Wednesday 17 January 2018

John Bowe MD, Mazars Corporate finance

Celtech Software company

John Bowe
John Bowe
Michael Tuohy
Noel Cunningham

Celtech has primarily focused on organic growth which has been largely driven by referrals from existing satisfied customers. The company is cash generative, which means that Celtech could fund any bolt-on acquisitions through a mix of cash and debt.

The key benefit of growing through acquisitions is taking advantage of the synergies that acquisitions can create for companies. Other advantages include the elimination of competitors, easier financing, economies of scale, instant market penetration and new product acquisition.

Celtech, as with all software service businesses, focus should be on adding new customers efficiently, delivering 24/7/365 operations and generating good margins which deliver a return on investment for its customers.

The aim should be to continue to increase the revenue mix to a recurring revenue model.

Celtech was founded in San Francisco in 1992 but has been based in Dublin's Eastpoint for over 15 years. Celtech has been pioneering IT solutions for retail and wholesale chains, especially the food and grocery, convenience and multiple chains, gaming and entertainment and pharmacy market sectors for the last 20 years and is very focused on UK and European markets.

Their long-standing customer engagement model has been based on Celtech's "ab-initio" system, a real-time enterprise-wide system that delivers a competitive advantage to their customers, enabling management, trading and marketing teams to enhance efficiency and profitability.

Celtech uses the latest technologies to deliver real-time visibility, management control and agility across a business, covering all physical store and online sales channels ombined.

They offer a full suite of software, from stocks and cash to real-time management reporting, marketing promotions etc, with on-premises systems or off-site fully managed services.

Celtech also brings consultancy services to shape and deliver a return on investment plan, along with all the hardware and infrastructure requirements. This offers lower capital outlay, allowing retailers to invest and build.

More recently, managing director Darragh Fanning has restructured the business strategy, developed a group structure and has brought a new management team on-board. Celtech is constantly developing the ab-initio system as well as enhancing the services they offer. As a result, Celtech has delivered excellent growth and profitability over the last few years and is now poised for further positive expansion.

As the company continues to expand its operations and entries into new markets it will likely deal with challenges typically associated with any growth organisation.

This will include on-going resourcing requirements and the challenges they bring in successfully identifying the right personnel to take the business forward and managing employee expectations while continuing to focus on controlling its cost base.

While the focus for a company like Celtech will be on developing the business and establishing structures in place to achieve this goal, ensuring ongoing compliance with laws and regulations will remain a focus point for the company.

Assessing the impact of the new Companies Act whilst continuing to deal with a new set of accounting rules only in place since the turn of the year will ensure that these issues remain a standing point on the Celtech board's agenda.

Tax reliefs are available for restructuring an organisation as it prepares for growth, and there are tax efficiencies that can be achieved where firms are within a group for Irish tax purposes. Additionally, as a presence is established in different jurisdictions, whether to enter each market by way of a branch or a subsidiary should be evaluated.

Projected financial performance over the next number of years is relevant, in that the initial years of operation in new markets may be loss-making. If so it would be preferable from a tax perspective to establish overseas as a branch initially rather than a subsidiary as the Irish company can take account of the branch losses arising for Irish tax purposes.

Tax treatment of a foreign subsidiary is less attractive, as the losses arising are generally ring-fenced for offset by carry forward against future profits earned by the subsidiary.

Sunday Indo Business

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