Azzurri: Capital spending a last resort for our customers

Comms integrator maintains net profit levels and praises impact of refinancing, despite big decline in FY13 sales

Profit levels held firm at Azzurri Communications during its 2013 fiscal year, despite a big rollback in IT project revenue wiping off about a tenth of its top line.

Recently published accounts reveal that the comms integrator's turnover for the 12 months fell 9.75 per cent year on year to £111m. Of its five units, the ICT project arm saw by far the biggest decline, with revenue plummeting by almost a third to £20m.

In his chief executive's report, soon-to-depart leader Vim Vithaldas admitted that the firm had struggled against a climate in which customers wanted to "sweat their infrastructure assets and have typically only embarked on capital projects as a last resort".

Sales at its support services and data units were both up slightly to £19.2m and £28m respectively. Azzurri's mobile unit and its consultancy, calls and lines division both shed about £2m from their top line and came in at £19.4m and £24m.

The firm's FY13 gross profit stood at £17.2m, equating to gross margins of 15.5 per cent, marginally down on the 15.8 per cent posted in the prior year. But the net bottom line of £3.5m represents a marginal rise on last year's figure. FY12 profit was hampered by Azzurri having to cough up £1m in a trading dispute with O2, some £820,000 of which affected the previous year.

During FY13 Azzurri claims to have stripped out £1.9m in costs, following on from the £2m extracted in the previous year. The firm's cost of sales for the year saw a decline of almost £10m, falling from £103.5m in the 2012 year to £93.8m last time out. The total wage bill for the year was reduced by more than £2m to £32.4m, although staff numbers dropped only slightly, from 704 to 692. The total equity in the business increased over the course of the year from £45.6m to £49.2m.

With the support of its banking owners, the VAR completed a refinancing process six months ago which allowed its £100m-plus debt levels to be trimmed down to £45m, of which only £25m is cash interest-bearing. Vithaldas' statement reasserted his belief that the restructure will boost customer confidence.

"The impact of this refinancing will be very positive for the business as it reinforces the confidence of shareholders in Azzurri and in its strategy going forward," he said.