It was fantastic to meet top brass from the twelve ‘small but perfectly formed’ (well, some not quite there yet!) privately-held UK software and IT services companies that now join the ranks of the TechMarketView Little British Battlers.
They are (note: pics not in same order):
Yesterday was our fifth Little British Battler event and brings the tally to 60 companies that have participated in the programme since its launch in November 2011.
As ever, we were bowled over by the enthusiasm and determination of the management teams to punch even further above their weight in local – and in many cases overseas – markets. And we heard about some great technology and innovation too, including one company that ended up designing its own purpose-built scanner to drive its proprietary SaaS-platformed document management service.
You’ll be hearing more about these Little British Battlers here in UKHotViews over the next couple of weeks. Eligible TechMarketView subscription service clients will also be privy to a more detailed analysis of the companies in our next Little British Battler Report to be published in January.
Many thanks to our sponsors MXC Capital, and also to industry association techUK for hosting us. And many congratulations again to the 12 companies comprising our ‘Fifth Dimension’. Watch out early next year for the announcement of Little British Battlers – The Sixth Sense!
Posted by HotViews Editor at '10:05'
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HP shares closed +4% the day after FY14 results were announced after the company stabilised revenue with a flat top line of $111.5bn. Non-GAAP operating profit was $2.7bn, up 0.6 points on FY13. For the first time in years, HP saw each business expand Q4 operating margin. Non-GAAP EPS was +5% for the year.
Enterprise Services revenue declined almost 7% due to key account revenue run off and “weakness” in EMEA. That said, profitability has steadily improved through the year due to job cuts and improvements in underperforming accounts.
Let’s just remind ourselves of what CEO Meg Whitman is undertaking. She is simultaneously splitting two large and highly complex Fortune 50 companies while conducting a five-year turnaround programme (now in year four). So is the turnaround working? Whitman certainly gets a tick in the box for improving profitability and going ahead with the decision to split the firm (shares are +40% YTD). The story around revenue growth in services is one that will not conclude in the very short-term. HP faces the same challenge as other large tech competitors: spinning the large legacy ‘plate’ while simultaneously spinning multiple other ‘plates’ in new, higher growth areas.
We therefore don’t expect to see the top line transformed in the immediate term. In UK infrastructure services, a good performance would be flat-to-low single digit growth - it declined 7% in FY13, but we estimate it improved in FY14. To get there, HP needs to win more big outsourcing deals and find ways to sustain renewal revenue by expanding scope. And of course, it needs to build its ‘new world’ services revenue substantially. There is still a way to go, and Whitman now has just 24 months to prove she can get services back to consistent growth.
HP is the largest provider of infrastructure services to the UK market. Read more about the suppliers to this market here: UK Infrastructure Services Supplier Landscape 2014-2015.
Not a subscriber? Contact Deb Seth.
Posted by Kate Hanaghan at '09:28'
In our detailed review of Monitise’s strategy (available to FinancialServicesViews subscribers, here), we emphasised that the company needs to achieve scale and execute flawlessly as it grinds out progress towards its banner targets of EBITDA profit in 2016 and 200m registered users with ARPU of >£2.50 and EBITDA margins of >30% in FY 2018.
These targets were re-affirmed in today’s announcement by the co-CEOs of Monitise of a major step forward with the expansion of the partnerships with Santander and Telefonica, closer cooperation with MasterCard to distribute their services through the Monitise platform and the addition of the Watson cognitive analytics capability within the IBM relationship. You can see a video of them explaining the latest moves, here.
Monitise is working with Santander and Telefonica to build an e-commerce ecosystem in the Yaap initiative in Spain and we expect further iterations of this model in new territories over the medium term. Monitise also launched a UK app for Santander in September. The Telefonica link also reinforces Monitise’s potential in Latin America.
Santander, Telefonica and MasterCard are also increasing their stakes in Monitise, this exercise raising a further £49m. With cash of £140m sitting in Monitise’s balance sheet at the June year-end, we would suggest that the real benefit of this move is as a clear sign of commitment to the Monitise vision and strategy.
This announcement means the postponement of Monitise’s December Capital Markets days, now to take place after half-year figures in February. Management needs to continue reinforcing its message of consistency, progress and increasing momentum and we expect clear evidence of how these partnerships will drive this process faster and with building confidence.
If you are interested in becoming a FinancialServicesViews subscriber, please contact Deb Seth of our Client Services team.
Posted by Peter Roe at '09:28'
Colchester-based Access Technology Group is emerging as a quiet powerhouse in the business applications sector, something the formal release of its FY14 results gave further credence too - revenue up 24% to £53.5m and EBITDA up 29% to £11.6m.
Although the privately-held company has been busy making acquisitions as part of its strategy to move to a direct sales channel, while also expanding its portfolio, it still managed an impressive 12% organic growth on the back of its vertical focus, industry-specific solutions and work on templates for easier implementation. Its performance is another indicator that the market is increasingly turning to mid-tier players for cost effective and fit for purpose solutions without the need for extensive customisation – other beneficiaries of the trend include UNIT4, Advanced Computer Software, Infor and IFS.
Access has been expanding into new verticals recently (see Expansive Access Technology launches health and social care division and Access Technology steps up leisure activities), which provide further opportunities for growth. There was no update on these areas of the business but as it is still fairly early days (the acquisitions were made in June and July 2014), hopefully that will come later.
Posted by Angela Eager at '08:56'
BT (number 2 SITS supplier to police forces) has been awarded a five year contract by Devon and Cornwall Police to provide IT infrastructure and support services to the force, replacing Capita.
In April 2015, BT will take responsibility for IT support for and will help the force ‘better use technology and innovation to more effectively police our communities’. IT transformation has not been widespread among police forces but, as seen in Staffordshire, some are beginning to embrace transformation to improve both their operations in the back office and on the frontline.
Chief Constable Shaun Sawyer refers to an ongoing strategic alliance project with Dorset Police; BT’s extensive footprint across the south east (with the SEPSNA (Southeast Police Shared Network Services Agreement) and the Southeast Police Hosting Services Agreement) will enable BT to augment such projects.
Like Staffordshire, Devon and Cornwall is looking for ways to collaborate with other public sector bodies and the private sector. BT’s contract with Cornwall Council will help the firm coordinate such collaboration in the county.
The contract win should provide a boost to the public sector team at BT Global Services in light of the rumours surrounding the division’s future. However by retaining Capita for developing specific IT products Devon and Cornwall will keep BT on its toes.
Posted by Michael Larner at '08:55'
Despite continued reassurances from the management team (see New CEO in pursuit of profit), we still feel nervous about Digital Barriers. Though revenues increased by 13% to £10.1m in the six months to end September, this was predominantly driven by a strong performance in the UK services division (up by £2.9m or 170% to £4.6m). Unfortunately, this was a result of work to support the 2014 Summer Games so won’t be repeated. And where Digital Barriers is pinning its future is on the international product market. Good news then that international revenues increased by 62% or £1.4m to £3.7m, but this is still a minority of the business. UK product revenues declined, due to a major MoD contract having no counterpart in this period, sending total product revenues down 25% to £5.5m.
Digital Barriers has spent considerable time and money integrating its various acquisitions, and ensuring its products are market ready (see the HotViews archive). It has faced two problems. Firstly the acquired products needed more development than expected, and secondly sales cycles have proven to be particularly lengthy. In this half, the company has managed to reduce adjusted losses by from £6.8m to £5.8m. But due to its acquisitions not generating sales in the expected timeframes it has recorded an impairment charge of £6.25m; LBT therefore jumped from £7.2m to £13.2m.
The good news is management hails a significantly stronger pipeline dominated by demand for its core products (including Integrated Surveillance Platform and TVI Video Surveillance Platform). The challenge now is to scale up its international sales and avoid further procurement delays. Though the signs are things are heading in the right direction for the international business, it will be no mean feat. Moreover, brokers, Investec, are not predicting operating profitability until 2017; investors will have to keep the faith for a few more years. Digital Barriers had net cash of £7.6m at the period end.
Posted by Georgina O'Toole at '08:47'
London-based social planning mobile app developer YPlan has just received a further £15.3m in funding through a Series B round led by existing backers Octopus Investments, Wellington Partners and General Catalyst Partners. In June last year YPlan raised £7.9m of Series A funding (see YPlan books US expansion with new funding). YPlan’s original seed investors include ubiquitous ‘digerati’ Brent Hoberman and Sherry Coatu. The funds will be used to support geographical expansion for the self-styled “tonight’s going out” app.
Posted by Anthony Miller at '08:37'
After closing off another good year in 2014 (see here), customer engagement and business process management (BPM) software provider Netcall is already expecting ‘a successful outcome’ for 2015 following a ‘positive start’ to the year.
Netcall’s next gen Liberty platform is gaining significant interest from both new and existing customers, and driving a growing sales pipeline. Customers are apparently purchasing a broader range of solutions across the Liberty platform, particularly around multi-channel. Liberty manages multiple interaction channels (web, mobile, social media, web chat, telephone and SMS) and includes a BPM engine to create a link to workflows and business processes to improve customer engagement and optimise processes.
Netcall has a long list of 700 customers across the private, public and health sectors, which provides plenty of up-sell and cross-sell opportunities. New customer wins remain important too, so it is encouraging to see West Mercia Housing Group and Hitachi Capital added to the list.
Posted by John O'Brien at '08:31'
In the latest edition of TechMarketView OffshoreViews we take a look at Cognizant’s recent flurry of acquisition activity which continues to set them apart from their peers.
Plus we have our usual pithy round-up of the India-centric majors along with our handy summary of their key financial and operating metrics, and a quick-click index to our recent UKHotViews posts about the players.
Eligible TechMarketView subscription service clients can download the latest edition of OffshoreViews here.
Posted by HotViews Editor at '08:02'
There can’t, by now, be a HotViews reader that doesn’t know of my real passion for both the creation of entry-level jobs in tech and encouraging our youngsters into all things STEM.
Last night I attended the Tech Partnership launch at IBM Southbank. Tech Partnership is essentially the ‘new’ e-skills – headed by Karen Price – and is a network of employers working with CIOs, Universities and Schools. The launch was addressed by Ed Vaizey – Minister for the Digital Economy – and was attended by many senior CEOs like Phil Smith (Cisco), David Stokes (IBM) and Christine Hodgson (Capgemini).
The Tech Partnership aims to create 1 million new jobs by 2025. The tech workforce is aging – just 6% are now under 24. It will do this by encouraging youngsters throughout their school and university lives. I was particularly encouraged by TechFuture Girls – aimed at 10-14 girls. Given that just 16% of the UK’s 1.1m IT professionals are females, you can appreciate the need. Indeed, one speaker said that ‘if you don’t catch girls before the age of 12 they will think tech is not for them and leave it to the geeky boys’.
But the headline grabbing initiative was Degree Apprenticeships. Here the Govt will fund 2/3rd of the tuition fees and Employers the rest. Apprentices will be paid throughout the programme and will end up, after 3-5 years, with an honours degree, no debt and a job. The first Degree Apprenticeships start in Sept 15 and 167 had already been confirmed last night. This is a quite superb initiative.
Short courses in Digital Skills will also be launched with the first in web development in Apr 15. Aimed at people working in the digital sector, successful participants get Level 3 certification.
The tech industry has the highest level of job vacancies of any sector in the UK economy. At lunch yesterday a CEO told me that he had the most difficulty recruiting people with 3-5 years experience. The problem is that, for the last 10+ years, the number of entry-level jobs created in the UK has slumped. At the same time the use of offshore resources has soared. We only have ourselves to blame that most young people with up to 10 years IT experience are now of non-UK origin – most in India. Forgetting the use of offshoring by the likes of Accenture, IBM, Capgemini etc, the off-shorers themselves now have c15% of the UK market (see OffshoreViews Q3 2014 published today) – yet they effectively create NO entry-level jobs here. It was interesting that the one major off-shorer present last night, with UK revenues of c£1.5billion, had not signed up for the Degree Apprenticeship programme. A few years back I had asked this company how many entry-level jobs they had created in the UK. The answer was 'Six'. Last night I was told ‘it is more than that now’. ‘Well, how many?’ I asked. ‘Twenty’ was the answer. I’ve already given my proposals for tackling this absurd situation – job visas should only be granted with the commitment to create an equal number of entry-level/apprentice jobs in the UK and the awarding of all HMGovt contracts should take entry-level job creation into account.
The new Tech Partnership initiative is to be applauded. We will be watching it carefully and wish it well.
Posted by Richard Holway at '07:20'
Today, CEOs from the twelve companies selected to participate in our fifth Little British Battler Day (see Little British Battlers – the Fifth Dimension) are coming to London to meet the TechMarketView team and discuss their achievements, challenges and aspirations.
We will be presenting highlights of each company here in UKHotViews in coming weeks and we will publish a more detailed analysis of the companies in our next Little British Battler report early in the new year.
Because today’s event sees the entire TechMarketView research team out from the crack of dawn, there will be a limited UKHotViews service this morning. But fear not - we will be back tomorrow as usual talking about the things that really matter in the UK IT scene.
Posted by HotViews Editor at '06:00'
Under the circumstances, flat full year revenues (in constant currency) should be considered to be a result for soon-to-be business of two halves (and many quarters) HP, especially while managing to hold operating margins stable at 6.4%. Profitability looked slightly better in the final quarter (to 31st October), up 10bps yoy to 6.7%, though revenues were 3% down in constant currency.
These numbers set the baseline for the year to come. Management is showing much optimism on future profitability, predicting a 23-31% increase in EPS (GAAP, diluted) in FY15 though this excludes separation costs. That looks a ‘challenge’ given flat EPS in FY14.
We will drill down to the key product and service line results in subsequent UKHotViews posts.
Posted by Anthony Miller at '23:04'
Advanced Computer Software (ACS) looks set to become the latest UK SITS firm to be taken private following a recommended cash offer on behalf of private equity firm Vista Equity. If the deal goes ahead – it is subject to shareholder approval - shareholders will get 140p per share. That’s a premium of 17% to yesterday’s closing price and 75% above the placing share price of 80p last February, valuing ACS at approximately £725m. It also implies an enterprise value multiple of 15.8 times ACS’ adjusted EBITDA for the 12 months to end of August 2014.
Under Vin Murria’s leadership, ACS has grown from a £32m business to one worth £725m in six years - a pretty impressive achievement by any standard. But it’s clear that ACS received a number of offers to take it private in recent months and found Vista’s offer too good to refuse. The private equity firm is focused on the software space and has completed over 140 transactions with an aggregate value of $32billion, including the likes of Misys (which it is now considering listing again), Tibco and Autotask (which recently acquired CentraStage, one of our Little British Battlers).
ACS is hoping to draw on Vista’s financial strength and expertise in the software sector to support its next stage of growth, including further acquisitions. It’s not 100% clear from the announcements whether Vin and her team are committed to staying in place but that does seem to be Vista’s hope as it “especially like[s] investing in the vision and commitment that a leader like Vin and the management team inspires”. There will inevitably be changes at ACS though with Vista already talking about realigning underutilised office space, and a potential 5% reduction in headcount short term as a result of rationalisation and restructuring across corporate, sales, operational and development functions. That should make it stronger in the long run though and with Vista’s deep pockets behind it, competitors will have even more reason to keep a watchful eye on ACS.
Posted by Tola Sargeant at '10:11'
When provider of IT security and risk management solutions, Accumuli, updated in October, we finished our piece Accumuli progressing as planned in H1 with: “The question we’d like answered when the full H1 results are released is the proportion of organic vs. acquisition led growth”. Well today the H1 results have landed and they don’t really provide an answer. Headline revenue is up 24% at £10.3m (Group EBITDA was up 36% to £1.5m). And we’re told that the results include a three-month contribution of £1.0m from the acquisition of ArmstrongAdams. But that won’t be the only acquisition affecting the six months; it’s also “approaching one year” since Eqalis was acquired (see Accumuli grows Splunk capabilities with Eqalis acquisition). Looking back, the acquisition of Signify Solutions in June 2013 would also have had an impact on growth (see Accumuli acquires Signify Solutions). A simple “organic revenue growth was” statement would make an analysts life so much easier!
Indeed, the latest release is full of a host of positive statements in the ‘summary’ but dig a little deeper and it doesn’t feel like Accumuli is finding the market that easy. Indeed ‘Support and Managed Services’ was the only revenue stream to grow (up 10% on a like for like basis); gross profit from recurring revenues increased to 64% (H113: 62%), while overall gross margin was down from 58% to 52%. Revenues from Technology Solutions were lower, “heavily influenced by timing of large projects”. And Professional Services revenues were flat due to delays in the recruitment of consultants and order intake. In order to satisfy demand Accumuli has had to make more use of external consultants to deliver orders. All this would all indicate that organic growth is sitting somewhere in the single percentage digits.
Accumuli traditionally has a stronger H2. And indeed, there are signs that some of the issues affecting H1 are behind it. For example, the order intake for Technology Solutions at the end of September (which was fulfilled in October) indicates there will be growth for the full year. And the recruitment of consultants for Professional Services has now been successful. Accumuli has also put more emphasis on ‘Customer Intimacy’ resulting in an increase in the proportion of customers taking more than one service (20% vs. 15%... though this was probably also boosted by the ArmstrongAdams acquisition as some customers were shared). It has also continued to develop the Group's IP.
Accumuli is sitting in a sweet spot but it is one of several developing players in the full managed security space. Also, interesting to note that Accumili is positioning as a “Capability Partner” for managing IT risk, which means that it will also be going head to head with many of the major IT services providers. Accumuli’s shares are down 2.59% in early trading.
Posted by Georgina O'Toole at '10:00'
H1 results from Phoenix IT show signs of improvement as it reaches the half way mark in Phase 1 of its turnaround programme. One of the key aims this year is to create more financial stability, and that is evidenced in lower net debt (£18.5m lower at £56.1m) and more control over Capex. In terms of the top line, revenue was down 8% to £107.4m. EBITDA was down 6.6% to £13.5m, producing a slightly improved margin of 12.6% (from 12.4%).
The ultimate goal is an improved profit and cash performance, hence the current focus on efficiencies and operational performance. In the Partner business (£49.8m, down from £57m), there has been some progress in this regard. For example, Phoenix has already moved partner, TCS, from a dedicated headcount resource model to a service level model, and it aims to do the same with other large partners too (Atos and IBM are two of its largest). Over time, Phoenix hopes to take its Partner business to a 7% margin (currently c4% when you take out certain gains). Returning the business to top line growth will be challenging given the broader market conditions. Phoenix hopes that by tapping into new types of partners (e.g. facilities management firms or telcos) it can open new revenue streams. It also intends to expand the services to existing customers, for example offering service desk in certain contracts. It recently appointed a new leader for the business to help drive these objectives.
Business Continuity is the most profitable area of the business, although margin inched down slightly in H1 from 24.5% to 23.5%. H1 was disappointing in terms of sales to new name customers and we really think this should be a much more strongly growing business.
Overall, Phoenix is moving forward on its turnaround. There’s plenty more to be done, and the improvements have got to keep on coming.
Posted by Kate Hanaghan at '09:54'
As indicated in its pre close statement (see here), Sanderson Group managed another positive year, with metrics up virtually across the board. Top line revenue for the year to September 30 2014 expanded to £16.4m vs. £13.8m and included pre contracted revenue of £8.8m – a comfortable 53% of total revenue. Order intake was up over 10% and it is acquiring new customers (17), with the value from new customers rising 15% to a solid £1.9m.
At £1.9m PBT was essentially flat (2013 saw acquisition costs and infrastructure investment) but cash rose to £6.2m from £3.7m. With the One iota acquisition bringing £1.7m revenue, group revenue benefitted from organic as well as acquisition-led growth.
The multi-channel retail division continues to drive forward and One iota is really starting to deliver - securing its largest order to date worth over £400,000 – helping to take revenue for this division up to £9.7m (vs. £7.2m). Progress in the manufacturing division is more modest - £6.7m revenue vs. £6.6m – but managing growth in this cautious sector is still something.
What is notable about Sanderson is its ability to manage change. Although its traditional mail order fulfilment business is declining, it is more than making up for it with its ecommerce and mobile offerings, which together represent 47% of its retail division revenue. However, these two areas are also fast moving growth areas across the industry so even though Sanderson is investing significantly, especially in mobile development, it will have its work cut out keeping up the pace and fending off competition. It does seem to have overcome one hurdle – customers are willing to pay for its mobile capabilities. The wider debate is to what extent customers see them as ‘free’ updates vs. new value-add capabilities. This could be an issue for the future, but for now Sanderson is making money from mobile.
Posted by Angela Eager at '09:47'
The market did not react well to the Q3 results from cloud pure play HR and financial software provider Workday last night, driving a 7% drop in the share price in after-hours trading, although shares are up c11% since the start of the year. The problem is the same as the one experienced by Salesforce.com – cloud pure plays are expected to greatly exceed expectations every quarter.
Q3 (to October 31 2014) was deemed to be up to the mark, with an operating loss of $59.9m (vs. $40m in the year ago quarter) on revenue was up 68% to $215m. Unearned Q3 revenue was $508m, up 44% yoy. At $219m - $222m, 54%/56% revenue growth, the Q4 forecast was considered a bit light and would represent a slowdown in growth – revenue was up 76% in the year ago quarter (see here).
The cloud HR market is still developing (particularly in areas such as talent and learning management, and analytics) because organisations are recognising the direct link between staff retention and training, and the ability to execute on strategy and drive enterprise growth. This means there is still plenty of growth potential for Workday -who recently passed the 100 customer milestone - but with SAP Successfactors storming ahead (see here), along with the likes of Cornerstone (see here), the competitive landscape is intensifying.
Posted by Angela Eager at '09:43'
Today’s trading update from UK-headquartered, international recruitment, outsourcing and offshoring firm, Harvey Nash, is far from the benign ‘on track’ message that the company usually issues.
For one thing, CEO Albert Ellis advised that full year ‘adjusted’ profit (to 31st Jan. ’15) will be ‘broadly similar’ to the prior year’s – which of course raises the question of what the ‘unadjusted’ number might look like. Ellis attributed the profit slowdown to a combination of ‘challenging conditions in permanent recruitment in mainland Europe’ – as signalled in August (see Q2 growth slows at Harvey Nash) – and ‘ongoing currency headwinds’ – surely business as usual for a long-established international player. Mainland Europe comprises 58% of Harvey Nash’s revenues and 46% of gross profit.
But arguably the bigger (and in my opinion better) news is that Ellis has finally decided to ditch the European telecoms outsourcing operations which have been a real drag on profits in recent times and I suspect longer (see Offshore drags down Harvey Nash profits ). I have often said that this business - and indeed the rest of Harvey Nash’s Vietnam-based offshoring activities which serve the US market - does not belong as part of a recruitment firm any more so than, say, a projects business might.
But I remain concerned about the profit story. Harvey Nash has been suffering gross margin erosion for years. Indeed, first-half gross margins (to 31st July ’14) were almost another point lower yoy at 12.3%. Today’s trading update suggests Q3 gross margins were higher yoy but there’s still the all-important final quarter to go. If the divestment of its telecoms outsourcing activities fixes the problem, all well and good. But if the issue also lies within the core recruitment business, then this would be of concern.
Posted by Anthony Miller at '08:59'
The reaction to BT’s possible move on O2 and/or EE (see - BT – One ring to bind them all?) has been almost universally positive in both the Press and by investors who pushed BT shares up 3.7% yesterday.
Our Peter Roe used the word ‘bold’ to describe the move and, indeed, BT’s CEO Gavin Patterson. I seem to have spent too many years trying to fathom BT’s decisions and its lack of performance. Previous CEO Ian Livingston got to grips with many of the issues and handed over a BT capable of ‘Doing Bold’ to Patterson. And that is exactly what he has done.
I’ve written often about how just keeping your eyes and ears open in everyday life helps greatly as an analyst. I’ve been leading a campaign to get Superfast Broadband into our local exchange. It finally arrived last week. Many residents have called me asking for advice. Almost without exception, those with broadband from suppliers other than BT were using the upgrade to switch to BT for one over-riding reason - access to BT Sport. No wonder BT’s Broadband uptake is soaring.
I’ve never been a great advocate of ‘all your services from one supplier’. Indeed quad-play has been slow to gain acceptance. But maybe its time has come. Adding mobile to the BT mix (again) seems completely right. Patterson seems to be in a Buyers market too.
The time for bold moves is here and Patterson seems to be relishing the opportunity.
Posted by Richard Holway at '07:48'
BT has admitted that it is talking with two mobile operators about taking over their UK business as it explores ways to develop a mobile business to complement its broadband, fixed voice and TV offer. One set of talks is with O2, originally BT Cellnet before being de-merged by BT. The de-merger was a response to the funding crisis created in part by BT’s ambition (and use of cash) to build a European mobile empire. The other talks are with EE.
The prize of a unified offer is tantalising, but difficult to win. BT’s systems and operations would need to be blended with those of the mobile operator, taking time and significant expense. The cultures of the operations would be very different (as evidenced by past negotiations with various mobile operators as BT re-sold their services) and competition is fierce. Mobile operators all have better High St. profiles and are increasingly competing with BT’s broadband offer. At the same time, margins and cash flow on mobile across the established UK market are poor and probably getting worse.
You have to admire the (fairly) new CEO, Gavin Patterson, for his ability to think boldly and to re-visit BT’s past decisions. Also for his vision of providing BT’s customers with all their telecoms and entertainment needs. Getting scale in mobile is extremely important and buying an established operation is the easiest way to do it, but the immediate cost and subsequent disruption would need to be kept within bounds.
The quandary is that if BT is to thrive, it needs to do something bold and challenging. TV and BT Sport was certainly one such move and a bold step (back) into mainstream mobile would certainly transform the Group’s revenue and margin prospects.
Posted by Peter Roe at '12:16'
Half-year figures from Eckoh, the global provider of secure payments and customer service solutions show strong growth. Revenue was up 24% to £7.8m with EBITDA up 29% to £1.6m. Recurring revenue represented 81% of the total.
The UK business is providing a solid foundation, with 65 customers on 3-5 year contracts and a very low churn rate, providing Eckoh with a predictable revenue and profit flow and fertile ground for the sale of additional services.
Eckoh’s latest innovation is the OneProx secure payments solution which will conceal the actual card data from the company taking the order. This adds another level of security to a Card Not Present transaction and should go a long way to remove the danger of card details being used fraudulently. The voice version of this service has gone live with one customer and hosted and point-of-sale versions will go live throughout 2015.
The US business is racing ahead, as the Obama administration and recurring data breaches send retailers across the US scurrying to find ways to protect their bottom lines. The year-old direct sales business see here, has secured 3 contracts for its CallGuard proposition and will generate revenue and profit in H2. The deal with West Interactive will enable Eckoh to address a pipeline of larger customers, offering a hosted version. $24m of revenue is guaranteed to Eckoh over the contract’s 5-year term.
It is just eighteen months since Eckoh acquired the Veritape business and transformed its outlook. Market expectations are for 30% revenue growth and a 45% uplift in EBITDA for the full year. The solid UK base, the US opportunity and the attractiveness of Eckoh’s secure payments offering suggest that the management have every right to be confident.
Posted by Peter Roe at '10:02'
At the half year results stage, we commented on the longer term strategy of Proxama, see Proxama playing the longer game, as losses doubled and as the company switched its model to a revenue share, rather than based on professional services and fees for implementations.
The management is confident of the growth of contactless technology and of Proxama’s position within it, in terms of providing systems to banks and credit card issuers (hence the recent acquisition of Aconite, see here) and in the growth in usage of mobile technology for transactions and particularly advertising and customer marketing. Proxama is showcasing its technology in Norwich and the latest step forward is to equip 100 Norwich buses with Bluetooth beacons, enabling passengers to receive location-based offers, marketing messages and other information. Proxama hopes that the system will be seen to add value and then be rolled out across the FirstGroup national network.
Proxama is in the process of building credibility for itself and its technology and this move is innovative and in the right direction, but it (like buses) may take longer than expected to reach its destination.
Posted by Peter Roe at '09:59'
The management of MoPowered, the mobile commerce company, have issued a downbeat trading update revealing that the number of customer wins and contract values are less than they expected. Consequently, H2 revenue will be lower than marketing expectations, as will the full year outcome.
The company has worked hard to regain its momentum with a deal with Time Inc. UK, see here, and a placing to fund additional marketing and re-structure some of its cost base, see here. These efforts have not yet had the desired effect and the company is pinning its hopes on a new product release, bringing the promise of better revenue-generation for clients and faster on-boarding times (both key drivers of success).
As we have said before, regaining momentum is difficult (see MoPowered stumbles) but the management, assisted by a newly-appointed CFO, are working hard. However, there is still a lot for them to do.
Posted by Peter Roe at '09:55'
It’s not been that long since GB Group updated on its trading for H1 (see GB Group indicates positive H1). Today’s half yearly results confirm that the company, which has built its business on the premise that “the most profitable organisations recognise the value of understanding the individual identity of customers and employees” is prospering in FY14. Total revenues increased by 28% to £23.2m. But even taking out the revenue contribution of £2.6m from DecTech acquired in May (see GB Group goes global), organic revenue growth was a very respectable 13%. Adjusted operating profit also increased – by 47% to £3.8m.
Both divisions grew – Identity Proofing soared with a 59% increase in revenues to £11.9m (21% organic), while Identity Solutions reported 8% organic revenue growth (to £11.3m). International services revenue growth was particularly strong.
All signs are good for the full year. DecTech and Transactis combined (Transactis was acquired post year end – see GB Group acquires more consumer data) will add 20% to Group revenues for over the 12 months. In addition, management cites a good start to the second half of the year. The strategy of expanding the product portfolio and entering new markets via acquisition appears to be paying off.
Posted by Georgina O'Toole at '09:40'
Neil Muller is set to leave Computacenter at the end of January 2015. The UK MD has held various senior operational, sales and leadership roles during his 20-year stint, including director of the services business. Neil joined back in 1994, not long after he graduated from University. He made his way up the ranks and played an important role in helping to create a services business that now ranks in our UK infrastructure services Top Ten. Indeed, Computacenter outperformed (by some margin) all but one of the other leading players last year.
After the close of Q3 this year, Computacenter’s year-to-date growth in services was 7% - up slightly on the 6% it achieved in FY13. Computacenter is now running what we often refer to as a ‘well oiled’ managed services business in the UK; selecting and winning the contracts that suit it best and that will help it to sustain both growth and profits.
Neil is therefore going to leave big shoes to fill. However, Computacenter has quite a number of long-serving, senior, talented potential candidates who know the business well. CEO, Mike Norris, does not want to make any significant changes to how the UK business operates so we would be incredibly surprised if he brings someone in from the outside.
Neil has not yet disclosed his plans for the future, but we understand he is going to a non-competitive company. We wish him every success in whatever he takes on next.
Posted by Kate Hanaghan at '09:19'
So far this year, VC funding for the tech sector in the UK and Ireland has well exceeded the total for the whole of 2013, according to latest data from corporate finance firm Ascendant. In Q3 2014, £363m was invested – over twice the value of the year-ago period – bringing the total for the year to date to £1.22bn. This compares with £937m for the whole of 2013.
The primary sector for investment by a country mile has been Internet Services, which has so far attracted £712m in venture funding. Software companies ran a distant second, with £231m, and the less-in-vogue Cleantech sector attracted £121m. Ascendant CEO Stuart McKnight noted the emergence of ‘crowdfunding’ as a funding source for UK tech companies, although with £12m raised so far this year, this is still a nascent market.
Eligible TechMarketView subscription service clients will be able to see where some of this money went by reading our regular quarterly analysis of the UK VC software & IT services scene in the next edition of IndustryViews Venture Capital.
Posted by HotViews Editor at '08:51'
A new battle for the future of the UK life and pensions (L&P) BPO sector could be about to waged, if the proposed £5.6bn takeover of Friends Life by insurance giant Aviva goes through (see here).
Aviva will acquire Friends Life (FL), subject to regulatory approval, in an all share deal, which would create the UK’s largest insurance, savings and asset management business by number of customers (16 million).
This deal has potentially huge ramifications for the UK L&P BPO market. FL outsources its L&P administration to TCS/Diligenta under the largest deal of its kind in the UK (see Diligenta wins £1.4bn Friends Life deal). Rival WNS meanwhile, handles most of Aviva’s claims administration, including L&P under another $1bn contract, making Aviva WNS’ largest customer. That deal was renewed only last month (see WNS renews flagship deal with Aviva).
The TCS/Diligenta deal would appear to be at significant risk if the takeover goes through. Aviva said ‘over time’, it would bring back ‘Friends Life’s UK assets under management which are currently principally outsourced’. Aviva will also gain more than £2bn in annual pensions investments from FL, and more than double its corporate pension assets under administration.
L&P insurers have been blind-sided by new pensions reforms that came into force in March allowing retirees to cash in their pensions investments, rather than take out annuities (see Life and Pensions industry faces digital revolution). Unsurprisingly annuities have slumped ever since. Meanwhile fines are now pending for annuities mis-selling.
This is forcing insurers to cut costs, innovate and seek ways to encourage people to save and invest – hence a big push to new products, and digital technologies and services, which can offer new ways of engaging with customers aimed at building repeatable, long-term business.
As part of this reinvention, Aviva clearly sees pension investments and administration as a strategic play. This has to be bad news for current providers TCS/Diligenta and WNS. Where Aviva leads it’s possible other major L&P players will follow.
Posted by John O'Brien at '07:42'
Are you a guru in ‘all things digital’? We are looking to recruit a principal analyst to join TechMarketView to boost our research in the ‘digital space’.
The role will involve working across all of our research streams (see our website) to support our research into ‘digital transformation’ and related trends. As such, the ideal candidate will have at least three years’ experience researching the UK IT industry and have deep insight into trends in SMAC (social media, mobile, analytics/big data, cloud) and related areas such as ‘Internet of Things’.
Ideally you are already an experienced industry analyst, but your background could also be in market intelligence for an IT supplier, or as a tech journalist.
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This is a very demanding but highly stimulating role. You must be self-motivated, confident, disciplined, and deadline-focused. We all work from our own homes but this is not just a ‘work at home’ job as you will be spending much of your time out in the market meeting clients and attending company briefings, as well as talking to the media. This means you should ideally live within an hour’s commute of central London.
TechMarketView is the very definition of ‘small but perfectly formed’! The compensation is competitive, the working hours are flexible, and there is plenty of opportunity for the right candidate to take on greater responsibility if they prove their worth. But perhaps the most significant reward is the recognition you get from being part of the most respected brand in the UK IT research industry.
If you think you might fit the bill, please email your CV with covering note to TechMarketView Managing Partner, Anthony Miller.
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Posted by HotViews Editor at '00:08'
The announcement that Staffordshire Police is looking for a ‘game changing' level of transformation chimes with the points we raise in our recent UK Police SITS: Market Trends & Supplier Landscape 2014-15 report.
In the report we highlight that police forces are yet to embrace transformation and instead prioritise back office savings. Staffordshire provides clues to SITS suppliers how police forces will look to balance the needs of saving money while retaining the frontline.
Staffordshire is looking for technology to enable staff to be more visible in communities across Stoke-on-Trent and Staffordshire. The force is looking to provide ‘a better customer experience’ which might raise eyebrows but suggests the police force is looking to change the underlying culture of the organisation.
The overarching objective appears to be for the SITS supplier to deliver ‘a one system approach to public services across Staffordshire’. The approach encompasses not only utilising analytics to anticipate where crime will occur but also for the force to be able to collaborate with other public services to understand the underlying issues.
Joining forces with other public sector bodies is certainly a worthy goal but the public sector does not have a good track record of delivering such projects. Staffordshire acknowledges that this will mean all participants sharing power, resources and responsibility.
The eventual contract value is anticipated to range between £150m and £200m. SITS suppliers will have to juggle the requirement to upgrade the day to day ICT environment with the longer term ambitions of the force. Suppliers will not only need to have expertise in transforming organisations but also the ability to manage partnerships among disparate groups.
Posted by Michael Larner at '09:49'
A couple of months ago, London-headquartered private equity firm ISIS Equity Partners signalled it was going to change its name for pretty obvious reasons, and has just unveiled the new brand, Living Bridge.
Managing partner Wol Kolade explains that “Living Bridges are bridges that are often centuries old and handmade from the roots of living trees … they continue to grow and self-renew and in doing so become even stronger over time … a perfect analogy for what we aspire to achieve with the businesses we back”.
I'm not sure it ‘does what it says on the tin’ but undoubtedly better than the name on the old can!
Posted by Anthony Miller at '08:52'
They may style themselves as a ‘specialist in digital transformation, consulting and business re-engineering’ (see Tech Mahindra picks up pace and profit), but Mumbai-based IT services firm Tech Mahindra’s colours are still very much nailed to the telecom sector’s mast.
QED, Tech Mahindra’s largest acquisition since it subsumed the late - and in part lamented - Satyam, being that of Virginia-headquartered wireless network services company Lightbridge Communications Corporation (LCC), at an enterprise value of $240m. LCC has revenues of around $400m and employs over 5,000 staff in more than 50 countries, including the UK.
This all looks perfectly reasonable in the context of Tech Mahindra’s core telecoms services, which currently comprise just over half its $3.4bn (run rate) revenues.
Was a company of two halves, is a company of two halves, and looks like will always be a company of two halves.
Posted by Anthony Miller at '08:31'
Troubled network security appliance supplier Corero Network Security (CNS) is to raise a further £4.5m cash to try to bridge the gaping hole left by lower than expected revenue from its previous generation product (see Corero’s woes continue). CNS will place 30m shares at 15p (a 5% premium to last night’s close) of which nearly 40% will go to chairman Jens Montanana, who is also to loan the company £450k. Famous quotes involving ‘holes’ and ‘digging’ rather spring to mind.
Posted by Anthony Miller at '08:00'
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