Friday, 28 November 2008

A bit of a ‘bits and pieces’ day – and some ‘blasts from the past’

(By Anthony Miller) There’s a slew of reports and trading updates from the smaller end of the UK S/ITS (software and IT services) market with some interesting nuggets among them which reflect the mood of the market. So, here we go.

At the not so small end, recruitment and offshore outsourcing firm Harvey Nash reported a very healthy four months’ trading to date, with revenues up 34% and PBT up 23%, closely mirroring its first-half 39% revenue boost (to £200m) and 25% PBT uplift to £4m. But the highlight of the period is of course the €54m outsourcing contract with Alcatel-Lucent earlier this month (see here) which sees Harvey Nash taking over Alcatel-Lucent’s strategic R&D centre in Nuremberg. Harvey Nash’s burgeoning offshore development centres in Vietnam had a big part to play in this deal and certainly sets them apart from traditional ITSA (IT staff agency)-cum-project-services shops.

And our first ‘blast from the past’ comes in the guise of IT services player (OK, ITSA) Triad. It’s come a long way (unfortunately in the wrong direction) from the days when it was a Holway Boring Award winner, but remains a stalwart feature of the UK S/ITS landscape. It doesn’t make any money to speak of, which, on a not unrespectable 20% gross margin, hints at an overweight back office. In the company's interim results (see here), Triad chairman John Rigg reported a continued reduction in resourcing activity in the government sector, and static fee rates.

Next, financial services software player, Total Systems, about whom we have written reams in Ye Olde Holway Report days. Total actually had quite a good half-year, with revenues up 31% (to £2.1m) and turned last year’s loss into a 6% operating margin, though still rather lacklustre for a software products company. The boost came from its flagship general insurance product, Ultima, which was selected by Capita in Jan. ’07 as the preferred platform for its insurance policy administration BPO services. If you’re going to hang on the coat-tails of any player, you couldn’t wish for better than the UK BPO market leader! Great win.

Another finance sector tiddler, Knowledge Technology Solutions, is soon to adopt the brand of its Sep. ’07 acquisition, Arcontech. KTS closed its original Market Terminal subscription business – a hugely distracting process, according to KTS Chairman, Richard Last – and is now placing its bets on Arcontech. However, new CEO, Andrew Miller (no relation) noted that “the implementation date of the much discussed Markets in Financial Instruments Directive (MiFID) passed without the anticipated increase in demand for technology and related services” which doesn’t bode well for a number of players who were banking on a bit of a bonanza from this legislation. KTS/Arcontech turned over £2m in the year to June ’08 but lost almost the same amount.

And finally ... we say a fond farewell (at least in the public markets) to training software and services player, ILT Solutions, which delists from AIM today. ILT floated in Sep. ’02 at around 13p but its shares have been in continuous decline for years. The stock went below 1p at the end of October, when the company announced it is to delist. ILT reported revenues of £900K at its June interims, at a very respectable 70% gross margin and 13% operating margin. I’d say delisting was absolutely the right decision! Training is a difficult place to be in the best of times, and we wish the team all the best out of the public eye.

No comments: