SMS flags further M&A potential


Australian IT services outfit SMS Management & Technology today said it expected to have a busy year investigating potential acquisitions, with one case currently in due dilligence and active discussions under way.

The company has acquired a number of smaller firms over the past several years, including TIbco specialist Aipex and data management consultancy Pelion in 2009.

“There’s enough that we would consider to be good companies,” said SMS chief executive Tom Stianos (pictured) today in an interview after the company released its financial results for the six months to 31 December last year. Revenue in the period was $117.1 million, a figure down 3.1 percent on the same period in 2008, while profit after tax was up 9.3 percent to $13.3 million.

Stianos said that after the global financial crisis, things were starting to heat up in the local IT services market.

SMS, for example, has been involved in a raft of projects with customers like the National Australia Bank, CGU, ANZ Bank and Cathay Pacific. The mining sector was showing signs of increasing investment, Stianos said, and the company’s Pelion acquisition was paying off, with staff focused on business intelligence and data integration being run off their feet with work.

And the energy sector was also proving fertile ground for SMS as utilities advanced smart metering plans.

Stianos said while SMS wasn’t involved in any larger merger plans, it was interested in smaller ‘bolt-on’ acquisitions in various verticals because it delivered SMS deep specialisation in certain domains.

It’s a strategy that other similar companies have also pursued. For example fellow IT services group UXC operates various subsidiaries in discrete areas like Oracle and SAP systems integration and unified communications.

SMS has also started “aggressively growing headcount,” according to the executive, after the company shed a number of staff and contractors in the second half of 2008, with the global financial crisis worrying local firms.

Stianos said during the period the company had retrenched about 10 people from its Canberra office as the impact of the Gershon review into government ICT spending had taken effect, and maybe “half a dozen” in NSW. “In the scheme of things it was tiny. I think it was the right thing to do at the time,” he said.

117 contractors were also cut in the period, but Stianos said that was the nature of contracting. At the end of December 2009, SMS had 1,193 staff, up from 1,168 six months earlier. 718 of those were permanent consultants, with an additional 51 to start since the results were locked in at 31 December.

Like other IT services companies, SMS’s share price has recovered considerably over the past year as confidence came back into the market. Stianos said anecdotally he knew some SMS staff had taken advantage of the lower prices and reaped windfalls. The son of a neighbour at Stiano’s country property had bought quite a bit of stock in the company, he said, at low prices.

“Apparently he did pretty well.”

Image credit: SMS Management & Technology