Integrator Redstone claims it has emerged from its fiscal 2011 as a sleeker and more focused incarnation of the £200m-turnover, debt-laden giant that nearly went under last year.
After taking on new top management, scoring new funding, restructuring and making a string of divestments, Redstone narrowed pre-tax losses from £11.1m to £6.6m for its fiscal year to 31 March as revenue hit £67.1m.
Redstone chairman Ian Smith argued the firm has "regained its corporate confidence" and is well placed to achieve its goal of boosting EBITDA margins to 10 per cent of revenue.
Fiscal 2011 was a year of flux for Redstone, whose bosses admitted the AIM-listed firm would in all likelihood have hit the wall had it not been handed a £8.5m refinancing lifeline in September.
In the last four months of 2010, it divested its interests in a BSF contract, some telecoms activities, its Irish business and its IT security arm. The Oxfordshire-based firm's headcount more than halved from 860 to 413 year on year.
Smith, who was made executive chairman in September, claimed Redstone had emerged from the process a "leaner, more efficient, focused and integrated business".
"As a result we now have a clear strategy to position Redstone to become the largest mid-market provider of network-based end-to-end managed services, technology and infrastructure solutions, delivering customer applications over leading-edge technologies across Redstone's own high-speed resilient network," Smith said.
He stressed that the new Redstone is a very different creature from the broad-based voice and data integrator that plied its trade in the last decade.
The divestment strategy was designed to refocus activities on the provision of network-based managed services, technology and infrastructure.
The three remaining activities, Converged Solutions (which turned over £57.2m last year), Managed Solutions (which turned over £9.9m) and the newly acquired Fujin business (a Brocade and Arista integrator), have been consolidated under one brand: Redstone.
Smith added that the VAR will focus on growing its business in the City following a string of financial services wins. This includes two contracts, for £4.98m and £5m in December 2010 and March 2011 respectively, with a Fortune Global 500 UK bank. Redstone also won a four-year contract extension with an unnamed US bank in June worth an estimated £10m.
Recurring/annuity revenue currently generates more than half (54 per cent) of revenue and Redstone said it intends to grow this to become the major part of the business.
Fujjn, which Redstone acquired for £2.9m in November, used to be headed up by Smith and specialises in the installation and management of advanced Ethernet technologies.
"The acquisition is an initial and important strategic step in adding to Redstone's market proposition as we re-position the business as a leading provider of network-based end-to-end managed services, technology and infrastructure solutions," said Smith.
Back on the front foot
Redstone's bosses admitted the reseller's previous "high and unsustainable" level of borrowing had had an adverse impact on its credit rating and trading prospects.
It now claims to be on a much stronger financial footing. The recent reorganisation yielded annualised cost savings of £4m and gearing has been reduced from 78.8 per cent to 51 per cent year on year based on Redstone's enterprise value. Total borrowings have been cut from £20.1m to £12.1m year on year.
Smith concluded: "Redstone has regained its corporate confidence and is now looking outwards to engage dynamically with its resilient and high-quality client base and generally to its redefined target market.
"We believe there will be opportunities to grow the business, particularly in the financial sector where we have proven credentials and established relationships. We also believe that leveraging the core network will provide opportunities for the successful marketing of our managed service capabilities."
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