Here is something that you probably did not know about SAD, the Polish company recently acquired by PTL International: sad, in Polish, means orchard. The name of the company is a play on its role as an Apple reseller.

But there is more that might have been missed about SAD, including the fact that, apart from being a retailer, the company started out as a solutions-provider for the audio visual industry.

This is perhaps why PTL sees it as having such a strategic role to play in its growth, which started with the acquisition by Hili Ventures of Philip Toledo Ltd in 2012.

PTL International CEO Kenneth SpiteriPTL International CEO Kenneth Spiteri

“Hili Ventures had had an interest in IT for quite some time and always had its eye on something that was sizeable in the technology area. First it formed part of a joint venture with other family businesses in Smart Technologies in 2008. I joined soon after it bought Philip Toledo and we created a strategy to grow the company quite substantially through acquisition and organic growth,” CEO Kenneth Spiteri said.

Mr Spiteri’s background is banking, financial services and telecommunications but he is passionate about IT.

“I am definitely not a technical person. But I love what IT can do for people and business. I am not interested in the technicalities of how it is done but what it does, whether processing, efficiency or environment. My experience in telecoms was a great help as this is also true of this sector,” he laughed.

Before getting on with any acquisitions, some key decisions were taken. One was to spread operations across not only geographies but also business margins, and another was to target a mix of technologies.

“We think that strategically this will help us to weather cycles, whether they are technology-driven or economic,” he explained.

PTL International wanted to limit itself to three areas: retail, business enterprise solutions and e-commerce.

The first area led to their €40 million acquisition of SAD, which sells Apple through its branded iSpot chain.

Expanding at an international level is not easy. You learn through experience and lose a lot of money before you learn. But Hili Ventures has already been through that learning curve and all that experience comes in handy

PTL already did business enterprise solutions. As a value-added reseller, it took existing techno­logy like Cisco, Apple and Microsoft then develops them to provide solutions for industry, a sector or a client.

SAD’s non-retail side also boosted this and could lead to contracts all over the world.

“These guys have a very unique skill set in this field. We have the ability to set up a production house or a TV station, with all the hardware, software, editing and so on.”

SAD created a solution for the Polish parliament which is paperless, one of the first parliaments to do so. It developed the application so everything from legislation to committees could be done through iPads.

It also developed an application for Orange Telecoms to basically stream video and TV on the mobile.

“The moment you launch something like this, it touches 10 million customers. This is very mission critical: that is the level we are playing at. Anything below that line is not of interest.

“Hili Ventures is active in the Baltics, Hungary, Romania, Greece and Dubai. So we can offer these solutions in different places... we would just need to tweak them to fit another market but the knowledge is already there. We have already taken solutions developed here and are testing them in Poland.”

Apco was the natural acquisition for the third pillar of the strategy: e-commerce. The company was well established and 80 per cent of their clients were international.

“We also found that from a platform architecture perspective, it could easily be enhanced through innovation as it is highly automated. There is a good technological story there. There are hundreds or thousands of payment gateways but many have reached their ‘end-of-life’,” he said about the €8.8 million acquisition.

The acquisitions brought PTL’s original 100 person headcount up to 400, including 230 in Poland, and the number is still growing.

PTL Holdings plc is issuing €36 million in unsecured bonds due to mature in 2024 carrying a coupon of 5.1 per cent per annum. The proceeds of the bond issue will be used to repay bank loans and other short-term borrowings taken out to finance these recent acquisitions.

Mr Spiteri acknowledged that things did not usually happen in that order.

“It was basically a matter of timing. The opportunities came along and we had the capability to access to finance through the banks, which we did. But we are now issuing the bond. Normally, a bond would be issued for forthcoming projects or to refinance an existing loan because of existing operations. This is the refinancing of the acquisition money,” he said.

The future growth projected in the financial model is dependent on these recent acquisitions and this needs to be kept in mind when comparing with past corporate results. Mr Spiteri explained that the trends were thoroughly analysed.

“We also modelled what would have happened had these entities been in our portfolio a year before,” he added.

Looking ahead, Mr Spiteri is pragmatic about the fact that there will always be challenges to growth.

“If you look at what happened over the past years over different cycles, it is all about disruptive technologies which make current technology obsolete – and it happens very fast. You can see this with Nokia and with a lot of other techie companies.

The moment you launch something like this, it touches 10 million customers. This is very mission critical: that is the level we are playing at. Anything below that line is not of interest

“The SAD retail chain being linked with the Apple brand means we clearly have a technology risk. If Apple does not continue to be innovative and come up with new products, then obviously, this will have an impact as our fortune or misfortune will be linked to theirs.

“But this is only part of the story. First of all, SAD through iSpot is the largest Apple retailer in Poland and is also considered to be a top performer on a European scale. Poland has a low penetration rate from an Apple perspective so there is room for growth.

“We also own the leases to the 21 shops located in the best malls – we only have one high street shop, which we opened in July. So the retail option can be changed if there are problems with Apple,” he said.

Apco is also still in its infancy on a global scale. In Europe in 2013, €360 billion were transacted online and Poland is still playing catch-up. Out of 40 million people, there are only 22 million connections and only 2.2 million people purchase online. So the potential growth for a payment gateway is huge.”

Would it have been possible if not part of Hili Ventures? Mr Spiteri paused very briefly.

“Anything is possible. But it is all about the mentality. Clearly being part of Hili Ventures was the key to having the ability, the know-how and the stamina to pursue such paths.

“Expanding at an international level is not easy. You learn through experience and lose a lot of money before you learn. But Hili Ventures has already been through that learning curve and all that experience comes in handy,” he said.

Are there any other acquisitions on the horizon?

“At the moment we want to consolidate so that we make sure that we take advantage of what we have. Although there is nothing on the horizon now, further growth will come through synergies and so we will eventually have to look at further acquisitions in the same three areas.”

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