Stone reports growth despite reorg and Microsoft margin crush
Staffordshire system builder achieves sales rise and small profit for 2015 despite group restructuring, changes to Microsoft's Technology Access Programme and increased competition
Stone Computers overcame a group restructure, intensified competition and unfavourable changes to a Microsoft schools programme to record a small profit and revenue growth for its fiscal 2015.
According to an annual report filed on Companies House, the Staffordshire-based system builder saw revenues rise seven per cent to £79.3m in the 12 months to 31 December 2015.
Operating profit for the year stood at £91,000, down from £2.9m in the previous year.
In the report, Stone described it as a "challenging year", as changes to Microsoft's Technology Access Programme (TAP) and a group restructure performed last autumn dragged on its financial performance.
"The company - like many OEMs - was adversely affected by the changes to the Microsoft TAP, previously Shape the Future, which were made in the year and had a negative effect on margins in the second half of the year in particular," Stone stated.
"As a consequence of this, increased competition and unforeseen disruption caused by the company's participation in its former group's reorganisation, a lower-than-anticipated gross profit of £14.2m was achieved when compared to the previous year's £15.6m."
Stone chief executive Simon Harbridge (pictured) characterised it to CRN as "overall, a very successful period" for the public sector specialist, emphasising that it still had £7m of cash on its balance sheet at year end.
Stone is one of the last sizeable UK system builders left standing, and although Harbridge said the firm is selling more and more third-party machines, he asserted that Stone's own hardware will continue to enjoy a strong niche in the public sector.
"If Birmingham City Council are buying 10,000 devices of a particular spec, and price was the important issue, that wouldn't be our market," he said. "But if it was 400 items for a school, and they were trying to do something creative with the curriculum, and they want to open the school especially on a Thursday afternoon in the holidays for the delivery, the multinationals probably couldn't compete with us.
"We are reselling more branded stuff all the time. We're not a Samsung, Lenovo or HP, and with the drive for lighter, better graphics, detachable two-in-ones etc, we don't try to keep up and compete in those situations. What we provide is great standard desktops and entry-level laptops. We are developing increasingly into what you'd recognise as a VAR, but with the added benefit of building our own systems where there is a benefit of doing so."
The rise of as-a-service models will also shape Stone's business over the coming years, Harbridge said, arguing that Microsoft's opening of a UK datacentre last month would remove a big barrier to cloud adoption in the UK public sector.
"Microsoft is now able to pretty much prove the data is in the UK, and that will speed up adoption of public cloud in the UK," he said.
"Device-as-a-service is relatively new and I'm quite interested to see how that develops. We are definitely seeing the demand for that across our customer base, which mirrors some of the things Microsoft are doing."
Harbridge said last autumn's restructure, which he billed as a "tidying-up", has established a structure that will take Stone forward for the next four or five years.
"The original investment of RJD back in 2008 and the original structure had reached the end of its sell-by date, so it was just a natural evolution. RJD are still a majority owner and management are still a significant minority owner in the new vehicle [Granite One Hundred Holdings]," he said.
"Perhaps over two or three years we'd see ourselves as a £130m-plus sustainable business."
Noting that the factors that dragged on its 2015 numbers have subsided, Stone said in its annual report that close management of its cost base will ensure it delivers a rise in profits for its current year.