MIS eyes acquisitions as sales rise
Cash-rich security VAR is chasing acquisitions after its turnover grew 15 per cent in the year to July
Etienne Greeff: Our goal is to make one or two acquisitions in the next year or two
Just like the housing sector, the IT security channel is said to be a buyers’ market for anyone with the cash. Fresh from posting upbeat annual results, and with the clout of its South African parent SecureData behind it, MIS-CDS has put itself forward as a likely consolidator. CRN caught up with director Etienne Greeff to find out where the security integrator is placing its bets.
CRN: MIS’s revenue grew 15 per cent to £14m in the 12 months to 31 July. How would you characterise the year?
Etienne Greeff (EG): It has been a very challenging year and a lot of people are in distress. A lot of our contemporaries have been acquired, have become part of a larger group or are struggling to grow.
CRN: How has MIS’s performance compared with that of your peers?
EG: Our EBITDA was 10 per cent in our last published results. Other growth companies in our industry, such as MSS, Trustwave and Caretower, are all growing revenue but at margins of four or five per cent. This is not a good place to be, as there is nowhere to go on such slim margins.
Lots of people in the market are buying business at any margin. Security Partnerships and Data Integration have higher margins, which is a more attractive business model.
CRN: To what do you attribute your relatively high profits?
EG: We have been a services-centric company for a number of years and it is starting to bear fruit because where there is mystery, there is margin. Fifty per cent of our revenue is services-related. And our percentage of recurring revenue is the highest it has ever been, at 62 per cent.
CRN: Which security technologies are gaining traction among UK
end users?
EG: There are some very interesting things happening right now. For the past 10 years, the security guys have found incredibly creative ways to say no. This is not good enough any more. To attract top talent, businesses are now finding they have to say yes. There is a new breed of digital native arriving who does not know of any world where they cannot use their devices. We are using technology from leaders in that space such as Juniper, Websense and Check Point to allow them to say yes.
CRN: Does that mean MIS’s vendor mix is changing?
EG: We are starting to align more strategically with our top vendors: Juniper, Websense and Check Point. But our biggest growth vendor last year was Aruba Networks. All these new devices connecting to the network do not have Ethernet ports and the only way to connect them is using wireless. Trend Micro is one of our new vendors – it is making a comeback and is the only one to have a virtualisation
solution for VMware, Microsoft and Citrix.
CRN: Do you have the backing of SecureData to make UK acquisitions?
EG: Our goal is to make one or two acquisitions in the next year or two, as we believe the market is ripe. Good companies are struggling and we have huge amounts of cash within the group. We are extremely cashflow positive and paid a dividend for the first time in three years this year, which is unusual for an IT company.
CRN: What are MIS’s sweet spots by customer size and vertical?
EG: Our sweet spot is mid-enterprise, which means 2,500 to 5,000-user companies. Having said that, we have some customers with 100,000 users.
This year we are putting a focus on verticals. We have found a sweet spot in the media and legal industries. We are adding a lot of value to those customers and the more you understand about them, the more value you can add. We are at a size now where that is the right thing
to do.
CRN: How exposed are you to the public sector and what will happen to spending in this vertical following the Spending Review?
EG: Government is a small component of our business. The bigger integrators are getting more public sector business as we are seeing more centralised purchasing.
There has been a lot of combining of functions [among local councils] and computing infrastructures as that is the only way they can save the money they need to save. They cannot do it by salami slicing and consequently the smaller players have been squeezed out.