Kinetic IT keeps it private

29/01/2019 - 15:56

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With 1100 staff across Australia, annual revenue nudging $200 million and more growth on the way, Perth-based Kinetic IT is a good case study for privately-owned companies.

Chief executive Michael North has been with the business for 20 years.

With 1100 staff across Australia, annual revenue nudging $200 million and more growth on the way, Perth-based Kinetic IT is a good case study for privately-owned companies.

Established in 1994, the IT services business has achieved strong growth, building a large presence in WA and an expanding profile on the east coast.

Its growth passed another milestone this month when it won its first contract with the federal government.

Chief executive Michael North has been with the business for 20 years and he said over that time, it has averaged 25 per cent growth.

“We do get significant benefit from the private ownership,” he told Business News.

“We can run the business with a very long-term view, with an expectation we will grow very large over 10-year periods rather than having a quarterly mindset.”

Mr North is one of three brothers in the business.

His older brothers Philip and Terry were co-founders and, along with chairman David McCleery, continue as directors and co-owners of the business.

Mr North credits his father with teaching the boys about work ethic and business values.

“We all come from Geraldton and we have a pretty straightforward attitude to doing business,” he said.

“Everyone tells us we need to change as we get bigger but it seems to be successful so we keep on keeping on

The company’s major competitors include Modis, Empired, DXC Technology, Fujitsu and ASG Group.

They all have the benefits of either an ASX-listing or international ownership, which typically delivers greater balance sheet strength.

Mr North said Kinetic needed to be very targeted with its growth.

“We’ve really strongly managed our growth over time so it can be sustained,” he said.

 “You have to plan and manage the growth in a very structured fashion.

“We don’t have the financial resources to chase everything so we have to be selective and go after the opportunities where we are in a good position.”

KInetic has targeted a new growth region roughly every five years.

After being established in 1994, it ramped up growth in WA from the year 2000. Its major clients in the local market include the education department.

It moved into Victoria in 2005 and has since won a $164 million contract with Victoria Police.

In 2009, the company moved into the Northern Territory, where it provides whole of government services, and in 2015 it moved into NSW.

Mr North said the company’s growth usually came in bursts so it needed to stabilise the business and then plan for the next phase of growth.

“That’s why those five year periods are quite elongated,” Mr North said.

The group was aiming to shorten the growth cycle.

Mr North said the group had previously not expected to break into the federal government market.

“We had resigned ourselves to thinking it would be too hard to win work in Canberra,” he said.

“The location isn’t really the issue, but size definitely was an issue.”

The Defence opportunity followed big changes to federal government procurement rules, which mandated that agencies cut down the size of each contract to a maximum of $100 million.

“Previously it would have been really hard to compete against the big multinationals but that opened it up for an organisation of our size.”

The Department of Defence carved up its IT procurement into three parts.

Kinetic won two contracts worth a combined $91 million and Fujitsu Australia was awarded a third contract worth $99 million.

The Defence contracts had a long lead time, with Kinetic lodging its bid in December 2017.

Kinetic’s annual revenue grew 8.8 per cent last financial year to $197.5 million.

That was also the first year where the company’s revenue was equally split between WA and the rest of the country.

Mr North said all growth has been organic (rather than via acquisitions).

He acknowledged the WA market had been soft but the group had compensated by pushing newer technology solutions, such as hybrid cloud operations, artificial intelligence, service integration, cyber security and data science.

A big focus would be positioning Kinetic as a place people want to work.

“One factor is offering an alternative to competitors where a lot of decision making is done outside of Australia,” he said.

“The second key consideration in that area is having a really strong learning and growth-led culture.”

Mr North said the company had a big focus on training.

“We’re investing heavily in our workforce of the future

“We have our own training arm, to train not only our own crew but also to go out and train others in the rest of the industry.”

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