Marketing services company Salmat records $5.2m loss after strategic review
Over $16m in significant items costs has been blamed for Salmat’s $5.2m loss, announced to the ASX today.
In the 2017 financial year the company improved its fortunes, posting a $4.3m profit after an $8m loss the year prior, however restructuring costs following business sales and “an impairment on loss of goodwill in the Marketing Solutions operating segment” held the business back this year.
Salmat is suffering from the ongoing decline in its catalogue business
The company said continuing industry decline in the catalogue business, ongoing pricing pressures in the market and non-performance of some of the digital business ultimately cost the company $15.3m.
Wait a minute…. a business that peddles junk mail as it’s primary source of revenue is….. struggling?
The catalogue industry in general has declined, not just Salmat, but other large Australian Catalogue distribution companies.
The Catalogue industry is a dying industry that is high cost to retailers, whereby digital is a low cost, compared to the printed format.
It will come to a point in time, whereby you will not see the national catalogues in letter boxes anymore, Digital power house will come to play.
A survey was conducted, a few years ago in relation to consumer shopping habits, (Food Shopping) and at the completion of the survey, the survey found that the location of shopping stores, was the biggest driving force of where to shop.( Consumer time management) not Catalogue distribution to the letter box
The only way for the Catalogue distribution to survive in Australia is for Salmat Catalogue Distribution and PMP Catalogue Distribution to join forces, for a lower running cost of catalogue distribution.
There will always, be a market for local business to advertise their business within smaller advertising catalogue distribution companies
The catalogue industry is (of course) in decline, and will only get worse. It’s shocking that companies like Woolworths and Coles waste so much money on printing catalogues when the information is easily available online.
I notice that Salmat is under investigation from the Fair Work Ombudsman for underpaying “walkers” aka the people that stuff junk mail into your letter box too. This was always in the post and it is common-knowledge within Salmat that the effective hourly rate of these “walkers” is in the $5-7 range – far below minimum wage.
The poor pay of these walkers makes it hard to fill positions, even more so in affluent areas. This causes huge problems for Salmat because they sell at marginal rates to supermarkets who prop up the network so that they can sell profitably to others.
Think about it this way – if you can’t get someone to walk a couple of areas in the eastern suburbs of Sydney it’s no big deal for a supermarket because the volume still stacks up nationally, but if you’ve sold it to a small business and that’s 20% of the area being delivered to that you can’t do, it’s a huge problem.
So Joe is right, but also the inherent flaws in this business model mean it’s not as straight forward as you might think.
PMP and Salmat will no doubt merge, else they are both toast. I’d suggest Salmat’s selling of non-core assets and several rounds of staff redundancies through FY18 are an indication that they are trying to save their way to a deal of this nature and prop up the share price in the interim.
I do not know if your company was or is in charge of delivering weekly catalogues to Craignish Qld but if you are you do a lousy job. My nextdoor neighbour receives the catalogues but I do not. How many more people in the area do not receive them. If you run the rest of your business the same way I can understand how you are loosing money