Clarius has shifted its focus away from acquisitions to organic...

Clarius has shifted its focus away from acquisitions to organic growth, CEO Diana Eilert told analysts today when announcing a 15% fall in net profit after tax to $11.3 million.

The result was in line with Clarius's guidance to the market earlier this year, and included about $750,000 in one-off costs from staff changes and redundancies.

The profit fall was on an 8% rise in revenue, to $321 million, but the top-line increase was almost entirely driven by the company's acquisitions of JAV IT and Southtech Personnel.

Eilert told Shortlist that the strategic shift to focus on organic growth was a factor of both the market and the need to build a more sustainable organic growth path for the group.

She said in the past Clarius had relied on acquisitions to boost its growth, "but the fact is you have to have an organically growing business".

"We don't believe an acquisition centred growth strategy is beneficial to shareholders at this time."

Eilert said while Clarius would continue to look for "opportunistic" acquisitions, the market had fundamentally changed and most vendors hadn't readjusted their price expectations. This meant the "acquisition equation just doesn't work at the moment".


EBIT down on client loss and contractor decline
Clarius's group EBIT declined 10% to $17.8 million after a fall in profit contribution from its core Candle business and reduced contribution from Lloyd Morgan.

Eilert confirmed that the Lloyd Morgan business had now been turned around under the management of ex-Hudson executive Greg Smith, and was now profitable and growing. It had grown its consultant numbers by 16% in the half year and had also added 10 major new clients, Eilert said.

The Candle business also saw flat revenue and a decline in EBIT, largely due to the loss of a key client and lower workloads from others. This had resulted in a steady decline in contractors over the past two years, Eilert said, but this had now been stabilised at around 2,500 contractors.

During the year, Clarius's debt blew out from virtually nothing last year to $13.6 million, but Eilert pointed out this was still a relatively low net debt-to-equity ratio (14%) compared with many of the company's peers, and Clarius was now much more focused on its cash flow and collections.


Outlook mixed
Eilert said that for the first two months of this financial year, Clarius had experienced "mixed" trading conditions in some sectors and regions.

She said while ITC market demand was still reasonable, there was some caution evident and it lacked the strength it had a couple of years ago.

Clarius was also starting to notice tougher conditions in Asia, particularly in Hong Kong, Eilert said.

She said Clarius was well-positioned to weather any economic downturn, with low debt levels, a focus on high-growth sectors, a strong contractor-based revenue stream and good geographic and sectoral diversification.