Sunday, 17 August 2008

SITS companies and the FTSE100

So, with Autonomy (see above) we might get our second UK software company in the FTSE100 to join Sage. (Note - I have always been at odds with others (including Rod Aldridge and Paul Pindar!) by claiming Capita to be a SITS stock. But that’s a discussion for another day.)

Turn the clock back 8 years are things were quite different.

Back in 2000, the boom had propelled seven SITS companies (eight if you include Capita) into the FTSE100. Six fell out fairly smartish when the deck of cards collapsed.

Let’s look at them.

Autonomy. Autonomy spent just one quarter in the FTSE100. It had been ‘worth’ £3.5b at its peak when its shares had hit £30 but crashed to 80p soon after. Today, Autonomy has a market value of £2.5b and its share price is £11.43. So how happy you feel today depends when you bought in!

Baltimore was worth over £2b back in 2000 when it entered the FTSE100 – indeed it was valued at $13b at its height. “Crash and Burn” is as good a description as I can think of for this encryption company which was begat from Zergo. Shareholders lost practically all of their value – although the company is still in existence with a quite different mandate.

Sema was worth over £4.5b back in 2000 when it made the FTSE100. Sema was a merger of the UK’s CAP with France’s Sema Metra. Sema hit bad times post 2000 and was first bought by oil company Schlumberger before the French orchestrated its purchase by Bernard Bourigeaud’s Atos Origin. The whole of Atos Origin is now valued at less than £2.5b, so I think you can draw your own conclusions about the current value of the Sema bit.

Misys was worth £4.2b when it entered the FTSE100 under the leadership of Kevin Lomax. He should have quit whilst he was ahead. Even today, Misys is ‘worth’ just £830m – and that is considerably higher than its nadir before Lomax finally departed; not before time.

I’ll cover CMG and Logica together. They both entered the FTSE100 in 2000 with valuations of £5.2b and £4.2b respectively – ie £9.4b in total. Logica and CMG subsequently merged and today the combined entity is ‘worth’ £1.9b. Martin Read (the previous Logica CEO) told me that his ambition was to see Logica back in the FTSE100. He didn’t. It would be a brave man who forecast that Andy Green would achieve that objective. But I can only live in hope!

So that just leaves the two companies who retained their FTSE100 membership.

Sage was worth over £7.5b in 2000 – they are currently ‘worth’ £2.7b (that’s not greatly more that Autonomy’s £2.5b) My biggest FT headline was in 2000 when I described Sage’s near £10 share price as NORTH OF STUPID. Well, they had a P/E of 184 at the time! I remind readers that Sage has never had an earnings reversal and their EPS today is appreciably higher than it was in 2000. It’s just that Sage was considered as THE UK’s internet stock back then and was rated far too highly. It’s a very good case of over-egging the pudding. Sage was and still is a great company. I rest my case.

Finally, we get to the real star – Capita.

Capita was valued at £2.6b back in 2000 when it entered the FTSE100. It is now ‘worth’ £4.4b. The only company in this list to be worth more than in those crazy days. Capita’s management were right not to want any association with those 'here today, gone tomorrow' tech companies (I remember Paul Pindar saying to me in 1999 that he would never want to be in the same index as Misys!)

Footnote – The 2000 valuations quoted above were taken as at mid-April 2000 from the 2000 Holway Report. Current valuations are as at close on 15th Aug 08.

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