Integralis returned to profitability in 2012 as the proceeds from the sale of some intellectual property (IP) assets boosted its bottom line.
The giant security integrator turned a 2011 €21.8m (£18.6m) net loss into a €1.9m profit this time around, while revenue grew by 15 per cent to €204.9m.
But the Prime Standard-listed outfit's performance was given an artificial sheen by the sale of its managed security services IP to majority owner NTT Communications last October. The sale was for a total of €23.8m and boosted its operating profits to the tune of €14.2m.
However, chief executive Simon Church stressed it was unfair to conclude that Integralis would have posted a loss without the sale, which he said would benefit both his firm and NTT Communications.
"Knowing we had the money from the IP sale in hand enabled us to invest more in the US and Asia-Pac operations," he told CRN. "It also allowed us to drive a lot further in the UK. Had we not had it, it is difficult to say [whether we had made a profit or not].
"NTT has been investing a considerable amount of money in Integralis and specifically in the next-generation managed security services platform we are developing. Since they are a majority shareholder, and managed security is critical to them in terms of where they are headed, they felt it prudent to purchase the IP and then contract back to us the running and maintenance and future development of those services.
"We get some investment in developing a much closer collaboration with NTT Communications and all the NTT companies. And it enables us to grow into a dominant player from a security services point of view."
Integralis' push to supplement its traditional technology resale business with higher-margin services was evident in its 2012 numbers.
While technology sales wilted by four per cent to €73.6m, support services grew four per cent to €70.7m; consulting, integration and training sales almost doubled to €41.6m and managed security services revenue jumped by 71 per cent to €19m. The decline in product sales was partially caused by "deliberate decisions not to engage in business with very low margins", Integralis said.
The revenue shift can also be put partly down to the fact that 2012 was the first full year that Swedish arm Secode Group's numbers counted towards the total. Secode drew almost all its €14.6m sales from managed security services and consulting.
By far Integralis' largest territory, the UK grew both its bottom and top line strongly in 2012 on the back of an investment in additional consulting capacity. Revenue hiked 15.1 per cent to €90m, while EBITDA more than doubled to €2m.
Church said: "We significantly upskilled our UK consulting organisation and we are going through that process now in the rest of the world. But it is not a switch away from technology – we are taking the reseller capabilities we have and are wrapping them with consulting and managed services. Technology does not go away – in fact it should increase – it's just that the proportion of business from technology to managed and professional services will shift."
Germany, Austria and Switzerland (GAS) – Integralis' second-largest territory – enjoyed a solid 2012 as revenue rose 9.4 per cent to €57.1m and EBITDA fell 25 per cent to €2.1m.
But elsewhere, it was a decidedly mixed bag as its US and United Arab Emirates operations continued to haemorrhage cash. The UAE business, which Integralis is in the process of winding down after failing to find a buyer last year, sank to an EBITDA loss of €1m on sales of €0.5m.
Integralis' average headcount for the year stood at 624 compared with 549 in 2011. The wage bill grew at an even faster rate, from €48.3m to €62.2m, which Integrals put down to investments in "highly experienced consulting capacities" and "further reinforcements to central functions" to support its global growth.
Integralis said it expects to return to profitability at the operating level in 2013, assuming its UK business continues to fire and it succeeds in rolling its service-centric business model to other countries including GAS and the US.
Church, who joined Integralis in 2009 as UK managing director, admitted the UK market was unpredictable, but said he expected both services and product sales to grow here in 2013.
"As we have seen from some recent reports, F5 and some of the other vendors are going through some challenges around Europe and in the UK," he said. "We are seeing some of the predictability drop away. We are still seeing deals, it's just they may have been pushed out, or further up into organisations. It's more spikey."
Church claimed that Integralis is finding it increasingly hard to identify any like-for-like competitors, arguing the firm sits all alone in a space somewhere between the traditional security VARs and SIs and the hardware vendors and telcos.
"Other organisations are having issues with staff retention and we can help support that. We see more people wanting to join Integralis because we are a pure-play security organisation and they can practise pure-play security working here," he said.
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