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There’s no doubting that it’s an interesting time for UK marketing software company, Alterian. Back in July it appointed a new top team – see Alterian ‘sorts’ new top team – of Heath Davies as CEO and Phil Cartmell as Chairman. Against the backdrop of the company being under offer (from SDL – see Alterian nibbles at revised SDL offer and work backwards), the new management have embarked on a 100-day transformation programme. Today, as the Group announces its half-year results to end September, they are 87 days in and have made some significant changes.
We have known Cartmell for many years and, organisationally, the changes to the business operating model into “three product and two territory business lines” feel very much like they have his stamp (Vega Group, which he led for more than seven years was, after all, successfully organised around the defence, space and commercial sectors).
The three product lines are in areas of the market with high growth potential – Campaign Management & Analytics (CMA), Social Media & Insight (SMI), and Web Content Management (WCM). In these results (following a full revenue recognition review), revenues were down 6% to £17.3 million. However, it’s still early days for the new management team and its new approach – the latest suite of CMA products had not been fully rolled out (and was behind schedule), WCM sales had been “slower than expected” and the pipeline for SMI solutions was still being built.
The aim is for 15% organic growth in the medium term. Though the £23.3 million of deferred or recurring revenues from 2012 onwards looks positive, we do worry about the vertical focus for each of these areas. Essentially, each product line has a core vertical focus.... but all are different. CMA (55% of sales) is focused on retail, finance, leisure & travel; SMI (18% of sales) on TMT and FMCG; and WCM (27% of sales) on its installed base plus new opportunities in public sector, financial services and pharma. That will surely limit the opportunities for cross-selling. Couple that with the fact the Alterian is spread across the US, Europe and Asia, and the business looks like it is spread far and wide with little synergy between business areas.
We really hope UK-based Alterian can make this work. It is focused on a fascinating and growing part of the market. And it has put a great deal of effort in a short space of time into getting the business back in shape. It has made further substantial cuts to its operating cost base in top of those announced in May 2011 (see Alterian management overhaul and cost cutting and Alterian’s active business transformation). We’ll have to wait for the cuts to be fully reflected in the financials; in this reported period, the “underlying” operating loss was £0.9m (compared to £2.9m in the comparable six months), but that was after exceptionals (£15m covering impairment of goodwill, restructuring costs, impairment of investments) plus R&D and amortisation of acquired intangibles. The reported operating loss was £18.6 million. Alterian’s certainly one to watch going forwards... whether it remains ‘independent’ or ends up in the arms of SDL. Customers will surely be more willing to ‘sign up’ once all the uncertainty is behind it.
