Melhuish named to head troubled Photon Group – company to reduce cash overheads 40% to 50%

Photon Group Limited – the publicly listed owner of agencies BMF, BWM and Naked – which is currently trading at a lowly 5.5 cents per share on the ASX – has appointed BMF co-founder Matthew Melhuish as chief executive officer, effective 16 January 2012.

Melhuish has over 25 years’ experience in the advertising and marketing industry, including at the most senior levels and is currently Head of Australian Agencies at Photon. Melhuish’s appointment follows the resignation of Jeremy Philips as Photon’s CEO in December.

Photon Group Chairman Brian Bickmore said Melhuish had been the key executive overseeing the company’s Australian Agencies business, which represents approximately half of Photon’s revenue. Matthew is a respected and leading figure within the Australian Advertising industry. He is currently Chairman of the Effies Advertising Effectiveness Awards, a National Board member of The Communications Council, the peak industry body, and a former Chairman of the Advertising Federation of Australia.

“We are delighted to be able to announce the appointment of Matthew as CEO. Matthew’s experience founding and running the successful BMF agency, and his leadership of the Australian Agencies group at Photon have ideally prepared him to lead Photon in the next stage of its development,” Bickmore said

“Matthew has overseen the operations of key agencies such as BMF and BWM for 18 months and his appointment will ensure continuity and a minimum of distractions for our businesses.”

Says Melhuish: “I am very excited about the opportunity to lead Photon during the next phase. The challenging work over the last 18 months has put the company in a strong position with a more streamlined operating structure, solid balance sheet and effective management team. I look forward to focusing on the growth of our core strategic marketing functions and maximising the opportunities for collaboration.”

Melhuish will join the Board of Photon Group as an executive director.

Review of Corporate Overhead

The company also today announced it had finalised the review of its corporate overhead following the completion of the sale of its field marketing and retail agencies in November 2011. The company will reduce its cash overhead costs by $4.0 million to $5.0 million on an annualised basis, representing a 40% to 50% reduction from the FY2011 level of cash overheads.

The key areas of overhead reduction are lower expenses associated with the previously announced relocation of the head office, a reduction in the new CEO remuneration package reflecting the reduced financial and operational complexity of the company, and other targeted general opex reductions.

There will be limited impact of these savings in FY2012 however all of the savings will be recognised in full by the end of FY2013. It is estimated that one-off restructure costs of approximately $4.5 million will be incurred during financial year 2012 to achieve the overhead reductions.

1H2012 Trading Update

Based on the unaudited management accounts for the six months ended 31 December 2011, pro forma Net Revenue is down 5% and pro forma EBITDA is down 7.5%. This is an improvement from the company’s trading update at the end of the first quarter 2012 when Net Revenue and EBITDA were down 7% and 25% respectively on the same basis.