One of Australia’s most established and long-running marketing services companies, Salmat, has entered an agreement to sell its Philippines-based managed services arm, MicroSourcing, to private equity-backed Probe BPO Holdings Pty Ltd for $100 million.
Sydney-based private equity firm Five V Capital is a backer of the business process outsourcing business, Probe Group, and in April 2018 it also acquired Salmat’s contact centre for $53m.
Salmat’s catalogue distribution businesses in both Australia and New Zealand were sold to printing and marketing giant IVE Group for $25m in November 2019 with the deal finalised on January 1, 2020.
The next to go is its Philippines-based managed services division, MicroSourcing, once shareholders and local Philippines authorities approve the deal which will be conducted via a share sale and is expected to be finalised by the end of February 2020.
The Australian Financial Review reports the MicroSourcing deal is worth $300m with Sydney-based Quadrant Private Equity joining Five V Capital in the buyout.
In the statement to the ASX, Lowde said with the sale of Salmat Marketing Solutions and Reach Media New Zealand now complete and once the MicroSourcing division is finalised, it will be time to “review all options available to the Company to return value to shareholders”.
“MicroSourcing has been a strong performer for Salmat since we acquired the first 50% of the business in December 2013, achieving revenue and earnings growth year on year,” Lowde said in a statement to the ASX.
“We believe that this proposal represents the best option for all stakeholders. New capital partners should enable MicroSourcing to invest in additional growth and the completion of this transaction will return funds to Salmat.”
Salmat’s 2019 annual report indicates a fully year 2019 net loss after tax from continuing operations of $26m, with a $5.2m loss reported in 2018. The 2019 figure also included $38.1m in significant items including restructuring costs, industry reviews and a $35.9m impairment as the catalogue market faced a challenging year through competitive pricing pressure and volume declines in Australia and New Zealand.
A segment breakdown shows its marketing solutions revenue was $162.4m, down from $176.9m in 2018, on the back of a 2.6 per cent decline in catalogue volumes. Underlying EBITDA of $10.2m, down from $16.6m in 2018, was driven by increases in catalogue weight and reduced volumes across the distribution network putting downward pressure on margins. Reach Media in New Zealand also suffered a $0.2m loss, against a FY18 profit of $0.4m.
The managed services division, MicroSourcing, improved revenues however bringing in $87.8m in 2019, up from the $72.8m in 2018. New business growth in this segment added $4.1m. Underlying EBITDA was also up for 2019 to $13.4m from $10.5m in FY18.
Probe BPO is part of the Probe Group, which provides outsourced sales, service and help desk contact centres.
Salmat was co-founded in 1979 by current chairman Peter Mattick and evolved from being a small letterbox distribution business to an ASX-listed company working with some some of Australia’s most recognised and trusted brands.
It also was the creator of the Lasoo online catalogue site which extends the reach of the printed catalogue and takes shoppes right to the checkout with sophisticated date and analytics to help inform highly targeted marketing.
The purchase of this division to IVE was completed on January 1, 2020 and Salmat’s distribution service is now accessible via IVE’s rebranded website www.ivegroup.com.au.
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