You've made three blockbuster acquisitions - Damovo, Phoenix and Alternative Networks - since you went private in 2015. How have they changed the character and scale of the business?
We are now a circa £720m-revenue business, and about £120m to £125m EBITDA. The Phoenix acquisition effectively gave us overnight the capability we needed to serve the strategic intent of the business, which is to be a converged services aggregator of business communications, IT and cloud.
We believe that in order to be a digital enabler of UK businesses, you must have these three capabilities in your kitbag. Whereas traditionally most people that exist in the market are either telecoms, IT or cloud, we can deliver all three of those things. Our strapline is "joining the dots in a converging world of business communications, IT and cloud", and I think that makes us very different.
What people are surprised about is the beautiful balance of our product lines. Until around five years ago, circa 90 per cent of our revenues came from lines and calls. Today, networking is £180m, mobile £150m, data £180m, business continuity and cloud £100m and systems £140m. That covers all the areas you need to deliver a converged offering.
You acquired Alternative Networks for £165m in December. How far are you along with the integration?
We are nearing planning completion, which I think is the most important part of the integration, and then we will get into the execution pretty immediately. We will be One Daisy, fully integrated with Alternative, very, very quickly.
In 2015, your founder Matthew Riley set a £1bn revenue goal. What are the ambitions now?
Success still looks like a £1bn business. While we've made 50 acquisitions, it is unlikely that we will make another one in the foreseeable future. We are now in an organic growth strategy. My job is to take this organisation from a circa £720m revenue stream to a £1bn business. If you apply what I believe to be the opportunity - which is double-digit organic growth - that should take about three years. Over the course of the last 12 months, our organic growth has been just over five per cent in a combined comms, IT and cloud market which is growing at around one per cent, which means we are taking maybe four to five times market share. I'm pleased but not satisfied with that - I know we can do better.
A Sunday Times article claimed that Daisy is gearing up to go public again in late 2017 or early 2018. Is that true?
We have no plans at this moment in time. We didn't instigate the article. We are always the subject of media speculation, and that's all it is: speculation. Right now I am fully focused on organic growth, and helping our customers and partners to do the same.
We have a vision of turning Daisy from a noun into a verb
You operate separate divisions serving SMB, mid-market and large enterprises. How is the revenue split between them changing?
Prior to the Alternative Networks acquisition, it was three, two, one - £300m, £200m, £100m. We are reversing ourselves into the Alternative capability here [in Blackfriars] which now makes it broadly speaking £300m, £320m, £100m.
There is also a message of balance and diversification, and a message of recurring revenues. Of that £720m, 75 per cent is recurring revenue, and that is unheard of. We don't have a large supply chain business - customers are buying multi-year contracts from us, which makes it a really high quality of revenue and associated profits.
Daisy's heritage is in SMB. What are your ambitions for that sector?
In SMB we have both a direct and indirect route to market. We serve around 60,000 customers directly with productised telecommunications packages through Daisy Retail. We also address that market in an indirect manner whereby we serve a further circa 500,000 customers. We do that by white-labelling our offerings to about 1,400 smaller telco resellers.
If you package that up, we have 560,000 customers of the circa four million [small business] customers in the UK. We are very dominant in that market with packaged offerings, but more and more moving forward [we are focusing on] what we call "office in a box". We have a vision of turning Daisy from a noun into a verb.
These four million small organisations are looking for a very simple offering from a single provider and that's some form of connectivity, laptops and emails, some might require Skype, and all of them require some form of enterprise resource planning system and some form of maintenance and support. In the fullness of time, we hope that start-ups, or small firms looking to modernise their offices, will say ‘why don't we just Daisy our office?'.
You sell 100 per cent direct in the mid-market. Why?
We serve the mid-market through Daisy Corporate Services. That's made up of the Damovo acquisition, the Phoenix acquisition and the Alternative acquisition, and basically we are going to reverse Daisy Corporate Services into Alternative. We address the mid-market in a wholly different manner because what they are after is one hand to shake in terms of delivering business communications, IT and cloud. What we also have with the Alternative acquisition is a billing platform that takes us into the corporate market, not just the previous Daisy platform that allows us to serve the SMB marketplace.
Why do you only serve the large enterprise market through channel partners?
We only want to serve them indirectly because their requirements are much more complex and in that market, customers buy from an ecosystem. All we want to be in that market is a complementary extension to the people who own it - that's SIs, large telco operators, large IT resellers and Indian offshorers. We have been very successful in the public sector in this area because we were one of only two organisations selected for all 11 Lots of the Network Services Framework, which gives us an advantage as those people who address that market can actually gain those accreditations by working through us.
In the fullness of time, you [Computer Reseller News] could keep CRN and just change it to Converged Reseller News, because that's where the buyer behaviour is going
Who do you see as your top five competitors?
For SMB you've got Verastar, Unicom and XLN - that's probably it. In mid-market you've got Maintel, Six Degrees, Redcentric and SCC, and maybe a few more niche cloud providers - but actually if you can get the customer buying the converged message, the competitors all of a sudden diminish. And in the enterprise space you have people such as Telent.
How do you brand yourselves now?
We bill ourselves as a converged services aggregator of IT, business communications and cloud, to help our customers digitise their businesses. We don't make anything, and have no desire to build anything; what we want to be is that one hand to shake that utilises the world's best technologies and makes things easy to buy and consume. In the fullness of time, you [Computer Reseller News] could keep CRN and just change it to Converged Reseller News, because that's where the buyer behaviour is going. The world of cloud, IT and business communications is converging, and the more analysts and journalists understand that, the better.
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