Up to yesterday it had been a tough six weeks or so for Salmat, the call centre and direct mail group.
The shares peaked at their 12 month high of $4.98 in late January, but it has been all downhill since then.
The company has produced an interim profit which disappointed, with the shares down 3.5% on the day of its release in late February.
At the time the company said it was still confident of making full year profit guidance of $92 to $97 million.
Then last Friday the company was dropped from the ASX300 index, meaning that some institutions will ignore the company as they invest to hug the index weightings.
That will see the shares lose some of their attractions as a mid cap stock.
Then yesterday those full year profit plans went out the window when the company told the market that Telstra had dropped it as a call centre supplier.
The shares fell more than 6% at one stage to a day’s low of $3.84, just over the 52 week low of $3.70. They recovered slightly to end down 5.6%, or 23c, at $3.89.
The call centre provider and catalogue-delivery company said Telstra had notified it that it no longer required the provision of its call centre services.
Salmat said its earnings before interest, tax and amortisation would drop by between $4 million and $5 million in the second half of the financial year and full year EBITA guidance had been cut by $5 million to between $87 million and $92 million.
The upshot is that unless the company finds a new call centre contract, then over 700 people will be sacked in May.
Salmat said a total of 742 full-time equivalent staff located in Sydney and regional Australia will be laid off by mid year.
The company said 330 positions will be cut in Sydney’s Surry Hills by April 30, with another 107 cut in Bundaberg, Queensland, and 142 in Wagga Wagga, NSW, in the same period. There will also be 163 positions affected in Geelong by May 31.
The company said nearly all the staff are tied to the Telstra contract.
But Salmat tried to spin the news by claiming that the loss of the contract actually fitted with its strategy of moving away from labour-hire call centre contracts.
"Salmat has clearly stated the strategy for its call centre business is to focus on leveraging its unique complement of hosted call centre technology and outsourced capabilities and to progressively move away from labour hire call centre contracts, such as the current Telstra arrangement," the company said yesterday.
"This decision clears the way for Salmat to focus on its strategy to provide professional outsourced call centre services delivering a superior customer experience and improved business efficiency to Australian businesses.
"These services incorporate its full suite of voice automation, workflow management, people capability development and call centre operational excellence capabilities.
"With a strong pipeline of opportunities, plus this strategic focus, the company is confident of lifting returns and growing its leadership position in the call centre business, "Salmat said.
But in the meantime over 700 jobs go, the company loses around $5 million in earnings in the 2011 financial year and will have to invest more to find new revenues to replace the lost income.
