ANS bears 'expected' revenue decline after shunning hardware business

FY2018 numbers show 10 per cent revenue drop, but professional cloud services grow 120 per cent year on year

ANS Group has endured an "expected" revenue dip after shifting its focus away from hardware and onto the public cloud.

The MSP's revenues declined by 10 per cent to £53.1m for its year ending 31 March 2018, while operating profits dipped by £500,000 to £7.7m.

Gross margins, however, grew by 4.2 per cent to account for 40.4 per cent of revenues, while its annualised EBITDA run rate was in excess of £12m.

CEO Paul Shannon told CRN that ANS' revenue decline was an expected consequence of its decision to step away from low-margin hardware deals and heavily invest in restructuring its business around public cloud providers Microsoft and AWS.

"We were expecting the drop in revenue because that's a natural step in reducing the amount of hardware you're selling," he said.

"We're stopping any kind of low-margin deals, which is obviously going to hit us in terms of turnover, but we made up the bulk of what we lost in hardware through services, which is why the overall GP profitability has gone up as percentage of turnover, because we've sold more ANS services, more professional services and more specialist managed services. It's broadly what we expected, to be honest, give or take a few percentage points here or there."

Shannon (pictured), however, expects ANS' revenues to stabilise for its upcoming FY2019 and beyond.

Professional cloud services revenues surged by 120 per cent year on year while cloud managed services saw 23 per cent growth.

Around 100 of ANS Group's 150 technical staff are set to be retrained as part of its shift to public cloud. Including sales and marketing teams, around half of its total headcount of 275 are set to receive fresh training.

"It's been really, really tough. When people ask me how it's been, I've just been really candid with them," said Shannon.

"It's really tough to see something you've been making money out of, and you've been doing really well from for a long, long time and seeing the margins diminish because the market is changing. Then realising you've got to go all in on something completely new - and not just for ANS - it's not like we've picked up on unified comms that people have been doing for years, public cloud is new for everyone.

"The fact we have such an amazing set of people to work for is the main reason - probably the only reason - why we've been successful."

Its shift to selling cloud infrastructure and services will not spell an end, or phasing out, of its partnerships with NetApp's FlexPod, Cisco or VMware but its cloud business will continue to account for a larger share of overall sales for ANS.

"They've all got public cloud initiatives going forward, so it's highly likely that we'll work with all those partners. We've already done some deals with them on those cloud initiatives," he said.

"We will continue to be a private cloud partner to those vendors; I can't see that diminishing. Will the overall spend diminish before it grows again? Probably. Do they know that? Yes they do."

Shannon said ANS will continue to build on its relationships with AWS and Microsoft this year, claiming that it will look to become an Azure Expert MSP partner and an AWS MSP partner by the end of the year. There are currently a little over 35 Azure Expert MSP partners globally.

"We'll be seeking to achieve any of the most advanced programmes, or highest levels of accreditation with those partners, this coming financial year, if not earlier. So Expert MSP for Azure, we definitely want to get on that programme and we're in the midst of prepping ourselves for that, and the same with the AWS MSP - I'd be surprised if we weren't on that this calendar year as well," he said.