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Business builder: Interview with Marcus Hanke, Chief Executive of Avisen plc

31 July 2009

Dire market conditions, fund manger apathy and tumbling share prices have conspired to deter all but the bravest (or luckiest) companies considering a move onto the Alternative Investment Market during the last year.

But while economic malaise has triggered corporate pain in almost every corner, one of the notable exceptions – Avisen plc – is turning its new life on AIM into a success story.

Avisen came to AIM in February this year as part of a reverse takeover of cash shell Z Group plc. According to chief executive, Marcus Hanke, soon after the deal completed the company was prompted to completely change its strategy.

Hanke had initially wanted to grow the business by refining and then rolling out its own core software and services offering. What he didn’t expect was a working capital crisis to take hold among some of his main competitors, giving way to four bolt-on acquisitions in six months.

Reporting a full-year swing into profit this week, Hanke said there would be no let up in the acquisition growth strategy, and as the new businesses are integrated he is keen to scale up Avisen’s client offering even further.

Performance management

Avisen has been around since 2004 and turns a profit by working with corporate clients on improving their performance management by finding ways to cut costs and boost profitability.

On one hand the company has developed its own intellectual property in the form of performance enhancing methodologies and applies them using a software package called StrategyGPS. On the other, it acts as a consultant and software reseller by applying its own IP to systems developed by the likes of IBM Cognos and Microsoft.

Seeing its chance to reinforce those key areas, the company kicked off its acquisition spree in February with a move on consultancy firm Wexner Global Ltd for £120,000 in shares. That was followed by Cognos resellers Eon Enterprises for £585,130 in cash and shares and Quadrum Consulting (Pty) Ltd for £200,000 in shares. The latest deal, which is due to complete shortly, will see it buy another Cognos specialist, Inca Holdings Ltd, for £3.5m in shares.

“We have picked up some very key assets that have enabled us to get a market presence that in normal circumstances just would not have been possible,” Hanke said. “We have effectively now cornered the IBM Cognos market, and our channel percentage share of the reseller market and consultancy in the UK is very high.”

He says that while the string of acquisitions has temporarily slowed down progress on refining the StrategyGPS product, work there is still ongoing and the development of its own IP and software is still a major part of the company’s grand plan.

He says Avisen’s core propositions around performance management along with its methodologies, support facilities and managed services are being well received by clients. “It is all starting to come together,” he said. “It is about investing and bringing the propositions to market, which is what we have been doing at the same time as managing all the acquisitions.

“We are fortunate that our client base is diverse and there have not been a lot of shared clients with the acquisitions. So we have extended our footprint into different accounts and now we are tackling the cross-selling opportunities.”

World class

While Avisen was able to take advantage of economic conditions in making its acquisitions, the company has also been able to capitalise on tough markets to sell more products.

Hanke notes that, like others, the market downturn has led to slower decision making among potential customers. However, as a business whose software is all about cutting costs and boosting profits, it is little surprise that it has got its hand full at the moment.

“One of our lead propositions is all around profit improvement and margin management,” he said. “In these circumstances there is not an organisation out there that doesn’t want to reduce costs in the most systematic way and improve overall profitability. One of the things we have, which is software supported as well, is a world class process around cost reduction and profit improvement within companies.”

Hanke is also keen to grasp opportunities where others have failed. In particular, he points to Avisen’s growing reputation for quality managed services from its bases in the UK and South Africa as an area where it can gain ground.

“Lots of companies in the UK have spent fortunes on services which have failed to deliver value – and a big part of that is around the support effort and the cost to maintain and manage the application set,” he said. “So we can see a big market opportunity there.

“It will be interesting because we are up against some pretty big guns, but we have managed to differentiate ourselves enough to stay in the fight. There is an appetite among clients to look past the day rate and to try and see what quality and value they can get from the people they are working with.”

Looking ahead, Hanke says there will be no let up in the flow of acquisitions and deals, whilst the company continues to build its model in new market areas.

“We tell our customers that if they do not have the structures, the process or the people in place to execute on their strategies, they won’t work,” he said. “It is the same for us - we are practicing what we preach.

“For us, it is about leveraging the IP, developing the product and moving our business to become more support orientated and recurring revenue orientated. The recurring revenue base has built quite nicely and we intend to use that to support the IP development.

“If we have done our jobs right at the end of the year then hopefully the markets will perceive us as an IP-centric organisation – that is where we want to be.

Ben Hobson, SmallCapNews.co.uk