jackie Korhonen:So in FY15, we had a record revenue result of $356 million; our EBITDA result was a 37 per cent increase on our previous year; our NPAT result was a 34 per cent increase on the previous year, and we ended the year with $9.2 million of net cash.
Carolyn Herbert:And can you tell us about the dividend, what was the dividend for the half and total for the year?
Jackie Korhonen:Yeah we pay a fully franked dividend and our board has a policy of paying 65 – 70 per cent of our profit in dividend. In FY15, our H1 payment was 7 cents per share, and in H2 10 cents per share; so that 17 cents per share payment was up about 34 per cent on the previous year.
Carolyn Herbert:And now to the SMS business. What is the revenue split between your IT advisory, solutions and managed services offerings?
Jackie Korhonen:So today the majority of our revenue comes from our IT advisory, consulting, and solutions business but if you look into the medium term our plan is to have a third of our revenue come from our consulting and advisory services; a third of our revenue to come from our solutions and implementation services, and a third to come from our managed services offering.
It’s very important to our business model that all three elements of our business stay strong with revenue growth, but if you just do the maths it probably means in the next few years the highest percentage of revenue growth will come from our managed services offerings.
Carolyn Herbert:So how do these services benefit clients?
Jackie Korhonen:So for most organisations, it’s not really advisable or desirable anymore to have all their IT capabilities in house. Many organisations find it better to partner with organisations such as ours. If you look at our services, our advisory and consulting services support clients in building an IT strategy that supports their business strategy. We have people who understand our clients’ industry, who understand the technology trends, also who have tools such as design thinking tools that lead our clients through that process.
So once our clients have their IT technology strategy, the next phase is to implement that strategy and that’s where our solutions offering come into play. So we then help our clients implement their IT strategy, we have systems integration capability, we have program management capability, and we’re also prepared to work on an outcomes base and commit to deliverables for our clients. And then once those systems are implemented, the client is looking for partners to help them manage that on an ongoing basis and that’s our managed services offering.
We support our client’s end users, we support their software and their applications and also the infrastructure environment whether that be public or private cloud or their own data centres.
Carolyn Herbert:Looking at the technology market more generally, what emerging technology trends are you seeing at the moment and how is the company poised to take advantage of this?
Jackie Korhonen:So let me just make the general comment first that I think the acceleration we’ve seen in technology change is only going to continue. So for organisations, the ones that will be successful are the ones that can make most advantage of that technology environment. And I think it’s no longer something that’s optional, I actually think it’s a staying in business question. So, having said that, we’re seeing three major trends that are driving our clients; the first I’ll call ‘user’ or ‘customer experience’. So more of our clients are looking to do business digitally over the internet, over the web. So it’s very important to them to make sure that their customers have a great customer experience when they do their transaction. Part of the challenge of this is that new technologies such as mobile phones, tablets, androids, and increasingly wearables, things like watches, are giving our clients a challenge of how do they make that experience the same? Whether someone interacts over the phone, whether they interact through their ipad, or through any other device. So that's an emerging trend and also a challenging trend for our clients.
Out of all that, we’re seeing the second trend, so with this increase in digital activity, our clients are getting a lot of data, and their challenge is how do they turn that data into real business insight. How do they use the data to help them reduce their risk or their costs, or even to develop new products and to understand the demographics of their clients. So that area of data analytics and business intelligence is also growing.
The third trend we’re really seeing is the use of the cloud. So default now, the public and private clouds, are really seen as the infrastructure for the technology of the future. Customers and organisations who can understand how to take advantage of the cloud, what they should put in the public cloud, what they should have on a private cloud – those organisations will get benefits such as reduced costs, increased flexibility, more responsiveness. So our organisation is setting ourselves up and building our capability to support our clients take advantage of these trends.
Carolyn Herbert:And finally Jackie what’s your priority for the next 12 months?
Jackie Korhonen:Yeah so I’ve been in SMS now since February and since coming on board we’ve done a renewal of the leadership team, we’ve brought in new leaders with expertise in sales and delivery and marketing. We’ve also made some organisational changes in the business to better focus on our clients and also to better build our capabilities and our quality processes and to build customer satisfaction. So with all that going on, my priorities will be to bed down the new leadership team and the new organisational structure and at the same time, not district people from the day to day business and delivering the results that we need to.
Carolyn Herbert:Jackie Korhonen thanks for the update on SMS Management & Technology.
Jackie Korhonen:Thank you.
Ends
