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Stone set to smash £100m revenue barrier

CEO Simon Harbridge speaks to CRN on the company's latest results and his call out to the channel to become a part of the circular economy

Stone Group's turnover is expected to climb to around £110m in its current financial year, according to CEO Simon Harbridge.

The Staffordshire-based systems builder saw revenue climb 15 per cent to £94m for its year ending 31 December 2019 and boss Harbridge said that it has seen a similar rate of growth in its FY20 so far, leading to the anticipated £110m revenue figure.

EBITDA grew 75 per cent year-on-year to £4.2m in its FY19, equating to 4.5 per cent of revenue which is "amongst the best in the channel", the chief exec said.

Stone underwent an MBO late last year, supported by private equity (PE) firm Souter Investments, which Harbridge declared the "standout moment" of its financial 2019. The reseller also secured a £17.5m banking facility from Shawbrook Bank during the year. At the time, Harbridge told CRN that the investment gives the company "firepower for M&A", though it hasn't made any acquisitions yet.

"We've looked at a couple of things; we haven't done anything yet, but I wouldn't rule it out," Harbridge told CRN.

"We got in a group of investors in 2019 who really get what we're trying to do in terms of continuing to add new customers and sell more lines of business and more solutions and services to each customer, which underpinned our growth.

"We did a deal with Shawbrook and got a £17.5m banking facility, which was committed for three years, and as at the end of last year, we're only using about £7.3m of that. With the investors and the new banking, Stone's probably never been in a stronger position."

Stone has a strong business among education organisations and saw the same clamour for devices as educational institutions pivoted to remote learning in March and April, which then resulted in a "hiatus" in Q2 when things settled down, the chief exec explained.

Though demand for kit from education organisations has seen a resurgence in recent months, they are now ordering far more mobile devices than the traditional desktops, he added.

"Overall, the picture is good, but individually there are issues; universities and colleges are big buyers of desktop devices and they've got large on-campus existing infrastructure, such as university libraries and labs - all these things with big investment in desktop infrastructure.

"This year we've seen a massive change in the mix from those traditional desktop refreshes to large purchases of mobile devices, there's been a huge swing in the actual mix and that's not going to change back in the short term, as they continue to wonder ‘what's next?'."

Calling out the channel

The systems builder also runs an IT asset disposition (ITAD) service which refurbishes and recycles old equipment. Harbridge has noticed a change in the demand for these products, particularly earlier in the year when demand for mobile devices outstripped supply.

The business dipped in the second quarter due to lower customer demand and Stone opting to stop collections during lockdown, but the unit has "gone from strength-to-strength" since lockdown ended, he stated.

"Demand [for the refurbished product] hit a peak in March for any kind of mobile device because people were desperate to be able to move to distance learning and home working, so that was reflected in demand for refurbished devices," he elaborated.

"Being able to provide large numbers of refurbished devices, particularly at price points that helped people cope with the requirement to get large numbers of devices, was a very strong thing to be able to do.

"As we came out of lockdown the business since then has continued to go from strength to strength. We have a circular vision for technology so that the whole sustainability message is absolutely key to everything we're doing now."

Harbridge believes his peers in the channel should follow suit in developing sustainability initiatives and taking back as much equipment as they sell.

"There are some frightening statistics around how much e-waste there is. I think we're approaching 60 million tonnes of e-waste worldwide a year and less than 20 per cent of that is collected and disposed of correctly," he stated.

"We're always pushing these latest, greatest devices in the channel; in this day and age in the UK I'd call out to the rest of the industry to say we're all placing these things onto the market, so let's all stand up and take responsibility and take them back."

Consumers have been more progressive in buying refurbished IT kit, but businesses are now starting to see the financial benefit of buying an older-generation model instead of brand new and this will likely be exacerbated by IT budgets that are constrained by the impact of COVID-19, Harbridge added.

"For example, a processor that is only a few generations old is probably at 90 per cent of the performance of a new processor anyway, with a bit more memory or an SSD added. It's a really great functioning device at a price point that's a third of a new one. We've all got pressure on budgets and this is a great solution," he stated.

He also anticipates that further demand will come once businesses realise they have a host of PCs and desktops in offices not being used that they could trade in for mobile devices to accommodate the new hybrid working environment.

"We are seeing an increased demand in refurbished IT; out there are legions of desktop PCs out there not being used at the moment and gathering dust," he said.

"I'm wondering when people are going to wake up and think ‘I might trade those in and invest in mobile devices'; so I'm waiting for that demand to come."