Telecoms provider Daisy Group forked out tens of millions of pounds on acquisitions in fiscal 2014 – only to see its top line stagnate as organic growth fell off a cliff in its legacy calls business. Operating losses have widened and debts mounted.
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The first three deals contributed some £23.6m in revenues for the 12 months ended 31 March – but, despite this, total group sales edged up just 0.3 per cent year on year to £352.7m. ABSE was gobbled in February, late in the fiscal year.
The sales pain was apparent in the networks and mobile businesses that sit under Daisy's retail division; here revenues dropped to £229.6m from £244.5 in the previous financial year.
The company said that "in line with expectations", the market for traditional fixed-line access and calls "continued to decline", but with more meat around its IT biz, these legacy products are becoming less strategic.
The wholesale unit managed to report 18 per cent turnover growth to £72.7m with the systems component – maintenance, engineering and kit sales –accounting for the lion's share of this, helped in no small part by the Indecs buy.
The Daisy Distribution biz – which ships mobile handsets and airtime tariffs from O2, Vodafone and EE via a dealer network – was up 11 per cent year on year to £50.4m.
The cost of goods sold fell nearly four per cent to £2,134.4m but operating costs were up by more than £10m to £157.1m, paving the way for an operating loss of £17.8m, versus operating losses of £16.7m a year ago.
After finance costs were included, the net loss before tax was £24.37m compared to £23.5m a year ago, but an income tax credit of £8.7m left Daisy with a net loss of £15.6m, albeit better than the net loss of £16.4m in fiscal 2013 when the tax credit was £1.7m smaller.
Net debt crossed the nine-figure line at £114m, up from £81.2m, "reflecting dividends paid, the acquisition, integration and change activity undertaken in the year". Free cash flow fell to £34.9m from £38.6m.
CEO Matthew Riley indicated it is not yet ready to hit the brakes on the acquisition train, claiming: "We have in place the platform, the systems, the people and the product set to allow us to grow both organically and via strategic acquisitions."
"Against a difficult economic backdrop, we believe we are well positioned to make further progress towards our aim of being the IT services and unified communications provider of choice to the SME and mid-market sectors"," he added in the statement.
Since the close of fiscal 2014, Daisy has acquired Layer 3 Advanced Business Solutions for an initial cash sum of £1.8m; the firm provides network audits, LAN and Wi-Fi services.
The tech and comms giant also saw a number of changes to its banking facilities, the principal one being the removal of term loan amortisation, giving the firm "capacity" for more acquisitions and stay within the permitted leverage of three times annualised adjusted EBITDA (£57.9m).
"These changes reflect the confidence of management and the lenders in the cash-generating capabilities of the business," Daisy stated in its financial report. ®