M2 announces record organic growth of 200% in its MPS business following its acquisition by IT Services giant SCC in 2014.

FY17 Highlights

  • £47m revenues, 51% Annuity services
  • EBITDA at £4.4m up 13%
  • Service annuity revenues up 14%
  • 14% growth in UK devices under MPS management

M2 revenues were £47m (year ended 31st March 2017) flat on the prior year with gross margins growing by 12% and EBITDA growing 13% to £4.4m.

Organic growth was primarily driven by new corporate customer wins, achieved through successful close working relationship with parent SCC, a newly focused Public Sector team and increased emphasis on specialist areas such as production print.

Multiple new Public Sector frameworks agreements for managed print services procurement were secured, including Crown Commercial Services (CCS) RM3781 – a £400m framework for MPS – and a key area of future growth. However, with the timing of these wins the impact on the current financial results was negligible.

Devices under MPS management now stands at 30,000 devices, up 14% with a further 5,500 devices won in preferred bidder status due to roll out over H1 of FY18 providing a run rate of c. 36,000 devices under MPS management.

M2 CEO, John Taylor comments:

“This continued growth in customers, assets under management and resulting service annuity margins is very pleasing in the context of reduced service revenues per device driven by a highly competitive market place, lower unit price for product hardware and a low single-digit decline in print volumes within the office environment.”

Service annuity revenue represented 51% of total revenues and 64% of total gross margin, up 14% on prior year. The key highlight was the success of driving MPS within SCC, where total MPS revenues grew 30%, annuity service revenues grew 21% and product revenues grew 40%, driving 51% growth in gross margins on prior year compared to a 1% growth in non-SCC introduced business. SCC now presents the primary route for large enterprise and public sector MPS business for M2.

M2 invested in the year, especially in its Public Sector sales team, Professional Services Consultancy and engineer base to reflect the growth and future target growth areas. M2 also absorbed the brunt of exchange rate pressures following Brexit with much of its supply chain dominated in Euro and US Dollar, which had an impact of negative c. £0.8m.

Customer wins such as John Lewis, Waitrose, Network Rail, Old Mutual Wealth, Jardine Lloyd Thomson, Devon County Council, IAG and University Hospitals North Midlands reinforced the strength in customer service excellence and the value our customers place in M2 Intelligence – our real-time customer service platform, complete with self-serve portal, measurement and SLA performance tracking on all aspects of our MPS service.

Taylor continued:

“Despite a highly competitive market place and cold winds from Brexit cost inflation, the organic growth is testament to strong customer loyalty and the attractiveness of M2’s MPS proposition, which is underpinned by M2 Intelligence and a solid customer experience focus.

 

“Customers are also seeing the value of absorbing MPS as part of their overall IT programme, something that plays strongly to our parent SCC’s broader IT Services proposition.

 

“As we step into the New Fiscal Year our focus on Public Sector, Production Print and smaller customers will grow to complement our strong large corporate enterprise customer base.

 

“Smaller customers will be targeted via our new self-serve eCommerce platform for quoting, ordering, funding and managing MPS solutions for smaller businesses in a transparent, flexible, easy and speedy manner, reflective of the trend consumers are pursuing.”

M2 was acquired by SCC in 2014 and has recently completed a three year strategic review. The business over achieved the objectives set in 2014, having organically grown profits double-digit each year. M2 has driven increased MPS business via SCC, which has grown over 200% over the 3 year period.