ANS tops £50m revenue despite cloud reinvention

ANS has seen sales top £50m despite undergoing a radical shift to cloud and digital services.

The Manchester-based firm had been one of the UK's top NetApp and Cisco partners, but shifted its focus away from hardware sales virtually overnight.

ANS' management team openly said that they expected a decline in revenue as a result of turning away from low-margin business, but CEO Paul Shannon (pictured) told CRN that sales in the last full year were better than expected.

For the 12 months ending 31 March 2019 ANS' revenue slipped 5.2 per cent to £50.4m, but gross profit was up 2.8 per cent (£22.1m) and EBITDA rose 4.9 per cent to £9.3m.

Gross margin was 43.8 per cent, up from just over 36 per cent in full-year 2017.

"We were expecting revenue to be more like £45m or £46m," Shannon said. "We actually delivered eight per cent revenue growth excluding hardware so it came in higher."

ANS now sees 46.3 per cent of its margin come from digital and hybrid services, equating to £12.5m - double what it saw in FY 2018.

Hardware's margin contribution also reduced significantly, to just 7.2 per cent (£1.9m).

Shannon said that part of the rationale behind the transition was to make sure that ANS was essential to its customers' operations.

"We took three years' worth of pain in transition, and retraining staff, retargeting the sales team, and getting away from the resell and professional services world, so we had to make sure that there is a direct requirement," he said.

"We didn't want to move into a new area where the customers could manage it themselves."

The CEO explained that ANS' transition is not yet complete, with a number of customers on "old-world" contracts that are up for renewal over the next couple of years - some of which are large hardware managed services deals at six-figure sums per month.

He said the firm will not renew deals with customers that only want hardware refreshes.

"We've identified which ones will be in line for a portion of the new estate to be in public cloud," he said.

"I think there is about 60 per cent of those customers where we are confident they won't just go and buy new hardware that they bought last time. They have an appetite to be transformational and in some cases all of their infra will go [to] public cloud.

"Another 20 per cent will do what they did before and want it cheaper, and we have just marked them as do not renewal. Some don't know that, but we have told some people that's what we are going to do and a lot have asked if we have a partner we'd recommend, so we tell them about someone we've worked with before."

Shannon added that ANS' employee structure is also likely to change once these contracts have ended.

"We still have big teams," he said.

"The old world is diminishing in terms of contribution to GP and the managed services for hardware has diminished, but not to the point where we can't have anyone in the business.

"We're not in a posiiton where we can let everyone go or retrain them. We have significant contractual obligations. That will diminish in FY20 and FY21. The waterfall in contacts is very steep and we're not worried about it at all."

Into 2020

ANS has now entered the fourth quarter of its current financial year, which Shannon said is on track to be the firm's best ever.

Q1, Q2 and Q3 have all been company records, he added, revealing that targets have pushed up in light of the progress.

The acquisition of the UK arm of Canadian Microsoft Dynamics partner Alithya has also made a solid contribution.

"We had a sales review board on Wednesday and not a single deal in the pipeline is anything other than digital, and we've built up quite a pipeline in Dynamics," Shannon said.

"We brought some along with the acquisition but it wasn't massive; it was an expertise deal not a pipeline deal.

"We're at least a quarter ahead of where we thought we'd be at this stage."