We met with Dermot Joyce, CE of local government business process services (BPS) provider Liberata for an update on progress over the past year. Unfortunately, the newly published full year accounts for the private equity owned company (see Liberata under new ownership), show a continuation of the revenue and profit decline it has been grappling with in recent years.
For the twelve months to 31 December 2011, revenue was £100.2m vs. £147.2m in the prior sixteen month period, or £110.4m averaged out over twelve months. This shows that revenue actually declined 9.2% year on year. Operating profit meanwhile was £5.4m (5.4% margin) vs. £9.6m in the previous sixteen months, or £7.2m on the twelve month average (margin of 6.5%). So the margin also fell a percentage point over the past twelve months.
Apparently, most of the revenue decline came from the decision by long-term client the London Borough of Southwark to move its revenues and benefits services back in house from March 2011. This loss of key clients has been a real road-block to Liberata's turnaround prospects (see Liberata restructuring puts it on path to stability). But there are wider issues too. Like many of its peers in the public sector, Liberata is also feeling the pressure on margins as contracts are being renegotiated at lower price points.
Liberata’s big gamble to turn things around is its capacity grid virtual shared service offering (see Could ‘Capacity GRID’ help Liberata’s fortunes?). The demand is clearly there. Since bringing on its first customer last October, Liberata now has 40 clients on the network buying revenues and benefits capacity from Liberata on-demand. Apparently two clients are now also buying and selling their own capacity through the network. Where Liberata acts as the broker it aims to make money by quality assessing work for the parties involved, and stepping in to take on work if service quality drops.
Capacity grid is a numbers game, so Liberata needs to get as many clients/authorities as it can onto the network in order to make money. Unsurprisingly it is therefore interested in expanding the target customer base into new areas such as social care and support services. But this means moving into new markets where it doesn’t have expertise, and managing increasingly complex sets of new relationships. So plenty of risks attached.
We will have more to say on Liberata’s strategy and prospects in HotViewsExtra later.