Monday 19 November 2018

Forget about Irish Water, Actavo Network's boss says his eye is on breaking America

TJ Malone joined what's now Actavo as a student installing cable TV. He's left and rejoined since then, but two decades later retains the air of a man whose journey is only getting started, writes Donal O'Donovan

‘By the end of 2016 we’re on course to grow to close to half a billion euro,’ TJ Malone says about Actavo’s revenue
‘By the end of 2016 we’re on course to grow to close to half a billion euro,’ TJ Malone says about Actavo’s revenue

If the controversial sale of Siteserv, four years ago, has cast a shadow over the business, nobody's told TJ Malone. The company has been renamed Actavo, and Malone - who first joined the business more than two decades ago straight out of college - heads up its largest division.

The 2012 sale - which in effect was driven by the former Anglo Irish Bank as Siteserv's main lender - has long been controversial both because of the scale of losses suffered by the then State-owned bank, and also because the old shareholders managed to pick up a payment for seeing the distressed disposal through.

The deal, along with others where the former Anglo took big losses, is subject to an ongoing enquiry.

The way Malone sees it though, it was a life-saver for the company.

If it hadn't happened, he and thousands of colleagues would have joined the hundreds of thousands of others from the construction sector who ended up on dole queues and emigrant flights after the crash, he reckons.

"The jungle drums were beating. Some very good clients were starting to ask questions - and I'd have been the same in their shoes. It (the sale) was very timely, if it didn't happen, I'd say we were a matter of weeks from Receivership," he says.

The company, weighed down by debts it couldn't support, had reached the end of its road when it was bought by Denis O'Brien, he says.

"There were two and a half thousand people, in the end the credit insurance had been pulled, that's a massive thing in our industry, particularly for the guys in the UK, it's massive."

Even before that crunch point, the business had been adrift, hampering the plans of Malone, who, despite his relative youth, is an industry veteran.

In person, he combines an entrepreneurial drive with fairly polished executive presentation style - sprinkling references to KPIs and performance metrics through our conversation.

"You'd go to meetings with clients and as time wore on you were getting more and more questions about it.

"You were putting tenders in for large work and the first thing you were asked for were your accounts, and there were questions over the viability of the company. Are you going to be around?"

The change from pre-sale to post, was total, he says. "It was like taking the shackles off us," he said.

The former Sierra, the part of the business run by Malone, has expanded from 320 employee to 3,000 now.

Along with the rest of the group, Sierra has now been renamed as Actavo's Network and In-Home division.

Its growth included winning one of four contracts to install meters for Irish Water, a contract that managed to win Actavo the ire of opponents of the water charges.

Presumably, opposition to water metering was part of the reason for the name change, I ask? Malone doesn't agree. The Sierra name was dropped reluctantly.

At a group level there was a need to simplify from eight brands to one - but serious consideration was given to retaining Siteserv as the overall brand, he says. Ultimately, the name, reflecting the past focus on construction services, was seen as too limiting. Actavo was seen as a better fit.

You could count the column inches dedicated to Irish Water, Sierra and water meters in miles rather than inches, but Malone insists it was never a huge part of his business - "less than 1pc of our turnover".

Surely then, he has cause to regret getting involved in what must have been a uniquely challenging contract - installing water meters in the eye of a massive, and probably uniquely bitter, political row.

Malone demurs.

"Any contract to us is worth it. We had a contract we had to deliver and we've delivered it," he says, matter of factly.

"Whilst everyone one else was writing about it and talking about it and deliberating over it, we haven't really paid that much attention bar doing the work and just getting on with it."

The numbers bear him out. Over the last three years the business, now headed by former Dell executive Sean Corkery, has grown revenue from about €184m to what will be just under €420m by the end of 2015.

"By the end of 2016 we're on course to grow to close to half a billion euro," he says.

That's on the back of a massive international expansion - in the UK, the Caribbean and with a push now into North America.

It's a far cry from the days in early 2012, waiting for the axe to fall.

"I think while everybody else appears to have been distracted by what's going on on the ground here, we've moved on," he says.

Once the talk turns to Actavo's current plans, Malone's enthusiasm starts to really bubble over.

But it's clear he's a careful manager, eyeing trends four and five years out and gradually rotating the business to take advantage.

During the crash here, that meant getting out of a lot of civil engineering work - "the market just stopped" - and getting deep into servicing the telecoms and home entertainment market.

"We sat down and looked at the recession landscape and asked ourselves what was future proof, what was recession proof?"

The strategy they came up with was counter intuitive - a big push into cable TV and broadband. The view was that with household budgets smashed, staying in would be the new going out - meaning more, not fewer, people signing up for television packages.

"Pay TV went from being a luxury to a necessity and we went hard after the telecoms market. It was a risk but it worked out."

Big contracts Actavo has with the likes of Sky and Virgin Media in Ireland, and similar players in the UK, is one reason some of Malone's thousands of staff may well have crossed your threshold this year.

It also does big volumes of work for Bord Gáis installing and servicing boilers.

The reason you didn't notice is that Actavo brands its staff and kit with clients', rather than its own, livery.

It means foregoing the goodwill potentially generated from millions of house calls and site visits a year, but is a differentiator for the business, putting the client's need first to maximise the customer experience, he explains.

It's a subject Malone is messianic about, even building a full scale family home inside the company's training warehouse, where staff simulate site visits and run through the challenges of being inside a real home.

To ensure best practice Actavo works with groups representing blind and deaf people as well as those with disabilities. The stakes can be high. "If you are in the home of say a child with autism - if that child is used to watching a programme at three in the afternoon and somehow you knock that out of sync, that child can take weeks maybe to recover.

"We've got to recognise that and we've got to work around that, and we've got to be able to talk with the parents and facilitate that," he explains.

It's the level of delivery that Malone says marks his business out from its rivals.

If TV was a good bet during the recession, Malone's big punts now are on smart meters which under EU rules must be rolled out for all gas and electricity users - first in the UK and then Ireland, within a matter of years.

The numbers are incredible - in Britain installation will have to happen at a rate of quarter of a million homes a week to meet the European deadline.

Actavo will be ready, Malone explains, after gaining expertise by taking on contracts to install pre-pay meters for Electric Ireland PrePay Power, and investing in costly accreditation to qualify once tenders start to be awarded.

But his biggest prize is the US. A huge contract to lay fibre to the home for Denis O'Brien's Digicel in the Caribbean, harder to win than I assume, Malone insists, has brought Actavo within an hour of Miami.

Earlier this year the company bought US network design firm AES, having collaborated with the business on the Digicel contract.

The deal takes Actavo further up the value added chain - it's high end specialised work, but Malone's plan is to add it to the existing capabilities to launch an end to end network design and build service in North America.

Fibre to the home is new, and new entrants are shaking up the market. "When we started to really research the market in the US it really blew us open," he says.

Like smart meters on this side of the Atlantic, fibre rollout in the US is a given, Malone reckons.

"You have Netflix, on-demand content, catch-up TV, all of these products demand high speed networks, the legacy copper networks just can't take it," he says.

Operators who don't put in new infrastructure will be left behind. "There are 136 million homes in the US and 28 million have a fibre network running by them, but that's projected to double in the next three years."

The idea is to leverage the business that has been built up in the Caribbean with AES's in-demand design services among operators.

"They need to design it before they can build it, so if we're in the door from a design point of view it brings us automatically in the door from a structural and installation perspective."

If it comes off, breaking the US market will be transformative.

So much so, that I wonder whether it makes sense to for Malone's Home and Networking division to remain within a wider group - wouldn't it be better as a stand-alone?

Malone says "no".

He cites as an example the Industrial Services division's recent contract win in Kazakhstan.

"It's somewhere we will look at now too. If one division goes in to a market they are putting a flag in the ground for the rest of us."

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