IDE Group mulls sale of networking business as 2020 revenues and profits tumble
MSP's revenue decreased by over £4m in 2020 while adjusted EBITDA dipped under £1m
Bournemouth-based MSP IDE Group saw its revenue tumble during 2020 and is undertaking a "full review" of its operations, which includes considering the divestment of its Connect business.
Revenue fell to £24.1m, down from £28.2m in 2019, while adjusted EBITDA declined to £0.5 million from £1.1 million in the prior year. The company had a net loss from continuing operations of £18.5m, down from a loss of £8.5m in 2019, following "a £17.2 million amortisation and impairment charge".
The business made several cost-cutting measures last year, including redundancies in areas which had experienced decline in demand during the pandemic, with 2020 marking a continued trend in revenue decline for the business in recent years.
"2020 was an important year in the ongoing rationalisation of our trading businesses and we have continued the good work from 2019 in positioning the group for a period of sustained growth which is now bearing fruit in 2021," non-executive chairman Andy Parker said in the results.
"Overall, despite the operating losses in our overall group in 2020, in the current year we are now seeing the real benefits of focussing our business strategy on profitable partnership channels and consolidating our group offering across the Manage and Connect operations and we can look to the future with confidence and expect to generate positive operating cashflow for the first time in several years."
The firm said it was considering the divestment of its Connect business due to "the very different levels of performance across two distinct business sectors", with revenue for the networking and connectivity focused division falling to £13.1m from £14.6m and adjusted EBITDA falling to a loss of £0.8m.
Parker added that the objective in 2021 is to "further reduce costs through datacentre and network consolidation and leverage these savings into more competitive pricing to generate new, and extend existing, business opportunities".
The company provided a more positive outlook for its Manage business - which takes care of managed services - despite revenue falling from £14.7m to £11.5m which it put down to "cyclical variability" in its supplies to system integrators and the "novation of contracts" to its Connect business. Adjusted EBITA rose by £1m, however, to £2.1m.
Despite decreases in revenue and profit, IDE pointed to an increase in overall gross profit margin from 22.8 per cent to 24 per cent - with the same figure for its Manage business increasing to 39 per cent from 31 per cent.
Parker also said that the current financial performance of its Manage business is "significantly ahead" of its 2020 results and expects the trading EBITDA level for its Connect business "to show modest growth in what is a very congested business sector".