As it enters its third year, there’s a sense that AIM-listed ‘buy-and-build’ firm Digital Barriers has reached an inflexion point. Over the last two years it has made 12 acquisitions, all of which have now been fully integrated into the group, and established itself in core UK and international homeland security and defence markets as a specialist provider of advanced surveillance technologies. It now focuses on three main areas in the surveillance market: video transmission, ground sensors and ‘standoff’ passive screening technology.
Over the last year, Digital Barriers has grown rapidly via acquisition but also delivered strong organic growth. Results for the year to 31 March 2012 show a 129% increase in revenue to £15.0m, and organic growth of 24%. Pre-tax losses, as reported, were £4.1m (2011: £4.6m). But the adjusted loss before tax - which takes into things like amortisation of intangibles, acquisition costs and adjustments to deferred considerations - was worse than the previous year at £6m (2011: £2.7m loss) as the company pushed forward with investments in international markets. Those investments – including a Dubai office – seem to be reaping early rewards. Digital Barriers is gaining traction with key flagship customers internationally and did £3.5m of business outside the UK last year.
Having built the ‘platform’ for the business, we expect the next phase of its existence to be focused on organic growth, and selling more of the products it’s acquired, particularly internationally. That’s not to say of course that there won’t be further acquisitions, but their impact on the business is likely to be much less significant than it was in the early stage of the company’s development. When I spoke to Zak Doffman, Group Development Director, earlier this morning he confirmed that the current focus remains on physical security; cyber security being more difficult to break into from a standing start and acquisitions in the area more expensive. He didn’t rule out Digital Barriers adding some aspects of Cyber to its portfolio in the future should the opportunity arise, but for now the strategic focus is on surveillance, a market that is not short of opportunities itself. Indeed, it’s no surprise that the management team has ‘very high levels of confidence’ in significant growth in the coming year and in the longer-term prospects for the group.