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Kelway profits up as firm explores future expansion options

Microscope contributor

Kelway is tracking a sales run rate close to £230m for fiscal 2011 and has three finance options on the table to underpin continued expansion through acquisition.

The London-based reseller has filed financials for the 12 months to 31 March 2010 with EBITDA - the most accurate business measure - up 97% to £8.3m.

Retained profit for the year was £4.1m, up from £1.7m and sales climbed 61% to £178m, helped in no small part by the buys of Repton and SAM Practice. Staffing levels increased from 196 in fiscal 2009 to 355.

Craig Compton, chief financial officer at Kelway, lauded the results and claimed they were achieved through improvements in operational efficiency and acquisitions.

"The operational efficiencies have supported the business, the acquisitions were integrated quickly so there is no disfunctionality across the business lines," he told MicroScope, adding that customers and not the stock market had shaped its buy and build strategy. 

Services represented one quarter of the year's gross margin, product supply accounted for another and IT solutions comprised the remainder.

When Kelway acquired Repton last summer, it set out the target to become a £250m operation and Compton said it was on target to hit £230m by March 2011, having achieved £115m in H1 ended this month.

"We are exactly half way through the year and half way on the number," he said, adding that some project work had freed up to help revenues streams flow.

The acquisition strategy is clearly work in progress for Kelway which continues to monitor the channel for potential targets.

Compton said it had clear options to fund future expansion; to gear the balance sheet, use operating cash flow or lean on VC partner Core Capital LLP to fund the expansion.

He pointed to the organic growth since it bought Elcom out of administration in June 2007, acquired Panacea in February 2009, Repton three months later and SAM Practise at the end of that year.

"If you look at the combined revenue stream for the five businesses from when we started that acquisition journey, we have grown from £137m and are on course to become a £230m operation," said Compton.

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