Newcastle IT firm TSG grows profits after owner Graham Wylie invests £1m
The Newcastle IT services firm owned by Sage founder Graham Wylie has seen profits soar after a strategy to focus on building up recurring revenues continued to bear fruit.
Latest accounts for Technology Services Group (TSG) show the business increased adjusted operating profit from £67,000 to £387,000, as more clients joined and continued to use the firm’s services.
The Great Park-headquartered firm embarked on a cost cutting exercise in 2015, slimming down the business in a bid to be able to react quickly to opportunities.
That shake-up involved the opening of an office in London, to take advantage of new opportunities in the south, while also putting a firm focus on rebuilding recurring revenues.
A year on, as the firm publishes accounts for the year ended March 31 2016, chief exeutive David Stonehouse says the firm’s strategy is paying off, with recurring revenues now accounting for 60.6% of turnover – 4% more than the previous year and a 13% leap on the figure reported five years ago.
Mr Stonehouse said a team of six experienced new business sales people focused in London and the surrounding area, in addition to those in Scotland and across the North, brought in significant new customers, including legal firm Leigh Day, fast food chain Wasabi and car park operator APCOA.
Notable successes in the North East included implementing products at Newcastle United, at national employment skills organisation Working Links, based on Teesside, and at consulting engineers Patrick Parson.
Within the accounts, Mr Stonehouse said: “A key component of the business strategy is to build our presence in London. We have expanded the sales engagement team during the year and opportunity pipeline continues to build. We expect to see strong returns on this investment in the coming year.”
Headcount was reduced to an average of 378 employees from 407.
Overall turnover also dropped in the year, by 5%, but Mr Stonehouse said this wasn’t unexpected.
“The successful implementation of a decision by the board to put greater focus upon rebuilding recurring income streams, including subscription and cloud services, as opposed to project-based service delivery continues to impact our turnover growth.
“As the business continues to win new subscription, support and cloud service business, this turnover decline is expected to plateau, and at the same time allow the business to rely on a consistent and reliable contractual income stream.
“The result of this continued focus is that monthly recurring revenues now account for 60.6% of total turnover.”
TSG took on nine new products in the past year, mainly sold on subscription basis, including Sophos Interceptx, security software which protects data from a ransomware attack, and it also continued its investment into product development.
An additional £578,000 was invested into Tribe, its membership software launched in 2014 which was its first product built from scratch in a decade, and Traveller, a complaints management system designed specifically for the travel industry.
The firm’s principal shareholder, Graham Wylie, also injected a further £1m into the business in the form of repayable loans, to finance the costs of restructuring.
Mr Stonehouse added: “It’s great to see progress in delivering our plans as well as improved profitability; however there is still plenty more to be achieved as well as the constant need to continue to improve our customers’ experience.
“The board and my team know we have the right offerings, supported by highly qualified and capable staff to deliver each in this dynamic market place.”
Stay right up-to-date with TechSparx. Read North England (North West, North East and Yorkshire) regional business technology news aggregated and also written by us, all in one place on TechSparx. Curated and brought to you by TechSparx.
