Services revenue continues to grow in FY16 as SCC announces Vietnam expansion
SCC announces its financial results for year ending 31st March 2016, with significant progress made on its continued transition to a managed service and solutions led business.
FY16 highlights (SCC UK & M2 combined):
- £653m turnover, down 1%;
- Services turnover up 11% to £177m;
- Data Centre Services revenues up 67% to £43m;
- 29% EBITDA increase to £24.9m;
- Services now accounts for 27% of total turnover (17% in 2013);
- Services margins represent 66% of total margins – up from 63% in the prior year and 52% in 2013;
- SCC announces new global delivery centre (GDC) in Vietnam.
Overall turnover showed a marginal decline of 1% in FY16 – with high-turnover/low-margin product revenue reduced by £35m – as SCC continues to focus on improved margin and developing its services business, which delivered substantial growth of 11% to £177m.
Over the last three years SCC has successfully changed the mix of its UK business, with 27% of turnover now coming from services, up from 17% in 2013, and 66% of gross profit is now generated from services, up 14% from 2013.
The most notable growth in FY16 came from SCC’s Cloud Delivered Managed Services (CDMS) business.
SCC’s total investment in CDMS surpassed £60m, with further investments in hosted voice & UCaaS specialist SIPCOM, and mobility business One Point completing its services portfolio, adding to investments made in FY15 in connectivity (Fluidata) and SCC’s third Tier 3+ Data Centre in Fareham. These businesses independently generated £26m of revenue in the year, taking combined services revenues past £200m to £203m.
In FY16, SCC’s overall managed services turnover grew by £22m, driven principally by its Data Centre Services which saw turnover hit £43m, up 67% on FY15. This was supported by a number of key wins in the private and public sectors including: Konica Minolta, Next, Clarke Willmott, Ince & Co, Arnold Clarke, and NHS Blood and Transplant.
With its focus still firmly fixed on building long-term strategic partnerships with its customers, SCC’s Data Centre Services closed FY16 with an annualised revenue run rate of £52m, a 51% increase from the start of the year, of which 80% is repeatable income, underpinning SCC’s strategy for annuity business and continued profitability.
Sentinel by SCC, SCC’s secure multi-tenanted cloud platform, continued its growth trend with revenue up more than 120% in FY16, increasing to almost £8m from £3.6m last year. Key customer wins for Sentinel in FY16 included: Sodexo, Oxford City Council, and DWP.
Since its acquisition by SCC in February 2014, M2, Europe’s leading Managed Print Services (MPS) business, has enjoyed its best ever period of growth. SCC & M2 closed FY16 on £46m combined turnover, representing 21% turnover growth, and £4.6m combined EBITDA, up 48%.
In the last year, M2 has grown to employ over 230 people and has 24,000 devices under management in the UK. FY16 also saw the expansion of M2’s regional office network to include: London, Bracknell, Bristol, Birmingham, Manchester, Leeds, and Scotland, and the creation of a dedicated public sector division.
SCC Chief Executive James Rigby said:
“We’ve had another strong financial performance in the areas identified in our business strategy as key to SCC’s long-term success. We continued to make investments throughout FY16 in additional capability, improved facilities and skilled people – all geared towards delivering the very best service to our customers.
“Our services business has grown significantly over the past three years and the forecast is for that to continue. And the opportunity for customers, particularly in the mid-market space, to grow with us has never been so large with the completion of our Cloud Delivered Managed Services proposition in FY16.”
SCC’s was recognised by two notable industry awards in FY16. In November CRN named SCC its Managed Services Provider of the Year, with the judges describing “a shining example of clear strategy”. And in March SCC won Managed Services Solution of the Year at IT Europa’s European IT & Software Excellence Awards for its Data Centre migration project with WHSmith.
Looking ahead to FY17, SCC expects stable growth in product revenues and continuing growth in services revenues led by its CDMS proposition.
Immediately following the close of FY16, SCC launched its Universal Cloud Gateway service, a cloud brokerage portal enabling customers to easily procure both public and SCC cloud solutions. This new service meets the needs of enterprise scale organisations with multi-cloud strategies and provides a simplified & flexible route to complex cloud services.
SCC will continue to invest in Data Centre & cloud services, with two major Data Centre expansion projects already underway at its Birmingham and Fareham facilities. In 2016, SCC will increase rack capacity to more than 3,000, bringing total capacity growth over the last three years to over 300%.
As SCC continues its journey towards a stronger mix of annuity-based services, with many of its customers’ infrastructures requiring 24x7 support, 2016 will also see the launch of SCC Vietnam.
SCC Vietnam, headquartered in Ho Chi Minh City, will deliver two main activities: firstly, providing level three & four infrastructure support to customers, and the creation of an Offshore Development Centre to accelerate the development of custom applications.
“It’s an exciting time for SCC as we look further East to a location that combines a sufficient time difference with widely-available technical skills. SCC Vietnam will be incorporated by August 2016 and we are aiming for an initial headcount of around 50.
“Vietnam is a country of over 90 million people with an average age of 30. It has a high quality education system, similar to Romania, with over 300 IT-only universities. English is widely spoken to a high standard and the time difference of London+7 is ideal for 24X7 customer support.”
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Points of interest:
- Europe’s biggest independent IT services business;
- Technology brand of Rigby Group plc;
- Over 5,000 employees across Europe;
- Top 3 UK Data Centre & Cloud Services provider;
- Supporting more than 5 million users;
- Profitable growth since 1975;
- Leading strategic partner to all major technology vendors;
- Managed Services Provider of the Year 2015.