Newcastle IT firm TSG invests £1m in R&D division

Newcastle-headquartered TSG, owned by former Sage director Graham Wylie, has established a dedicated 15-strong team to focus on R&D, led by Mat Peck, in a move the firm believes will cement the business’s expertise in its chosen markets

David Stonehouse, chief executive of TSG
David Stonehouse, chief executive of TSG

It services firm TSG has invested £1m in a research and development division to spearhead a series of new products.

Newcastle-headquartered TSG, owned by former Sage director Graham Wylie, has established a dedicated 15-strong team to focus on R&D, led by Mat Peck, in a move the firm believes will cement the business’s expertise in its chosen markets.

The announcement comes after the firm, which employs 473 staff, posted a 5.7% drop in turnover for 2013, following a year of weak investment in technology solutions by SMEs.

The company, which provides IT solutions to small and medium-sized businesses, recorded sales of £40.01m for the year ended March 2013, down on the £42m it noted in the previous 12 months, and earnings before interest, taxes, depreciation, and amortisation (EBITDA) were £540,000 compared to the previous 12 months’ £1.2m, while operating profits dropped from £838,000 to £154,000.

TSG attributed the drop in performance to SMEs which have failed to fall in line with the economic recovery, and firms which have also been cautious of “cloud” computing.

However, the business said it has acted swiftly to rebalance the cost base and since the end of the financial year the company has secured a series of lucrative contracts, worth more than £1m.

As well as setting up the R&D department TSG has secured new contracts with Newcastle-based Winn Solicitors, The Labour Party, Owen Pugh and Nomad Digital.

Chief executive David Stonehouse said: “Throughout the recession and now, we’re continuing to take a long-term view, investing and developing so as to put us in a strong position longer term.

“We’ve not been driven by short-term profitability, but building for long-term success. Nevertheless, it’s pleasing to see progress with slightly improving gross margin percentage showing some operational improvements.

“The business is now truly one national business, working in one way with our 4,500 or so customers nationally to give them the best we can consistently – not an inconsiderable achievement given we are the result of around 25 acquisitions of smaller local IT companies around the UK.

“We’re now well positioned to address the changing market for IT services to SMEs as ‘cloud’ computing and on demand delivery takes hold over the coming years.

“We decided in 2013 to invest significantly in product research and development. This investment in people and an appropriate build and testing environment costs nearly £1m annually some of which was incurred during financial year 13.

“We expect to announce our first product releases in around April 2014 – with more to follow.

“Our investment in R&D is to secure and exploit our position in chosen vertical markets with ‘on premise’ and cloud-based solutions giving customers a choice of platforms for delivery.

“We believe many mid-market businesses will look for domain expertise to be reflected in their IT partners’ solutions – and that’s why we’re making our investment in R&D.”

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