Elite demerger sparks growth

The demerger of Elite into two separate businesses operating under the umbrella of New Technology Group (NTG) creates an opportunity to realise the group’s goal to treble in size and hit £100m revenue, says CEO Adam Turton.

The demerger of the comms and IT services part of Elite Group into two separate trading companies addresses the fundamental question of how to most effectively address these markets, believes Turton. The restructure sees Elite maintain its focus on comms while the Netcentrix brand (acquired in 2016) has been resurrected to focus on IT managed services. The move is a key pillar of Turton’s long-term vision and follows a strategic review of the business that also advances his customer value and experience ambitions.

“Organising our company this way provides greater focus on execution, enabling us to offer more value, technology and innovation to Elite Group and Netcentrix customers,” explained Turton. “This approach enables the delivery of specialised and tailored solutions with increased agility, optimising the experience for customers and meeting specific requirements with precision.”

Elite currently employs close to 170 people across the group and has circa 3,000 customers incorporating small, medium, large and enterprise segments covering a range of vertical markets. Adjusted trading for this financial year will be relatively flat and in line with budget. But importantly, underlying UCaaS and CCaaS recurring revenues are growing organically at 10 per cent.

For Netcentrix, adjusted trading this financial year will show 10 per cent organic revenue growth with underlying recurring revenues growing at 19 per cent, delivered by incremental fixed recurring revenues for Microsoft Azure services including cloud infrastructure and Azure Virtual Desktop, as well as growth in Modern Workplace services. Turton also expects to see additional and consistent incremental growth in professional services.
“Our ambition is to treble the size of the group over the next three to five years to £100 million revenue through a combination of organic growth and M&A,” stated Turton. “The demerger represents the first step in executing our growth strategy. It was clear to me that with the right focus we could be doing more for customers. Furthermore, the opportunity that exists in both the cloud communications and outsourced IT support and managed services market is significant to say the least, and one we must capitalise on. These changes enable us to diversify our technology revenues, target more markets with more technology and with a greater combined capability, meaning we can accelerate growth and reinvestment into the business.”

Immediate impact
Although the demerger is officially launched this month the group is several months into a soft launch with a demerge already implemented in a number of departments. “Customers will feel the benefits of this change almost immediately, with the positive impact to growth and profitability following 12 to 18 months later,” said Turton.

He also noted that the demerger hasn’t involved redundancies within either business, but instead will create opportunities to expand teams across both companies with fresh, specialist talent. “This is key because the longer-term priority for both businesses is associated with sustainable development, a proactive approach towards the planet, people, society and profit,” commented Turton. “Not forgetting that our people are our biggest asset.”

AI will be transformational and the single greatest differentiator and driver of value for UCaaS and CCaaS over the next five years. Many use cases already exist

In terms of the leadership structure for each business, Elite’s current Chief Commercial Officer, Pete Jury, has been appointed Interim Managing Director for Elite Group. In addition to Turton’s role as Group CEO, he will be taking on the role of Interim Managing Director for Netcentrix. “These interim roles are in place to oversee the planned demerge and establish the new group structure,” stated Turton. “The plan is to appoint permanent Managing Directors for both businesses post demerge.”

Their priority areas will be distinct and sharply focused, with Elite Group doubling down on providing cloud communications services including connectivity, UC and UCaaS, contact centre and CCaaS leveraging conversational AI, voice services, mobile and IoT. “AI will be transformational and the single greatest differentiator and driver of value for UCaaS and CCaaS over the next five years,” said Turton. “Many use cases for AI in both UCaaS and CCaaS already exist and leveraging this technology will be a critical part of our go to market for Elite Group. The immediate priority is on product market fit and working with key vendors and strategic partners to redefine cloud communications and strengthen the technology proposition we provide.”

From Netcentrix’s perspective, the UK market is fragmented with thousands of MSPs and IT services companies making it ripe for consolidation, presenting a ‘massive opportunity’ for an ambitious and well-funded challenger brand like Netcentrix looking to grow both organically and via M&A. “Additionally, the lack of IT skills and high costs associated with data loss and downtime has led to cybersecurity emerging as the top priority for investment,” added Turton. “We see cybersecurity and managed security services as a driver of value and a critical part of our go-to-market for Netcentrix.”

Quest for value
The question of whether to demerge the comms and IT services parts of Elite Group at a time when organisations are looking for a one-stop-shop solution provider is an easy one to address, says Turton. “I challenge the conventional wisdom that says businesses are looking for a one-stop-shop solution provider,” he stated. “I believe organisations and business leaders are looking for real value delivered via any number of strategic partnerships with different service providers. For us, it’s about focusing on the quality of the service offering rather than the quantity of services offered.”

According to Statista Market Insights, the UK IT services market will reach £70.1 billion by the end of this year and is forecast to grow by 35 per cent to £96 billion by the end of 2028. “Within this space, the outsourcing of IT support and managed services dominates the market, and the size of this opportunity was a factor in our decision to demerge IT services and communications,” added Turton.

He pointed out that the overarching NTG business will support all group companies with execution of the strategy and M&A. “In the case of Netcentrix, we want to acquire additional capability and scale while also looking to expand our national coverage to strengthen our localised IT support model,” added Turton. “Elite Group is also seeking to acquire for scale and capability as we look to strengthen our proposition in the large and enterprise business segments as well as the public sector. We are looking for targets now with a view to acquiring in the next 12 to 18 months.”

By taking into full consideration everything that Turton is prioritising right now we can see that change management is high on his agenda. “Leading change is one of the most challenging priorities facing business leaders,” he commented. “We regularly hear about companies suffering the consequences of not changing, so having the courage to be bold while embracing change and innovation is critical for success. Today’s leadership priorities are also about articulating why the business exists and creating purpose driven companies that inspire and engage people. Culture and employee engagement has to be top of the agenda for business leaders.” 

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