Analysys divisional report

 

Simon Jones, Chief Executive Officer
Simon Jones
Chief Executive Officer                                                 
Bill Moore
Finance Director

 

OVERVIEW
Analysys Mason is established as the premier specialist telecoms, ICT and digital media consultancy, offering a unique range of strategic consulting, market intelligence and implementation services on a global basis. Analysys Mason provides strategy advice, operations support and market intelligence to leading players in the industry, including: operators, broadcasters, vendors, financial institutions, regulators, new media companies, public sector organisations and enterprises.

Analysys Mason has a wide range of clients in over 80 countries around the world which it services from its offices in Cambridge, Dublin, Edinburgh, London, Madrid, Manchester, Milan, Paris, Dubai, Singapore and Washington DC. More than 60% of its business comes from outside the UK home market.

Analysys Mason offers end-to-end solutions that support a client's entire business development cycle and offers a portfolio of services which is delivered out of two major divisions: consulting and research:

  • Consulting: offering bespoke advice and support on setting strategy, planning for change, and implementing that change.
  • Research: offering market intelligence services and research products.

2008 OPERATIONAL HIGHLIGHTS

  • Further globalisation of client base with 60% of revenues now coming from non-UK clients
  • Core telecoms consulting revenue have had 12% CAGR over the last three years
  • Strategy consulting business had record performance at both revenue and profit
  • Research business had strong revenue growth of 24%
  • Established Dubai offi ce for Middle East and North Africa (MENA) region
  • Completed the acquisition of Redbox Consulting in February 2008

THE YEAR IN REVIEW
During FY2008, Analysys Mason improved its financial performance at all levels of the income statement. Revenue grew modestly to US$63,5 million (2007 US$61,4 million) but more significant was the improving operating leverage derived from better utilisation and business mix which meant that gross margins expanded to 40% while operating profits rose to almost 11%. EBITDA approached US$7 million (2007 US$6,2 million) and would have been greater but for some restructuring costs. The revenue gains were accompanied by better utilisation of consultants, reflected in the overall improvements in both gross and net margins.

The internationalisation of the company has continued to improve throughout the year, with 60% of all business now derived from outside the UK. The Middle East and North Africa in particular continued to show strong growth and Analysys Mason opened an office in Dubai to make the most of this opportunity. North America and Asia have also showed good progress in 2007.

Strategic telecoms consulting remained strong during the year, especially for new emerging markets driven by deregulation and mergers and acquisitions, such as the Middle East and Africa. Changes to the business model and management in the research division led to a strong turnaround in performance with a resurgence of revenue. The group continues to invest actively in this area.

Analysys Mason continued to win challenging and ground-breaking projects; nine of the group's top 20 accounts in FY2008 were not on that list in 2007. The group's three strongest client categories continue to be mobile operators, incumbent fixed operators and central government.

On 19 February 2008 Analysys Mason completed the acquisition of Redbox Consulting Services. Net assets acquired were US$1,4 million and goodwill acquired was US$2,6 million. This acquisition will further enhance the range of services that can be offered to clients. The business will be fully integrated into the consulting division and is expected to bring close to US$3 million of additional revenues in 2009.

MARKETS
Analysys Mason's addressable market continues to be characterised by rapid technological and regulatory change. While strategy work has continued to grow at a pleasing rate there has been a signifi cant shift in the market away from large-scale network roll-out projects in developed markets, to more business-driven operational improvement, restructuring, operator launch and optimisation projects.

The group responded to this change by focusing on its core telecoms, IT and media consulting business which has grown by 12% per year since 2005/6.

There are a number of key industry drivers which will drive the business over the coming year.

These include:

  • Next Generation Networks - access, applications and product innovation, fi bre deployment.
  • Mergers and acquisitions and launch activity in emerging markets.
  • Digital content/delivery - distribution, service integration, advertising models, carrier IPTV vs aggregator IPTV.
  • Retail business models for telecoms operators and service providers - cash flow impact of legacy decline vs digital content and applications.
  • Telco IT and process re-engineering.
  • Mobile Broadband/HSPA.
  • Radio Spectrum - licensing, LTE/WiMAX, digital dividend review.
  • ICT productivity in the public sector and Enterprise.
  • Data/broadband in emerging markets.

STRATEGY
Analysys Mason's reputation is built upon the sector-specific knowledge, intellectual rigour, and operational experience of its consultants, whose expertise provides industry-leading insight into issues facing the convergence industries of telecoms, IT and media. The group's service portfolio is clearly defined into strategy, implementation, planning and review, with market intelligence at the centre of its work.

Analysys Mason delivers services to the industry across five major areas (see diagram overleaf).

Analysys Mason has increasingly worked to deliver projects that span the full business development cycle, including strategy, planning and implementation. In line with its strategy of continually enhancing the value it delivers to partners, and in response to clients who arecurrently engaging with all parts of the group, the group is now moving to offer the full portfolio of client services under a single brand.

On 30 April 2008 the new brand was launched and the group's four constituent companies (Analysys Consulting, Analysys Research, Mason Communications and Catalyst IT Partners) now trade worldwide under a single name: Analysys Mason.

FINANCIAL PERFORMANCE
Revenue grew to US$63,5 million (2007: US$61,4 million). Core telecoms consulting revenues have seen a much stronger improvement with compound annual growth of 12% over the last three years. Analysys Mason has also seen further globalisation of its client base and its non-UK revenues now represent 60% of total revenue (2007: 55%). Much of this growth has come from the Middle East and North Africa ("MENA") region.

EBITDA was US$6,9 million (2007: US$6,2 million) at a margin of 11% and profit before tax increased to US$5,9 million (2007: US$3,8 million). This improvement in profitability has been driven by a stepped increase in gross margin to 40% (2007: 36,3%).

PEOPLE
As a specialist telecoms, IT and media advisory group Analysys Mason's success depends largely upon the quality of its people. Attracting andretaining the best people in the sector to maintain the group's leadership in the markets it serves remains a key strategic objective for the business.

Today Analysys Mason employs 254 consultants around the world, servicing clients in more than 80 countries. The group's employees have had a major influence on the industry for more than 20 years and have been involved in many groundbreaking projects such as:

  • Led the liberalisation of telecoms across Europe and Asia.
  • Established many of the core principles and policies used by regulators to govern the operation of the sector.
  • Mediated in major policy issues for both commercial parties and regulators.
  • Supported several hundred transactions and licence acquisition processes for operators and financial institutions.
  • Provided operational support to major operators in the roll-out and expansion of businesses across the sector.

Marketing and recruitment will continue to be focused on enhancing Analysys Mason's reputation in growth segments such as Next Generation Networks (NGNs) and solutions, and consulting to the media and networked IT sectors, along with its pursuit of emerging geographical markets. Management will continue to look for ways to improve productivity and enhance operational synergies as a platform to accelerate future growth.

FUTURE PROSPECTS
Along with exploiting growth opportunities in established markets and sectors, Analysys Mason continues to make the most of group synergies and much potential remains for the group to broaden and deepen both its thought leadership-based service offerings and its geographic footprint.

Organisation priorities for 2009 include:

  • Exploiting the power of the single integrated brand and end-to-end service portfolio.
  • Optimise value from Redbox acquisition.
  • Increase focus on account management and geographic market penetration.
  • Build and update our consulting and industry thought leadership across the entire portfolio.
  • Broaden existing service offerings into business transformation and operations improvement.
  • Extend international reach of our planning and implementation businesses.
  • Continue to look for acquisitions to build convergence consulting, geographic and publications scale.
  • Align bonus and equity incentives with growth strategy.

Management remains very conscious of the uncertain economic climate we face and retains a prudent and cautious approach to recruitment, cost management and growth initiatives.