David Castledine has just come back from one of the most important
appointments of his life when Accountancy Age comes to meet him.
‘I was attending my daughter’s school play. I missed last year’s and I was
told in no uncertain terms not to miss this year’s.’
His family life and his work as FD of
Geo, which designs and
builds bespoke communications networks for businesses, bear other close
‘I joined Geo in 2003
and also got married in 2003, so concurrent wins. In some ways you equate the
growing pains of company with the growing pains of a family the family
develops so the children begin to walk on their feet and actually go out and
interact with the world.’
Geo was founded in 2002 when telco giant Hutchison Whampoa snapped up a
network that had been set up by the National Grid in 2001. Its aim was to
provide a fibre optic backbone network for Hutchison’s new 3G mobile operation,
3, which was due to launch in March 2003.
These days, 3G technology is practically a given, and anyone that has
experienced a server crash knows how important IT networking is to a business.
Now Geo is busy carving
a niche for itself in a fiercely competitive market where BT operates and the
company attempts to punch far above its weight, providing dedicated fibre optic
networks to mobile phone operators, financial services companies and internet
A ten-year contract with
Warehouse to provide a fibre optic network linking seven of its sites in and
around London is proof of that. ‘We have an ongoing relationship with Carphone
Warehouse, and we are also building a major network in North Wales.’
The Welsh project covers a government funded fibrespeed network connecting 1
4 business parks in the ‘broadband desert’ of North Wales a high profile job
which could lead to more lucrative repeat work in the future. But it hasn’t
always been plain sailing, says Castledine.
‘There have been a few dead ends, some ups and downs, but overall we are
doing well. We’re getting into the bigger leagues financially and increasing our
profile and scale.’
But now the UK finds itself in the grip of a recession, with no sign of any
let up in the near future. There has been some retrenchment, admits Castledine,
as the banking crisis has had knock-on effects for Geo because of the heavy
reliance of IT systems in the financial service sector.
‘The banks were one of the first non-telecoms customers that were interested
in getting access to the networks, the fibres of the structure and getting
services off it. So we have done some deals with financial services companies
that have said they’ll take our services but they’re not able to commit to
anything else further down the line.’
There have been accounting decisions that have impacted the telecoms sector
over time. Issues relating to asset acquisitions came under the spotlight of the
standards bodies in the early 2000’s following the ‘tech’ crash.
It was common practice among telcos to recognise revenue early from the sale
of telecommunication services and this also received close scrutiny.
Fallout from the collapses of companies such as Global Crossing and Worldcom
also did the telco sector no favours.
Now part of firebrand private equity chief Jon Moulton’s Alchemy Partners
investment portfolio after Hutchison sold the business (see box), the deal has
benefited Geo and given the company a more focused approach, Castledine says,
including good governance to avoid mistakes of other telcos at the turn of the
century. ‘He’s very aware that a lot of companies that sold networks, especially
to each other, treated it as early revenue recognition. We account for it as
conservatively as possible as deferred income.’
Been there, done that
As we all attempt to manage our way through the latest recession, Castledine
recalls trying to find a job in the last one.
He completed a maths degree but ‘always enjoyed those parts of the discipline
that interacted more with the real world,’ he says.
‘Getting under the bonnet of a business was what interested me and I resolved
to get into it through the CIMA route.’
However, his career path hit slap-bang in the middle of the early 1990s
recession. ‘Companies were cutting back on what they were doing for graduate
training for that year. I can just remember what is was like trying to get a job
the days before the economy was booming.’
Before committing himself to the telecoms sector he also recalls a stint in
the investment banking world working on risk management on derivatives
instruments he describes as being ‘totally divorced from reality’, a comment
which many will find rings true in the current climate.
That experience has given him the extra drive to ensure that a growing
company flourishes in the good times and holds it own during leaner periods.
Initially, Geo’s remit was solely focused on building the 3G network for
Hutchison, compared to its current broader business model of building and
renting to others under its new owners. Castledine had to help the company
achieve its task of getting Hutchison’s 3G network up and running before it was
given its license to expand into other sectors.
‘Roll your sleeves up’
Geo now has its own finance team, albeit a small one with a headcount of
four, but boxes clever by hiring contractors to do standalone financial analysis
on an ad-hoc basis.
Castledine helped oversee the organic growth of Geo’s own network through the
purchase of a London fibre grid in 2005 and, under his stewardship, Geo’s tu
rnover has risen from £3.5m in 2006 to over £10m in 2007 and is currently
forecast to exceed £30m for 2008. Geo is still making operating losses, but is
heading for the black as revenues roll in from its long term contracts as the
company continues to expand.
He dealt with moving from an Oracle accounting system ‘which was costing
hundreds of thousands of pounds’ to a basic system that was far more suitable.
‘Now we’ve built it to a general ledger system. It’s a constantly evolving
thing. We are a growing, project-focused company and we have to set up the
processes to do that.
‘We can now focus on the value added reporting and the key performance
indicators. Jon Moulton is obviously a very challenging person to report to.’
Businesses in the Alchemy portfolio automatically come under KPMG’s audit
umbrella. ‘They did all the due diligence for the original purchase so we got
off to a good start. It’s been quite hectic this year, and KPMG have been very
helpful in talking to us about how to grow the business. For it to work, the
auditor has to be able to understand and adapt.’
In these troubled times, Castledine concludes by saying: ‘Don’t be afraid to
roll your sleeves up, get into the business and do things. Getting the
perspective of how other people do their job is invaluable. Get out of your
Advice which, in this environment, may not be hard to follow.
The evolution of Castledine and Geo
Before joining Geo, David Castledine had a background in the utility sector
and worked for its former parent company, Hutchison, in a business development
role in their telecoms division.
Geo was born in December 2002 when Hutchison Whampoa acquired the assets of
186k, National Grid’s failed network.
‘Regardless of how much money you’ve sunk into this as an investment,
sometimes it’s better to bite the bullet and say it’s time to get out and stick
to what we know, which for National Grid was electricity transmission. The
infrastructure was great, it was just the business model that needed work.’
Castledine’s first challenge was to secure the assets required for mobile
phone provider 3 to successfully launch services in 2003 and then transform
these assets into a successful business in such a way that avoided replicating
the wider failures of the telecoms sector.
He then played a key part in building up the business case for Geo’s
offering, based around using its existing network assets to offer dedicated
networks to the growing market of enterprise customers with high data transfer
Having structured the deal, David was then asked to join CEO, Chris Smedley,
in managing the assets and transforming the business, ultimately leading to
Hutchison being able to sell Geo to Alchemy in February last year 2008, a deal
in which he again played a significant part.
‘We bought just the assets we needed and left behind the rump of all the
outstanding employee issues and property issues.’
Now, it’s all about the long-term outlook for the communications network
provider as companies must decide whether to speculate to accumulate and invest
in a downturn.
‘Year one costs may not be particularly cheap, but long-term costs are
cheaper in the long run as you grow the business.
‘We also have teams of network engineers that can sit down with them and work
out how to grow. When the sales team sit down with the CFOs it’s usually them
who drive the long-term view of saving costs for data communications for large
To learn more about geo visit
Read more about the UK’s place in the pecking order of the world’s fibre optic
network providers at v
Get the lowdown on the Fibrespeed project at
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