Kin + Carta‘s acquisition of US firm Spire last week neatly highlighted where the business is travelling both commercially and geographically.
Spire is a digital transformation company that advises companies on how best to exploit technology, an area of the consultancy market where Kin + Carta now specialises.
The group knows first-hand the problems of dealing with digitisation, having been formed out of the St Ives group that at one time was the UK’s leading printer before the shift to online media destroyed that market.
Kin and Carta, which advises companies on how best to exploit digital technology, has acquired Spire Digital, a US-based digital transformation consulting firm
Now Kin + Carta helps companies with legacy businesses to reinvent themselves and use technology to keep up with the digital-based newcomers entering their space.
J Schwan, chief executive, describes the business as a services company that helps businesses answer the question of how they should change to take advantage of digital-age opportunities.
In some cases, that might mean either developing a whole new business model, new products to launch or how to augment existing offerings.
K+C has strategists and a team of over 1,500 designers and engineers to work out the best digital solutions.
‘Every business is struggling to try to understand the potential of digital technologies, especially as the technologies themselves evolve and change every year,’ says Schwan.
Most of these changes are coming from the big four of Facebook, Apple, Google and Microsoft, he adds.
‘How do these technologies potentially disrupt the business and can they drive new areas of growth are questions that every boardroom is discussing.’
Encouragingly for a consultant such as Kin + Carta there is no one-size-fits-all solution. ‘The answer is quite different depending on the sector and the business,’ says Schwan.
Financial services are an important sector for the company and one of the markets where digitisation is reasonably well advanced.
Healthcare is another important area, says Schwan, as pharma businesses and insurance groups decide how they can use technology to change the patient experience.
Industrial B2B-focused businesses are also coming around to the view that their perspective is not that much different from consumer-facing organisations.
‘We are just human beings who have certain expectations in terms of how services are delivered.’
‘There is a lot of work to be done in those areas,’ he adds.
Being smaller than the ‘big four’ management consultants and with a very focused approach gives Kin + Carta an edge when it comes to pitching for business and recruiting the best people.
Revenues at present are roughly split half in the US and half in the UK, but Schwan sees opportunities to roll-out further across Europe and into the western half of the US.
Kin + Carta helps businesses keep up with digital changes, which often come from the big four of Facebook, Apple, Google and Microsoft
A restructuring Schwan instigated a year ago was designed to give the scale and capability for expansion. Rather than a portfolio holding company model, the business is now an integrated consultancy focused around three areas.
Schwan concedes the pace of change has been a little behind schedule with the strategy and communications arms taking longer to get into shape than expected, but he is confident the foundations are now in place.
‘We have worked hard to build a central sales team arm and to expand our geographic capabilities as well as bulking up in areas such as artificial intelligence and the cloud.’
The market seems to have recognised that too, with the shares recovering after a trading update in August had knocked sentiment.
At 95p, the business is valued at £158million compared with net revenues of £148million in the year to July and adjusted profits £17.6million, down 5 per cent year-on-year.
There was a pre-tax profit of £1.8million, however, against a loss of £31.2million while the dividend was maintained at 1.95p.
Schwan expects a big improvement over the coming twelve months and had has already predicted double-digit net revenue growth. Organic growth is ‘paramount’ but acquisitions are also on the agenda, especially to boost its regional presence.
Big companies tend to work with businesses close to their headquarters, Schwan says, hence the Denver-based Spire deal that takes it deeper in the west of America and closer to the many companies based there.
Spire cost an initial £11.4million rising to £27million if all earn-outs are met. A £13.6million at 89p placing helped cover the initial payment.
That share issue was a modest discount to the price, which reflects the opportunity in digital transformation – a $200billion global market that is growing at 18 per cent per year.
Broker Peel Hunt has a price target of 145p, while the shares currently yield 2 per cent.
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