The head office of one of the UK’s largest supplier of accountancy practice software is not what you would expect.
Not for Iris the cold sterile city office building with workers sitting uniformly under bright neon strip lights. Instead, its HQ is situated in the small rural town of Datchet, in a manor house that reminds you more of a secluded retreat than a business hub. There’s fresh air, rustic furnishings, picturesque surrounding fields, and not a neon strip light in sight.
It encompasses the relaxed and fuss-free thinking that is core to Iris’ business objectives.
The largest part of the company’s business is its accountancy practice software, with the next being its legal technology. So it makes perfect sense for the company to employ a finance director with an education in the legal sector and an accountancy qualification.
It does sound like the company was made for the current finance director Neal Roberts but it wasn’t always this way. Roberts has earned himself the reputation as the FD to bring in if there are any difficulties in a company and is known as the man “who gets things done”, thanks to his colourful career.
Having previously been FD at one of the largest privately owned technology companies, Computer Holdings, Roberts’ experience of dealing with the market had been limited. So, moving to a company listed on the London Stock Exchange may have been just as nerve wracking as it was exciting.
Unfortunately for Roberts, in his first month in the FD role at GuardianiT he found severe accounting irregularities at the company and a significant overstatement in its forecasting.
He was recruited in December 2001 and by the New Year had to make his first statement to the shareholders on the severity of his findings.
He conducted a detailed review of the company’s books with his team and found a series of accounting errors and irregularities conducted over a number of years by the finance department. He subsequently needed to hire outside help from forensic accountants at KPMG, the firm he qualified at, to double check the books, although according to Roberts, “they didn’t find anything that we hadn’t already uncovered”.
Roberts had to adjust the annual accounts of GuardianiT, which resulted in the business breaking banking covenants, a turn of events that can see a company’s share price spiral downwards at lightening speed.
In a similar case, Aero Inventory’s management found accounting irregularities in stock levels meaning its forecasting could be inaccurate and it was in line to break banking covenants. That turn of events meant KPMG was called in as administrator soon after.
However, Roberts managed to renegotiate the banking facilities and provision a capital payment holiday from the leasing finance providers. “That was the hardest period in my life. I didn’t see daylight very often,” says Roberts. “We found the issues quite quickly, and went to the city being very honest and open. That gave me some creditability. We got together as a team and worked ridiculously long hours.”
Although the hours were tough, Roberts adds that it makes you realise “it’s not what you know or who you know but how you build your team that counts”.
He adds: “The breadth of what you are looking at is vast. You can’t be an expert in all of them. You have to pick a team that has expertise and specialism. If you inspire them it’s amazing what you can achieve.”
Roberts continued to achieve great things for the company, including its sale later that year in May 2002 to SunGard, having worked so hard to save the company from collapse and learning many lessons along the way. He did however have to compile a due diligence disclosure and obtain PwC sign off on a clean audit opinion before recommending the deal to shareholders to ensure all accounting was on spec.
Reports suggested the deal was vital to the company as it would not see out the year if it was not bought. This news gave SunGard the opportunity to buy GuardianiT for 80p per share, just 5% of its value, but an estimated £111m debt would follow the company – as would Roberts.
He stayed on with the combined company, now SunGard, taking on the title of chief executive of business continuity in Europe (excluding the UK) and South Africa.
He concurrently held the title of chief financial officer of Europe Middle East and Africa at SunGard, now one of the biggest IT companies in the world with revenues of $5.6bn (£3.53bn) in 2008 and part of the elite Fortune 500 group.
Roberts left SunGard in 2005 to take up his current appointment at Iris, working with chief executive Martin Leuw, a qualified accountant who had worked with Roberts in the past on building the company’s brand and acquisition list.
“It is quite an exciting company and it has a good future. Iris is private-equity backed, which does mean one always anticipates a transaction at some point – that’s quite an interesting period to go through. There is a lot to do operationally here.”
Iris was sold to Hellman & Friedman, the private equity investors in 2007 by its former private equity investors HgCapital. H&F created an enlarged company by merging Iris with another UK technology group focussing on the legal market, Computer Software. The combined company cost H&F approximately £500m in 2007 with joint revenues of £100m. As a result of this, the group, continuing under the name of Iris, now has combined revenue of £119m in 2009 and profits of £40m for the same year – up from £13.2m in 2006.
The move to a large private equity-backed UK-focused IT business from a senior global position in a large listed company may seem strange to some, but Roberts insists the change was not without its challenges.
“There are some interesting challenges here. Iris hadn’t been integrated with itself.
Martin and I have worked quite closely together and changed the executive team. One of the biggest attractions to the company was its banking package. It is almost, uniquely, covenant free, which helps me sleep better at night,” says Roberts.
“I worry about everything,” he adds. “I like to know the cash balance every day. I like to manage the business on cash. I am passionate about the cash. It becomes less about the profit and loss and more about the cash generation. You soon learn that real importance is the lifecycle of the cash. I receive daily cash reports, weekly audit reports and monthly very rigorous forecasts.
“I’m more interested in the forecast, as I can’t do anything about the past. It gives us the opportunity to plan for the future.”
And the future looks good right now. In the recent Deloitte Buyout Track 100, which ranks private equity-backed companies on profit growth, Iris software came 16th for 2009. This is another improvement on the company’s rank in 2008, when it entered the shortlist at 21. The research shows the company increased its profit growth by 75.6% in the last year.
Neal puts the secret to his success, aside from the lack of banking covenants, down to his team.
“I drive people very hard here. We reward the better people. I’m a great believer in a performance culture” said Roberts.
The FD admits that although the company has various benefits including medical insurance and employee share schemes to name a few, the business hasn’t historically had a good pension plan for its staff.
Currently the IT business operates a non-contributory scheme for the majority of its employees with a chosen few, who have remained with the company following an acquisition, receiving contributions to schemes established prior to them joining the group. However, Roberts confirms that this calendar year employees will have their salary rise diverted to a pension scheme to encourage them to invest more.
The changes don’t stop there. Historically the company has focused on accountancy practice technology with legal and not-for-profit IT systems making up the rest of the company. But Roberts has his eyes set on other sectors, including the medical profession, and is “constantly on the lookout” for opportunities to expand its range of services to other professional industries.
“There’s not as much money in audit” Roberts said. “We want to expand the business through the legal profession. The other trend we are seeing is the burden of maintaining the IT structure. We are currently looking at the cloud (online technology). We are making an exceptional expenditure on research and development in this area.”
But he is still not entirely convinced. “I think the market will go there, but not as fast as some predictions estimate.”
Roberts should know, having been an FD for over 20 years with more than 10 of them spent in the IT sector. He believes the key to a successful company is for the finance chief to understand the commercial arm as much as the accounting.
“I used to go out with the salesmen, see what issues they face. Being with people – that is what is at the core.”
Name Neal Roberts
1984 Audit senior, KPMG; Management accountant, Unipart
1985 Financial analysis, MDISL
1986 Business planning manager, McDonnell Douglas Information Systems International
1987-1991 Financial controller/FD Filtrona Division of Bunzl; Group financial controller, Bunzl
1993 FD, Red Bricks
1997 FD, Computer Holdings plc
2001 FD, GuardianiT
2002 Chief executive of business continuity in Europe and South Africa, SunGard
2005 Finance director, Iris
Getting the most out of audit
Iris software is one of the largest privately owned software companies in the UK. It has a 40% market share of accountancy practices services (APS) with 14,000 firms on its books. Neal Roberts believes that “there is not as much money in audit” as there used to be, so its latest venture to secure more accountancy practices, aside from its practice management software, is to outsource some of the accountants’ paper work to India.
The company can outsource tax returns and filing of statutory accounts through its Asian operations. It has staff of over 100 people based in Chennai in India who also work UK hours and are chartered accountants, account managers or have book-keeping skills.
The service is the fastest growing part of the APS division, the bulk of Iris’ business, in terms of revenue and profit, although the company does not publish a breakdown of the accounts in this department. It currently has over 100 customers with some clients racking up over 400 hours every month.
As a standalone company, Roberts was pivotal in the acquisition of a majority shareholding stake of 51% in Utopia BPO Private Ltd in early 2007, which already provided the service, with Iris rolling out the outsourcing function under its brand to its customers in June 2007.
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