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AIM-listed communications services firm, Daisy, saw H1 revenue (ending September 2013) decline 2% to £173.9m - primarily as a result of its declining fixed line network services business and a change in contractual terms with a key mobile partner. However, the adjusted EBITDA margin edged up very slightly (from 15.3% to 16%) due to changes in the business mix and cost control. Across its product areas, Network was down 9% to £73.7m, Data was up 13% to £38m (boosted by £6.1m in revenue from the acquired 2e2 data centre services business), Systems climbed 3% to £15.6m, and Mobile declined 4% to £46.6m. Daisy, like other network services firms (e.g. Colt, see The IT services piece in the Colt growth puzzle) faces the not insignificant challenge of trying to recoup the decline in its traditional voice and data business by entering growth areas.
Acquisitions have formed an important part of Daisy’s strategy to improve its product mix and shift both revenue and profit in the right direction. However, Daisy has to be very careful that it is able to create something that is more than the ‘sum of the parts’ of its purchases.
After the close of H1, Daisy acquired Indecs (Daisy expands IT services business with Indecs purchase), which provides multi-vendor support and maintenance services for servers and storage. Together with its Servassure and Net Crowd businesses, Daisy claims it now has “credible scale” for the provision of services to partners. Scale in ICT support operations is indeed important for firms that are the ‘feet on the street’ component. However, we know how tough it can be working with partners who apply significant and consistent pressure to reduce the cost of the services they buy from third parties. Daisy certainly has its work cut out.
