ERP software and services firm XKO Group Plc is planning an acquisition spree over the coming months following a buoyant half-year. CEO Simon Beart for Chertsey, UK-based XKO told ComputerWire: “In very harsh markets customers are in control, and they will not buy from fragile, financially insecure companies. We are currently speaking to two small companies in a similar position to this, as with our earlier acquisition of Aran.”
XKO, which develops and integrates a suite of ERP tools targeted at the small to medium-sized enterprise market, made a net profit of 50,000 pounds ($78,000) during the half year period to September 30, compared to a net loss of 4.89m pounds ($7.63m) in 2001, on revenue that increased 5.8% to 21.6m pounds ($33.7m).
However, excluding acquisitions, revenue from continuing operations remained flat at 20.4m pounds ($31.8m). At the end of the period, XKO improved its cash position to 898,000 pounds ($1.4m) from 136,000 pounds ($212,160) in 2001. At the same time, finance director Andrew Smith resigned from the board and was replaced by former Druid financial director Robert Kimber.
During the period, XKO acquired struggling ERP software and services firm Aran Ltd for 2.42m pounds ($3.7m), which gave XKO a total customer base of 2,000 companies. Aran made full-year 2001 revenue of 5.7m pounds ($8.7m), with an installed base of 400 users of its mid-range ERP suite, which XKO has now renamed XI. The company said this would add to its existing X3 portfolio of ERP tools aimed at the high end of the market.
XKO occupies a niche space within the IT services market, where it provides the entire integration work around its own products, which generally involves providing the network, selling applications, as well as additional maintenance and support.
As a result, Beart said the company does not tend to compete against traditional services firms, but rather local distributors in the network integration space, and small ERP vendors such as Sweden’s IFS AB. Most of the ERP software in the SME market is similar, but what is most important is that customers want to know you have a strong financial base, he said.
Consolidation is occurring rapidly across the IT services sector and also in the mid-market ERP space. Beart maintained that many of its smaller competitors have now disappeared, and two main rivals Navision and Kewill’s ERP practice, have both been bought out in recent months by Microsoft and Exact Holding respectively.
Beart conceded that selling out to a larger player could eventually also seal XKO’s fate. We are profitable, have the right management, but you’re right, if a company put an offer on the table, we’d have to think about this seriously, he said.