Next year, PayPal is to be split out of its parent eBay and listed as a separate company, but will it wreak havoc throughout the world’s payments markets?
In the first six months of 2014, the combined PayPal (Payments) operation within the eBay group generated US$3.8bn of net transaction and marketing services revenues, 20% up on the previous year, generating operating income of US$953m. The total value of payments handled rose by 29%. Around 56% of this net revenue was from activity outside the US. By way of comparison, this operation is roughly the same size as Barclaycard or Visa Inc. and still less than one-quarter the size of American Express. It will nonetheless dwarf the revenues of other members of the complex and fragmented payments ecosystem. For example, Worldline, spun out of the Atos group is the largest payment service provider with annual revenue of c.€1bn (US$1.3bn). PayPal is also growing much faster than any of the other companies mentioned, boosted by the growth of eCommerce, currently at 18% p.a.(Source: Capgemini/RBS).
PayPal has been aggressively innovating outside of its on-line comfort zone with mobile wallets, etc., but (certainly in the UK) it is expensive and has a long way to go in achieving coverage of merchants and developing a USP. Nevertheless, it will have the cash to disrupt targeted markets and away from the link with eBay it will also have the incentive and the experienced management team to try.
Merchant acquirers and payments processors will see yet another significant threat to their market share and transaction volume. However, the credit card operators, who are already facing the threat of Faster Payments and where fees, expenses and margins are high, are probably the group that has most to fear as PayPal breaks loose.
Posted by Peter Roe at '16:01'
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When ATTRAQT, the provider of eCommerce site search, merchandising and recommendation technology to online retailers, listed in August this year, see here, its half-year to June had already closed. Consequently, the figures announced today should generate few surprises to the investors who injected £1.25m to fund the business’s US expansion and further development of the core platform. Revenue was up by 30% to just shy of £1m with losses before tax quadrupling (albeit in line with management expectations) to £0.47m.
The news on usage and new customer acquisition however makes for more up-beat reading. Platform usage was up by 213% and the client roster added 21 names, bringing the total to 73, with a wide range of newcomers, including Screwfix and Fat Face, adding to the list which includes Tesco Clothing and TK Maxx.
Several companies in a similar stage of growth have had problems converting new client announcements into revenue. ATTRAQT appears to have avoided this pitfall so far, adding 30 new sites over the last year and has a strong pipeline for delivery in the second half. The interim report also gave examples of follow-on business with customers and an increase in average deal value of 22%, adding to management confidence.
The management is certainly not short of ambition, setting out to become “the merchandising platform of choice for online retailers” and aggressively addressing the US in a very competitive and dynamic market. They have a lot to do, and will certainly be looking for more funds to do it, but with new customers going live in the second half and traction in the US, they have generated momentum and are making progress.
Posted by Peter Roe at '11:17'
This year, the SIBOS caravan has settled on Boston for its banking mega-chat. This is the biggest event of the year in the banking world as over 5,000 of the great and the good assemble to put their world to rights.
Already the discussions have ranged far and wide, with substantial implications for Software and IT Services suppliers. The keynote speech from Citi co-president Forese centred on regulation, calling on the banking world to press for regulators to more closely co-ordinate their efforts and approaches. The issue of regulation still dominates many CTO “to-do” lists, with short term projects dominating as regulatory deadlines loom. But if the Financial Services industry is to embrace, and benefit from, the technological innovation that is now available, it needs a clear view of the regulatory environment going forward. Adoption of cloud in banks is a case in point and engaging the regulators in a meaningful way is difficult. See our report on Hot Topics in Banking, here.
SWIFT, the driver of SIBOS, is working hard to build its value proposition to its member banks. The latest initiative has been to offer contributing members free access throughout 2015 to its KYC (Know Your Customer) registry as it fights for market share in the provision of regulatory utilities. SWIFT has also been reducing the price and improving the flow of business intelligence of its ubiquitous messaging service. SWIFT will continue to play a major role in the international strategies of the larger banks.
Elsewhere, Social media and Big Data will be important features in this year’s conference as they become mainstream in many areas of banking. Infrastructure resilience and the move to faster settlement (T2S) have already held centre stage. There will be a lot for the wider industry to digest.
Posted by Peter Roe at '09:58'
Microsoft is scheduled to announce version 9 of the Windows operating system in San Francisco later today. It could be called Windows 9, it could take an abbreviated form of its code name, Threshold, but it will bring back a version of the much loved Start menu. Hopefully it will also bring other sought after features such as the artificial intelligence-based virtual assistant Cortana and virtual desktops. What it needs to do is re-capture the goodwill of customers and prospects that was lost with Windows 8 (although some will have been lost for good), because although there is more to Microsoft than Windows (see here), it remains a big part of the picture.
Posted by Angela Eager at '09:52'
Several announcements from provider of software and services to the recruitment sector, Dillistone Group, indicate a bit of an uphill struggle for the company.
Revenues for the six months to end June 2014 increased by 10% to £4.2m, but the growth looks like it was entirely down to the contribution from FCP Software, brought on board in July 2013 (see Dillistone picks up new passenger on its voyage). In addition, any acquisitive increase appears to have been partially offset by foreign exchange movements. Meanwhile pre-tax profits (before acquisition related items) declined by 4% to £824K, suffering from higher cost of sales, higher administrative costs (investment in strengthening management) and exchange rate movements.
Though Mike Love, non Executive Chairman (also non-Executive Chairman of Scisys) describes “another solid set of results”, it appears that Dillistone is struggling with the shift to a SaaS/subscription model. Recurring revenues in the period were up 19% to £2.86m, now representing 68% of revenues, while non-recurring revenues declined. The shift will mean pressure on short-term revenues in exchange for longer-term visibility.
Dillistone continues with its growth strategy of investing in products (it is launching a new product, FileFinder Anywhere next week) combined with selective acquisitions. Today, it announces the acquisition of ISV Software, a UK-based supplier of training and testing services, primarily to the recruitment industry. ISV Software’s latest results show revenues of £750K and PBT of £162K. Dillistone will pay an initial consideration of £0.85m in cash, with a further £150K payable in mid January. The maximum total payout, including deferred consideration, is £2.5m. Dillistone’s share placing, which raised £500K before expenses, will go towards paying the initial consideration.
Also notable is that Dillistone expects to carry out a similar placing, of similar size, “shortly”. The funds will be used for working capital purposes. Dillistone is anticipating that 2014 adjusted profits will be at a similar level to 2013, as the company continues to invest in new product development but “limits the number of new product rollouts to ensure a high standard of client care”. At the same time it is coping with an increasing number of clients moving to the subscription model. The management is keen to highlight its longer-term confidence, though, increasing its interim dividend by 4%.
Posted by Georgina O'Toole at '09:51'
Despite a slowdown in Q2 (Q2 growth slows at Harvey Nash), Harvey Nash’s first half performance comfortably met management expectations thanks to robust performances in the UK, Ireland, Benelux and the United States.
The UK-based international recruitment, outsourcing and offshoring firm reports a respectable 8% revenue growth (12% on a constant currency basis, ccy) to £356m; 1.1% growth in gross profit to £43.6m and a near 5% (11% ccy) increase in adjusted operating profit to £4.6m in the six months to the end of July.
In the UK, revenue increased by 2% to £114.2m and gross profit increased by 9% to £17.7m. We’re particularly pleased to see strong growth in operating profit in the UK, up by 10% to £1.9m, boosted by market share gains and growth from new offices. That’s despite slower demand in Scotland in Q2 as the referendum on independence from the UK grew closer.
Harvey Nash’s offshore services business continues to grow strongly with gross profit up by 27% on the prior period. It’s secured a number of new clients in the period and is also doing more software and development work with existing clients.
Overall, the group has performed well despite currency headwinds and the markets in Europe remaining challenging. Demand for permanent recruitment is still subdued in Europe, particularly in Germany, although contracting activity on the continent is described as ‘strong’.
According to Harvey Nash’s CEO Albert Ellis, global multinational clients are beginning to hire selectively at the executive and strategic level and there are severe skill shortages in the digital and mobile technology sectors. Both these trends have been drivers for growth in contract and permanent recruitment in the first half and bode well for continued growth in the second half.
Posted by Tola Sargeant at '09:50'
AIM-listed InternetQ , the provider of mobile marketing and digital entertainment solutions, has published its Interim results to 30th September with revenues growing by 53% in the first half of 2014 to €65.7m (HY 2013: €43.0 million). Growth stems from integrating businesses acquired in Latin America (see InternetQ buys again in LatAm mobile market), the purchase of Atlas Interactive in Germany and organic growth fuelled by the success of both the B2B and B2C divisions.
Revenues from B2B activities grew by 49% to €51.5m (HY 2013: €34.5m) and revenues from B2C grew by 67% to €14.2m (HY 2013: €8.5m). InternetQ is geographically diversified with 34% of revenues from Europe, 32% from Asia, 18% from the Americas and 16% from the Middle East & Africa.
Revenue growth was not at the expense of profitability with the company reporting adjusted EBITDA growing by 88% to €9.8m (HY 2013: €5.2m), a margin of 15% (HY 2013: 12%) while profit after tax for the half year remained stable at €3.2m compared to €3.3m for the HY 2013.
The B2B division’s Minimob smart advertising services platforms now counts more than 250 million installs and this is increasing at a rate of 1 to 2 million installs per day. InternetQ has undertaken mobile marketing projects in the Americas and integrated more ad networks in Germany, UK, China, Israel, Singapore and India with the Minimob platform.
The B2C division highlights that the Akazoo music streaming service has strong pipeline into 2015 with the firm benefitting from strong relationships with mobile operators, handset manufacturers and ISPs; in H1 2014, InternetQ was selected to run the Orange Poland’s music service.
InternetQ's strategy of broadening its geographical reach whilst further developing its service is enabling the firm to cement its position in the global mobile ecosystem. Certainly a firm worth keeping an eye on.
Posted by Michael Larner at '09:27'
Having shopped itself around for two months, infrastructure and business software provider Tibco Software will move back into private ownership as part of the portfolio of private equity firm Vista Equity Partners. Vista will pay $3.98bn ($4.3bn including debt) for the company, who delivered $1.08bn revenue last FY (up 4%) but whose performance and profits have struggled due to competition and poor sales execution. The purchase price represents a 23% premium on the pre-announcement share price.
Tibco joins the list of established companies from the pre-cloud era who are struggling and need injections of PE cash and transformation. BMC Software (see here) and Compuware (see here) recently went down the same route. Vista is a heavy investor in flagging software companies but this is probably it’s biggest to date and came as it announced it was exploring a potential IPO for Misys, the UK banking software company it bought in 2012 for $1.3bn (see here).
Tibco demonstrates that a company needs more than a portfolio of sound products to succeed when up against cloud providers who can offer ‘good enough’ alternatives at lower price points. Problems with the sales leadership teams in North America and the UK have played havoc with execution and contributed to Tibco missing out on the large enterprise deals it needed. Sales of emergent products such as the visual data discovery Spotfire offering have faltered in the last few quarters, while competitors like Tableau and QlikTech have continued to soar, indicating the problem is within Tibco.
Vista has a lot sort out, but it does have some good products to work with. Given the diversity of Tibco's software offerings, a break-up or asset sell-off could be on the cards.
Posted by Angela Eager at '09:22'
Recruitment firm, The ReThink Group, has said EBITDA for the full year will come in “marginally below current market expectations”. The news sent shares down nearly 10% in early trading this morning.
For the six months to the end of June, Group EBITDA (“before separately identifiable items”) decreased by 18.4% to £910k, due to investment in its Talent Management Division and the cost of moving to a new head office. The total combined investment was £400k in the period. Operating profit from continuing operations (i.e. before those investments) increased 18.4% to £810k. Meanwhile, revenue increased 4.5% to £56.5m.
Taking a step back, ReThink has actually been through a period of very sensible change, focusing the business squarely on recruitment managed services and contingent staffing. This paid dividends in FY13, when the company returned to profitability (see ReThink confirms profitable thoughts).
While underlying profitability is improving, the challenge is that it is very difficult to avoid making investments in the business - in particular when these are to underpin future sources of revenue growth. The added challenge for ReThink is that client relationships for managed recruitment contracts tend to be based on trust and a deeper understanding of the clients' business, versus traditional recruitment. This can mean that payback on investments (e.g. bringing in additional sales staff) takes longer to materialise. That said, we are of the view that if ReThink executes well in the coming quarters, it stands a good chance of establishing more sustainable profit growth.
Posted by Kate Hanaghan at '09:16'
News today that Vista Equity Partners are taking Tibco private in a $4bn move was accompanied by the announcement that Vista are seeking advice as to an IPO for Misys, the UK-HQ’d banking software provider. Misys was bought by Vista in 2012 for $1.3bn.
Since the take-over, the world has changed –and so has Misys.
The market for banking software is in rude health as challenger banks emerge and as incumbents realise that they must increasingly adopt standard systems to become more agile and reduce cost. Even over the past twelve months there has been a tangible increase in banks’ willingness to invest in such systems, as reported by Misys’s most direct competitor, Temenos (see here).
Misys has responded to the expertise of Vista Equity in terms of new business practices, tighter management and a more coherent and forward-looking portfolio. (Today also sees the announcement of an integrated corporate banking platform as part of the FusionBanking portfolio). After taking it private, Vista combined Misys with the Turaz trade and risk management business of Thomson Reuters. The Misys group has been further strengthened by two acquisitions; Custom Credit Systems and IND, see here and work back, to fill out the company’s domain expertise and technical capability. Misys has also benefitted from being out of the public’s gaze while it sorted itself out.
With a receptive market, renewed portfolio and growing revenues, Vista looks like it will be able to make a handsome return on its venture into banking.
Posted by Peter Roe at '08:41'
My accountant for the last few decades has come up with many perfectly legal schemes which could, he says, save me tax. I’ve resisted most of them. In turn most of them have since been closed down and, in some cases, the people who used them have suffered. My attitude is that something may indeed be ‘legal’ but that doesn’t make it ‘right’.
It really does ‘make my blood boil’ when (mainly US) companies pay little or no tax in the UK but proclaim that they do everything required by UK tax laws. As I said ‘something may indeed be ‘legal’ but that doesn’t make it ‘right’’.
An FT analysis showed that seven US tech groups paid just £54m UK corporation tax. Their UK turnover was £1.7b even though their sales to UK customers totalled $15b. The use of what is known as the ‘Double Irish’, holding IP in tax havens, the old ‘use of logo’ charge etc are all utilised to minimise tax paid in the UK.
Anyway, yesterday George Osborne announced new plans to crack down on this in what is dubbed the ‘Google Tax’. Not before time. Everyone – including US tech groups- should pay their fair share to the UK economy. We all benefit from it in terms of education, NHS etc and we should all pay our fair share too. What we need is low taxes. Only if all parties pay their fair share will such low taxes be available to all.
Posted by Richard Holway at '07:59'
Just before the US market closed last night I noted that CSC shares jumped by over 5%. Bloomberg explained this with a ‘rumour’ that CSC had contacted Blackstone and Bain ‘to gauge their interest in a leveraged buyout’. None of the parties confirmed – or even commented – on the rumour.
We have long suggested that CEO Mike Lawrie would seek to take CSC private and then prepare its component parts for possible sale. The US Govt business is quite different to its other activities. And, of course, Lawrie does have ‘form’ here as we can see from his time at Misys.
Posted by Richard Holway at '07:30'
The last five years have seen unprecedented change in end-user expectations and this shows no signs of slowing. This paper, written by Fujitsu, considers how the workplace will look in 2020, based on work with Enterprises, R&D and industry bodies and tested against the perspectives of some of the country’s leading CIOs.
How do organisations and their CIOs prepare to meet and exceed business demand and user expectations? What strategies and plans should be adopted to prepare for a seismic change in the workplace between now and 2020?
Cloud –reinventing not just IT but the entire marketplace
IT Departments will need to adapt to survive
Different ways of working driven by people, not technology
One major device, not many, and with broader functionality
It’s not only the corporate worker who will be mobile-enabled
The paper investigates the impact these changes will have on the IT department and its role within the Business. It outlines the market’s belief that IT will become a utility. It considers the demise of the Service Desk as we know it and how the supply chain will be revolutionised. Ultimately, Operational IT will need to adapt to survive and offer competitive advantage for the wider business.
Download the white paper here
Posted by Fujitsu at '00:00'
It’s been announced that Liam Maxwell has committed to remaining UK Government Chief Technology Officer until at least 2018. Maxwell became UK Government CTO, reporting to Executive Director Mike Bracken, in December 2012 (see Liam Maxwell to be Government CTO). He has been part of the Cabinet Office IT team since June 2011, when he joined the Cabinet Office as an IT advisor. Prior to taking the CTO position he was deputy Government CIO for nine months.
We must admit that we had previously considered it unlikely that Maxwell would remain onboard after the next General Election if there were a change in Government (see Cabinet Office: Accepting win-win good for all?). We’d always viewed him as something of a political animal, having previously been the Tory Councillor responsible for IT policy at the Royal Borough of Windsor and Maidenhead and involved in drafting the Conservative’s technology policy in the run-up to the last General Election.
With this latest move, Maxwell has committed to his role regardless of the outcome in May 2015. That will surprise many. There is no doubt that Maxwell and his cohorts have been doggedly resolute in sticking to their ICT agenda over the last few years. And, regardless of whether you agree on their route to getting there, they have achieved a great deal, not least by contributing to billions of pounds of Efficiency Savings.
But they are only part way along the journey to a ‘Government as a Platform’ model – “government made from platforms: reusable, interconnected, easily replaceable components that can be used and shared by everyone”. And, particularly following the departure of COO Stephen Kelly (see Sage announces Stephen Kelly as CEO), it is heartening to see Maxwell commit to sticking around to make that a reality. Moving away from monolithic legacy systems at the heart of Government is not going to happen overnight; and too often in Government difficult, long-running, programmes never make headway because the people driving the programme move on. Maxwell should be praised for wanting to see things through.
Posted by Georgina O'Toole at '09:58'
IS Solutions had another ‘down’ in the first six months of the year (to June 30 2014) on the roller coaster it has been on. The systems integrator and value-added reseller saw revenue drop a challenging 31% to £3.4m, and fell into an operating loss of £310k vs. an operating profit in the year ago period of £328k, which was a contrast to the stronger end to the last FY (see here).
The strength of the pound was an issue but business activity was lower, impacted in part by lack of government spending. Project work fell across all three business areas – Portals, Analytics and Enterprise Content Management – and although recurring revenue (maintenance and contracts) held up, product revenue was slashed from £1.1m to £648k.
Several factors combined to stress the company, including a delay on an analytics contract due to the customers’ budget restraints, and a portal project entering the test phase. What is disappointing is the lack of progress around analytics, which has been a growth area for the company and represented around half of overall revenue at the end of the last FY. Management says there are a number of analytics POC engagements under way which are generating revenue themselves and are expected to lead to longer term revenue but has not given timelines. However, the company still believes it will meet full year expectations. In our view, the problem with IS Solutions is that its portfolio remains disjointed and its lacks a unifying strategy.
Posted by Angela Eager at '09:52'
After interim results last week which showed some good underlying progress, see here, the management of AIM-listed Bango, enabling payment for downloaded content via the mobile phone bill, has decided to tap the markets for another £6m of cash. This is through a placing of 4.2m shares and an offering to existing shareholders of 2m shares.
At the end of the first half, Bango had cash of £2.65m, having burnt roughly the same amount over the six months.
One of the characteristics of Bango is that, unlike many other companies of similar size, we consider that is not on a treadmill of ever-increasing sales and marketing costs and investment. Indeed in the half-year report the management stated that the “cost base remains stable and no further significant increases are anticipated”. Nevertheless the company has accumulated losses of nearly £24m as it has built its business.
On the other hand, the underlying revenue outlook looks good, with Bango benefiting from its long and expanding list of AppStore and MNO agreements. Gross margins appear stable, albeit at a low level, and so it comes down to a matter of waiting for the volumes to grow and the bottom line to benefit. The management obviously felt that another injection of cash would make that waiting less stressful.
Shareholders are probably less than amused however. After having marched up to 250p in March 2013, their shares are now back down to 100p. (One UKHotViews reader recently wrote to say that “it’s always jam tomorrow with Bango”). The business model looks sound and the market is growing, but coming to the market for more cash places an even greater responsibility on the Bango management to deliver and reward shareholders’ patience.
Posted by Peter Roe at '09:23'
AIM-listed Brady, the provider of commodity, energy and recycling software returned some good interim figures at the beginning of September. Revenue up 5%, but EBITDA more than doubled to £3m, a margin of 20%. The results showed a recovery from the delays seen in the second half of 2013 (see Brady picks up where it left off, here).
Today Brady has announced another major deal, this time with Norilsk Nickel, the world’s leading nickel producer, for its Commodity Trading and Risk Management (CTRM) software. Brady will supply an integrated platform solution to support Norilsk across its portfolio of business operations. This deal builds on recent successes for Brady with FinEx in commodities trading and LG International in metals trading in Asia-Pac, having signed ten new licence sales in H1.
Brady is the largest Europe-based software vendor in the Energy and CRTM market and the only one of the top five suppliers that is listed.
Second half figures last year were impacted as Brady could not complete negotiations and implementation of several larger contracts. Over the year, the Brady management team have gained additional experience and are benefiting from the organisational changes they introduced. They will also be careful to avoid a repeat of last year’s stumble.
With an expanded sales team, a wider acceptance of Cloud-based solutions and a growing penetration of the major suppliers, Brady looks to be delivering in terms of revenue growth and consequently profitability. Worth watching.
Posted by Peter Roe at '09:18'
The annual San Francisco invasion that is Oracle OpenWorld has begun and unsurprisingly, the front wave of announcements is cloud based. Equally unsurprising, is Larry Ellison’s declaration that it wants to be the largest cloud player – its ambition is always to be the biggest whatever sector it turns its attention too but as we know, it is no easy matter for traditionalist Oracle to disrupt the cloud disrupters.
So how it is doing? According to Ellison Oracle has gained 2,181 new SaaS customers over the past 12 months, of which 1000 subscribed to customer experience solutions, 959 opted for HCM and 263 for ERP. He also stressed the many SaaS solutions in the Oracle portfolio - bought and built - and Oracle’s ability to span IaaS, PaaS and SaaS. There is no question that the company has increased its cloud assets and is positioning for a deeper push. The question is whether customers want Oracle for their cloud solutions and reality is that cloud customer numbers (most of which have come via acquisitions) are a small proportion of its 400,000 total customer base, and revenue is too - in Q2 (see here) revenue from IaaS, PaaS and SaaS combined was just 5% of total revenue (vs. 4% the year ago period).
We’ll get a better idea of how Oracle plans to build out and differentiate its cloud business as OpenWorld rolls forward. As an early example of its cloud intentions, it has announced it will match Amazon Web Services on IaaS pricing, although this is not so much a challenge as a baseline requirement.
Posted by Angela Eager at '09:09'
TechMarketView is delighted to announce that the fifth in our series of Little British Battler events will be held in London on Wednesday 26 November 2014.
We want to hear from the CEOs of small, privately-held, UK-owned software and IT services companies that are punching above their weight in UK tech. There’s no specific theme for November’s LBB day, but as always we’re particularly keen to hear from innovative SMEs that have an interesting story to tell. Successful applicants from past rounds have been active in a wide variety of fields from big data analytics and business process automation, through to cyber security and the Internet of Things.
As usual we will select twelve CEOs to meet the TechMarketView research team in central London in closed session to present their company and its market propositions. In return we will give unbiased, constructive feedback based on our extensive knowledge and experience of the UK software and IT services market. Each session lasts 50 minutes and there is no fee or commitment involved.
The twelve companies will also be featured in UKHotViews, the most highly regarded and widely read source of opinion and commentary on the UK IT scene, and in a special research report distributed to selected ‘movers and shakers’ in industry and government.
Many of the CEOs who participated in previous Little British Battler events have seen real benefit to their company in terms of increased market visibility and access to new business opportunities (see here for just a sample). This is an unparalleled chance to get your company on the radar of the UK’s premier software and IT services research firm.
Candidate companies must be headquartered in the UK (i.e. not subsidiaries of foreign firms), privately held (though may have accepted external funding), with annual revenues under £25m. Companies must derive the substantial majority of their revenues from software and/or IT services and/or IT-enabled business process services.
If you want to apply, all you have to do is click here and fill in the registration form (you may apply again if you were previously unsuccessful).
The deadline for registrations is Friday 17th October. We aim to notify successful applicants by Friday 31st October.
Should you have any questions, please email us at email@example.com.
The TechMarketView Little British Battler programme is run in association with corporate finance firm MXC Capital.
Posted by HotViews Editor at '07:00'
AIM-listed EU Supply, the Sweden-based e-commerce business providing an e-procurement platform for use in the public sector has presented half-year results, with revenue of £1.05m, up 21%. Operating losses also increased by 21%, to £1.45m. Cash used in the first half totalled £1.67m, with period end cash of £100k.
Across the EU, there is a big push for standardisation and rigour in procurement with several new directives driving interest in EU Supply’s platform. The IPO in November 2013, see here, raised £5m, and a further placing in July raised £1.3m to fund a larger sales team and a higher level of activity. The platform for growth has also been consolidated as all renewals due in the first half were successfully completed and development activity is going well. The platform is now being marketed into the private sector. EU Supply is also investigating leveraging its breadth and 7,000 strong customer base to supply tender information and business alerts to suppliers.
EU Supply has expanded its customer list and pipeline, so is expecting continued growth in activity in the second half. The interim statement also indicates that several revenue share agreements should start generating significant contribution in 2015 and the CEO expresses his confidence in “strong and profitable growth”.
Nevertheless, to get to profitability requires a massive change. Revenue share and/or volume-related payments may come to the rescue of the P&L, but public sector bodies EU-wide will all have tightly constrained budgets that will not flex easily to pay bigger sums to EU Supply. Top-line growth looks assured, but unless management can significantly change the business model, EU Supply’s shareholders will have to get used to putting their hands in their pockets.
Posted by Peter Roe at '10:02'
Last week saw HP sign a deal with the Business Services Organisation (BSO) of Health & Social Care Northern Ireland (HSCNI) (see here) and this week the firm has been selected for a Managed Services contract at Worcestershire County Council (see here). HP will be responsible for the management of all the Council’s ICT infrastructure, migrating the telecommunications platforms onto a new unified communications platform, revising the council’s end user computing strategy and improving the print services at the Council.
Worcestershire states that ‘the managed service will contribute towards cumulative cost savings of £7.06m over the maximum 7 year term. £3.4m of this figure is directly attributable to the managed service provision and the remainder from related services and initiatives supported or delivered by the preferred provider.’
The Council highlights that a shared approach to risk was a key strength in the firm’s bid. HP assumes the risks associated with operational performance and efficiencies while the Council retains the risk relating to the reduction in volumetrics (number of users, devices and servers).
Outsourcing is often not popular with councillors but HP has committed to helping the local economy by:
· promoting and supporting Worcestershire’s Advanced Manufacturing and Cyber Security sectors (which chimes with Vince Cable’s announcement supporting cyber SMEs)
· helping NEETS (young adults not in employment, education or training) to gain certification, training and employment
· supporting local SMEs
· inspiring young people to learn new skills
The win demonstrates that HP can mitigate falling central government revenues and with the unrelenting pressures on councils Worcestershire will be a key reference point to achieve that objective.
Posted by Michael Larner at '09:48'
Symantec’s third permanent CEO in three years will be Michael A. Brown, who has held the CEO position on an interim basis since March 2014, when the previous incumbent Steve Bennett was ousted on the back of Symantec’s poor performance. Brown was one of c100 candidates and the 30 or so who had their credentials actively scrutinized. During his stint as interim CEO he has raised revenue and profits sufficient to beat expectations, while also cutting costs (see Symantec improves but is still not doing enough).
There is still a lot of work to be done to get to the performance levels of other security providers like Kaspersky and Check Point and compete against giants like IBM who are heavily investing in security, but he has have made a positive impact so far. The next stage will come within the next 30 days when he reveals his strategic plan. At the time he took the interim role, the market chatter was about whether a potential break-up of the business was on the cards and whether activist investors would rise up. The talk died down but Symantec watchers have limited patience with the company, so Brown will not have long to set his strategy and deliver positively on it.
Posted by Angela Eager at '09:08'
After stellar results for FY13, see here, this Munich headquartered, AIM-listed supplier of software and services to the global automotive dealership industry pushed further ahead in H1 2014. This advance however was principally due to the acquisition of a direct solution seller in the German market, RCRBS (now “incadea Deutschland”) putting the Group into a domestic leadership position.
The incadea management announced revenue up 61% to €22m, with RCRBS adding a net €7.3m. The organic growth rate fell from 2013’s 23%, with management working to secure some record deals, e.g. a 5-year concord with PSA Peugeot Citroen and a deal with Mercedes Benz Mexico. Since period end, more deals have been signed with major car manufacturers and a leading international components supplier, opening new revenue streams. Internationally, growth was strong, with user numbers doubling in China and Asia Pac yoy. These operations now account for over 25% of the user base (and a third of revenue).
Gross margin was 43%, down from 46% yoy. EBITDA margins were 4%, with reported EBITDA for H1 up 24% to €0.78m. Losses before tax however increased to €3.7m, from €0.6m due to increased finance charges. Cash at period end totalled €4.9m.
Alongside international expansion, management also aims to offer a broader portfolio through the cloud, expecting margin uplift and consistent increases in recurring revenues. This will mean shifting away from the sale of licences to a rental model. It is not clear from the H1 figures how this is progressing as the acquisition muddies the water. Certainly management deserve congratulations for the improved positioning, the deals and likely mid-double digit organic growth in the year. However, observers will probably want to understand more about how cloud is going to work out before putting the pedal to the metal.
Posted by Peter Roe at '08:02'
We could both rejoice and despair at that headline. The company is Slough-based Travelport which supplies booking software for travel agents. Yesterday they IPOed on the NYSE with a value of $2b. Shares increased 13% on the day. C$500m of new money was raised to pay down debt. See Nic Fides article in The Times Patience a virtue for Travelport as listing takes off
Travelport had attempted an LSE IPO in 2007 and 2010 but got hit by the market volatility around at those times. Mind you Travelport has had its own problems post 2010. Blackstone had paid $4.3b for Travelport in 2006 but was forced into several debt for equity swaps since. Travelport made a loss of $98m last year but latest results for first six months of 2014 show a $3m profit on revenues up 4% at $1.1b.
Good luck to them. But we’d still have preferred a London listing.
Posted by Richard Holway at '07:17'
UK Digital Skills Taskforce
Back in April I was asked by Maggie Philbin to make a submission to the UK Digital Skills Taskforce. Knowing that this was at the behest of Ed Miliband I had to think long and hard. But took the pragmatic view that I should help anyone who was interested in improving the state of digital skills in the UK.
I therefore submitted a set of proposals with backing evidence.
As many of you know I am passionate about creating entry-level IT jobs in the UK – be they apprenticeships or for graduates or whatever. As the use of off-shoring has risen in the last 15 years so the creation of entry level IT jobs has fallen. UK HQed SITS companies create hugely more entry level jobs in the UK. This reduces for US and French HQed SITS companies. But it is practically zero for Indian HQed companies.
My proposals to the UK Digital Skills Taskforce included:
1 – Just like reporting on CSR (charitable donations, political contributions) was made a part of company reporting a decade ago, so every company should provide details of their entry-level job creation on the front page of their R&As. Compulsory reporting changes attitudes. Who wants to publicly say they create NO entry-level jobs in the UK?
2 – Every tender for Government business should include details of entry-level job creation from the bidding company. Within the limits of EU law, it should be a significant criteria in the awarding of Government contracts. Companies should be encouraged to replicate such principles down their supply chain.
3 - Offshore companies in particular should only be permitted to bring in employees with major (10+ year) experience thus forcing them to grow more onshore talent at the lower levels.
4 – There should be considerable tax incentives given to companies that provide entry-level jobs. Eg via zero ERNIs for the first year of employment, tax and other incentives on the cost of training.
5 – As well as shaming those that do not provide entry-level jobs, there should be high praise for those that do. Eg via the Queens Awards to Industry or maybe other new Awards for UK Entry-level job creation.
Ed Miliband's speech at the Labour Party Conference
So I was intrigued to read that some of these proposals were included in Ed Miliband’s speech to the Labour Party Conference. I hope ContractorUK will not object too strongly if I quote from their write-up
“Criticism of Ed Miliband for forgetting part of his conference speech may be more muted among IT contractors, because he nodded to their industry, its workers and even the self-employed. The Labour leader singled out IT as an industry that would benefit from his pledge that, by 2025, as many youngsters will do apprenticeships in the UK as currently go to university. “You see we can’t have what’s happening at the moment in IT where you’ve got more and more people coming in, but actually the number of apprenticeships falling in IT,” he said.
Mr Miliband vowed to tell employers that “if you want to bring in a worker from outside the EU, that’s ok but you must provide apprenticeships [in the UK] to the next generation.” This ultimatum, of sorts, surfaced in 2013 when shadow immigration minister Chris Bryant said Labour would force all UK hirers of non-EU migrants to offer apprenticeships locally. But speaking to the party’s conference in Manchester, Mr Miliband went further by saying hirers who ignore the requirement will be made non-eligible for major government contracts”
I am no Ed Miliband supporter but truly hope whatever Government we have post May 2015 will take heed of these proposals.
Posted by Richard Holway at '14:47'
Although most readers probably think I’m Apple’s #1 fanboy, my phone is still my Blackberry Bold. I will not grace it with the title ‘smartphone’ because it isn’t very smart at all. But it still has the best email system around and a very long battery life. Indeed I find my Blackberry and my iPad (with mobile data) as my perfect travelling companions.
But my old Bold is about 4 years old and I do need to change soon (I guess)
So two bits of news yesterday were of great personal interest
1 – I was very impressed with Apple’s new iPhone 6. In particular because of the promise of longer battery life. But this was rather dented yesterday when Apple had to withdraw the iOS8.1 software upgrade because users reported a range of bugs. Not least that they couldn’t make calls at all and that the battery drained rather quickly. See BBC report for more details. What really amazed me was that over 50% of Apple users had upgraded to iOS8 within 48 hours. Why on earth would you do that? I always wait weeks before I do an Apple upgrade for exactly the reasons made so clear by the bugs in iOS8.1.
2 – Blackberry released the Passport. So called because it is the same square shape as a passport. Designed that way because it is very good for looking at spreadsheets. It has the much loved Blackberry physical keyboard which it is claimed is 4x more accurate than using a virtual keyboard. I can vouch for that – indeed I suspect it is even more accurate than that. The reviews were of the ‘Marmite’ variety – some really loved it, others thought it was a joke.
But really good to see Blackberry sticking with (reverting to?) corporate users who, afterall, make up 30% of the mobile market. I will wait until the Blackberry Classic is launched later this year before deciding to dump my Bold.
Posted by Richard Holway at '11:06'
In the company’s half-year statement in early August, see here, the management team of AIM-listed StatPro announced a change of tack so that it would (sensibly but belatedly) concentrate on larger customers to speed the migration of revenue. They also restated their confidence that the cloud-based replacement for their largest product, StatPro Seven would be launched early next calendar year. Nevertheless they warned that the process of migration would still take significant time to complete, having started three years ago. As a result this will delay the receipt of the anticipated cost and agility benefits and product development costs will continue to impact cash and profit. Interim EBITDA was down 37% to £2m on revenue of £15.7m.
Given this “glass half-empty” appraisal of the migration process (and a drifting share price), it is pleasing to see news that one of their major asset management customers has just signed a 5-yerar contract worth £1.6m. This is driven by the functionality of the StatPro Seven product, but also includes provision for migration to StatPro Revolution and to StatPro R+, the Seven replacement.
StatPro has also strengthened its management team to speed the transition of clients to the cloud-based products, with the appointment of Dr. Ian Thompson from Bi-Sam to lead the functional delivery of the new R+ platform..
These are two steps forward on a long road, but nevertheless they are in the right direction.
Posted by Peter Roe at '10:22'
Civica has won two significant contracts for its Tranman fleet management system. It has signed up both Police Scotland and the Scottish Fire & Rescue Service; the organisations selected Civica’s Tranman software independently. The wins follow the recent combination of eight Scottish Police forces and the combination of eight fire service organisations to form the two new entities. The Scottish Ambulance Service is already a client for Tranman. The organisations were looking for a supplier which could help them standardise their processes quickly. They also looked for a supplier who could be a long-term partner.
Civica has a breadth of experience in the emergency services; it has carried out similar projects for Norfolk and Suffolk police as well as providing a shared system between three Yorkshire police forces. We expect increasing opportunities for suppliers of technology to the police and other emergency services. While large scale outsourcing is out of favour, police forces are turning to a range of technology solutions to help them meet ever demanding budget cuts.
In addition, alongside the police innovation fund of 2014-15, the announcement this year of a £75m transformation fund open to fire & rescue services in 2015-2016 to encourage delivery of blue light collaboration projects, will further boost activity in the marketplace. Steria, for example, expects demand for its Command & Control solution STORM to be invigorated; historically targeted at police forces, it has recently seen Kent Fire & Rescue come on board. This year, collaboration projects have increased in the emergency services; for example Merseyside Fire & Police are working together to combine their Command & Control Centre and in Devon & Somerset, ambulance and fire services are running a joint response system.
Posted by Georgina O'Toole at '10:21'
Learning Technologies, the e-learning company, posted Interim results for the 6 months to 30 June 2014 showing revenues jumping by 75% to £6.5m (2013: £3.7m) adjusted EBITDA growing to £874,000 (2013: £563,000).
The company’s original business, Epic, delivered organic sales growth of 8%. However, the buy and build strategy has continued with the acquisition of Preloaded, a creator of innovative learning games, in May. We noted in our coverage of the full results in April (see here) that the firm needs to be mindful that any new acquisitions are not ‘too big for it to swallow’. Today the company highlights that April’s acquisition of LINE Communications, a designer of blended learning solutions, has been merged with its core business, Epic, to form Leo Learning Ltd (LEO). Furthermore, the integration of the firms’ processes and functions was completed on time and within budget.
Learning Technologies aims to position itself as an end-to-end service provider of learning technologies and launched gomo an authoring tool for multi device learning.
Outside of the UK the firm’s US office has won contracts with the US government and not-for-profit sectors while their Brazilian joint venture is cause for optimism.
Learning Technologies reiterated its goal of achieving sales in excess of £50m and is certainly a firm to watch closely as it looks to become the European market leader in e-learning custom content.
Posted by Michael Larner at '10:13'
Last month Atos revealed that it has supported Enfield Council in converting the authority’s ICT delivery model to one based on Service Integration and Management (SIAM). This is the first example we have seen of a local authority adopting the SIAM approach. As such, we took the opportunity to talk to Atos’ Jim White, Head of Local Public Services to understand more about the arrangement.
In our latest PublicSectorViews research note, Michael Larner outlines how Atos worked alongside Enfield to deliver their ICT strategy, considers whether SIAM has a future in local government and Atos’ chances of success in local government.
PublicSectorViews subscribers can download the research from today here. If you don’t yet subscribe to our PublicSectorViews research stream and you’d like to know more, please contact Deb Seth for details.
Posted by Michael Larner at '09:41'
After beating its Q3 revenue target (see Accenture beats Q3 revenue target), IT services bellwether Accenture, has done it again in the all-important final quarter. CE Pierrre Nanterme was ‘very pleased’ with the results – and so he should be.
Net revenues for the fourth quarter were up 8% in local currency (LCY) to $7.8bn, ahead of the $7.45bn - $7.7bn guidance. Operating margins remained flat, albeit at a very healthy 13.9%.
Outsourcing led the way with an impressive 13% (LCY) growth to $3.8bn, and consulting revenues were up 4% (LCY) to $4bn. Looking ahead, new bookings are up 8% too - 6% in consulting and 11% in outsourcing. At the current course and speed, outsourcing revenues may even overtake consulting by next year, which would be a landmark for the group.
Accenture’s largest Americas region stormed ahead, with revenues up 10%, followed closely by EMEA up 9% (LCY) and then Asia Pacific someway behind up 3%. All verticals are performing well too, although the standout is communications, media and technology (up 12%), followed by financial services (+8% LCY) and health and public services (+9% LCY). Double digit margins are being achieved across the board.
In the full year, net revenues hit the $30bn mark (up 5% yoy), with 2% down to acquisitions. In FY15 net revenue is expected to be up 4% to 7% (LCY), with 1% coming from acquisitions like Enkitec and PureApps in the UK (see here and work back).
Accenture is also going to push harder on the profit levers in FY15 to get operating margins over 14%. Two-thirds of employees already operate out of Accenture’s global delivery network. But even more offshoring, platform-based services and business process automation will be needed to keep pushing the margins in the right direction (see Business process automation: a brave new world for BPS providers).
Posted by John O'Brien at '07:56'
I spent a day as a guest of UK Trade & Investment in Sao Paulo talking to a number of small, privately held Brazilian IT companies – you might call them Little Brazilian Battlers – looking to make it big time in the UK – for some a bold ambition given they had not long started business in Brazil!
I was not in the least bit surprised to hear some exciting ideas from these entrepreneurs, every bit as innovative as we see in the UK with our own Little British Battlers. Three companies in particular caught my interest.
Cora is the name of the e-commerce marketplace just launched by web development start-up 3bingo! to connect door-to-door (D2D) consumer product salespeople with customers. D2D is still big business in Brazil – indeed according to the World Federation of Direct Selling Associations, direct sales in Brazil last year totalled some $14bn, over four times higher than in the UK. Cora is aimed at salespeople representing consumer brands such as Avon, Tupperware and local cosmetics brand o Boticario. However, Cora has yet to get buy-in from the brands themselves. If they do, then this becomes a really interesting proposition.
Web Moment, on the other hand, has developed a SaaS platform which lets organisations such as trade associations create tailored s-commerce (‘s’ as in services) marketplaces for their own ecosystem rather than relying on one of the growing number of ‘come one, come all’ s-commerce portals that businesses can tap into in order to locate service providers. Has more of a ‘community’ feel about it and I like that.
Peoplenect is not a startup – it’s an application software and services company that’s been around since 2000. But what’s new is cloudhire.me, a SaaS version of their Application Tracking System based on their successful HR package aimed squarely at the SME market. There is, of course, no shortage of SaaS HR application startups in the UK and US especially, but Peoplenect are well on the way to launching in the US, leveraging a partnership with one of the leading global job boards.
Whether any of these companies will be able to make a go of it in the UK is moot. But they all get an ‘A’ for ambition!
Posted by Anthony Miller at '23:07'
As we said in Oracle is out to build its data assets, we think suppliers will be on a mission to build their own data assets - and up steps Salesforce.com with a timely example. It has made a trio of product announcements which include the launch of ExactTarget Journey Builder for Apps which is a platform to build interactive mobile applications capable of taking advantage of external information like location information and beacon technology for personalised customer experiences example, and an alliance with advertising and marketing communications services provider Omnicom. According to Salesforce.com, the partnership will “allow Omnicom agencies to deliver highly personalized communications that connect the dots between marketing, sales, communities and customer service.”
What is notable about these announcements is that they take enterprise applications into new areas and by making or enabling the use of external data, they move firmly into the world of data driven applications. They also enable the connection of applications, hardware products (e.g. the Internet of Things) and locations, thereby supporting new style applications that are not just customer but also individual-centric. The ability to connect people, processes, applications, physical devices and locations, is a core requirement in the push for digital transformation (as attendees of our recent event will know – see An Evening with TechMarketView), so suppliers need to be geared up on the innovative technology and imagination fronts to help clients on their journeys.
Posted by Angela Eager at '10:02'
Bango, the company which enables mobile users to pay for downloaded content via the mobile network operator’s bill, has made significant progress although a cursory glance at the first half figures may suggest otherwise.
Reported interim revenues were down a third, to £3m, but this is misleading. The revenue figure is a blend of principal and agency revenue and there has been a shift to agency as many of the new deals with AppStore providers (e.g. Microsoft, Google and Mozilla) use the agency model. Revenue is also impacted as the company moves from up-front fees to monthly fees and per transaction income (as with Proxama and Monitise).
Bango expects a gross margin of 2%-5% on all its transactions. This averaged 2.6% in the period (2013: 2.3%). Higher margins can be achieved on cross-border transactions, particularly when Bango can net off the currency element. As a consequence, the most reliable indicator of progress is the end-user spend carried over Bango’s global network. This rose 63% to £10.7m.
Another measure of progress is the number of contracts set up between AppStore providers and the regional operations of the MNOs. At the end of the half, 130 were in place (vs 112 in September 2013). Amazon AppStore has now gone live and Bango has signed a deal with Deutsche Telekom for AppStore purchases. The contract pipeline now totals 30.
Bango has laid solid foundations for success, see here and work back, and can cope with significantly higher volumes without major growth in cost base. This should result in a faster move to profit as end user revenue grows. The business model is proven and a predictable growth trend established. Bango is well on the way to be the major player in this niche of the payments market.
Posted by Peter Roe at '09:56'
Interim results for Scisys, the defence, space and media focused SITS provider, showed the firm’s restructuring during 2013 is delivering results with EBITA increasing by 40% to £1.4m (June 2013: £1.0m), statutory profit from operations rising by 56% to £1.4m (June 2013: £0.9m) while adjusted operating margin improved to 7.0% (June 2013: 6.1%). Total revenues were down slightly to £21.1m (June 2013: £21.4m), however as we said here there should be plenty of opportunity to start growing the top line again in the coming months.
Indeed the Enterprise Solutions & Defence (ESD) division generated revenues of £7.3m, a contribution of £1.8m, and has an order book up 10% since the beginning of 2014. The company has gained business from the Government Digital Service procurement portal and an automotive sector customer. Scisys has also extended the Work on the Warrior fighting vehicle upgrade programme by £0.6m and secured £4.0m of recurring support revenue for 2014.
The Space divison delivered revenues of £9.3m, and a contribution of £1.7m, but revenues suffered due to timeline delays to certain German national programmes. There were wins at the European Space Agency (ESA) to deliver the Harwell Robotics and Autonomy Facility (HRAF) initial pilot project and the renewal of the key flight dynamics contract for a further year at the ESA’s European Space Operations Centre (ESOC). While the Media & Broadcast (MBS) posted revenues of £4.4m, and a contribution of £1.2m, including the deployment of the company’s dira! technology to the new BBC broadcasting house.
Since June Scisys has been contracted to supply the System and Information Management (SIMS) system for the next 12 vessels in the RNLI’s latest class of lifeboat and the company has been selected to develop the flight software responsible for the rover navigation and self-locating on the Mars surface on behalf of Shannon Airbus Defence and Space.
Scisys aims to become a £60m company in the next five years through a combination of organic growth (from core and adjacent markets) and acquisitions. In conjunction the firm aims to have double digit margins; given the impressive improvements in profitability so far we don’t think that's an impossible task.
Posted by Michael Larner at '09:54'
The first half of 2014 has continued to prove challenging for Instem, provider of IT systems and services to the global life sciences market, despite what appears to be good strategic progress. The level of new business in the first half was lower than expected, affecting both profits and cash received.
Revenues increased by 4% in the six months to end of June to £5.7m. Within these SaaS revenues were up by 6% to £0.8m and recurring revenues were constant at 74% of the total. But Instem moved into the red, reporting an operating loss of £0.5m compared to a profit of £0.3m in the same period last year. Instem’s usual seasonal cash outflow, coupled with lower levels of new business, also resulted in a negative cash balance at the end of June of -£0.2m, down from £2.1m at the end of December 2013.
Despite these lacklustre figures, Instem has made progress. During the period it completed the integration of recent acquisitions Logos and Perceptive (see here); carried out a corporate reorganisation and began work on its strategically important 10-year contract with the US’ National Institute of Environmental Health Sciences (NIEHS), a $6-8m deal which was recently extended to add new further sites and 100 additional users.
The management believes that the focus and momentum that the company has created in the first half - together with improving market conditions - will support a second half that is significantly ahead of the same period in 2013, but there are no guarantees. Indeed, with continued uncertainty over the timing of the receipt of a small number of high value contracts in Q4 we could yet see a ‘material impact’ on Instem’s full year results if those deals aren’t forthcoming by the year-end.
Posted by Tola Sargeant at '09:54'
Proxama, the mobile proximity specialist, returned interim revenues of £350k (flat yoy) and EBITDA losses nearly doubled at £2.5m. Period end cash totalled £5.3m, following the £8.6m placing in December. Results were in line with expectations and the July Trading update, see here.
Proxama has changed its business model to play the longer game. Earlier periods were boosted by professional services and one-off implementations. Management is now confident of the market growth and of their offering and is signing revenue share and per transaction agreements with customers. This step echoes the similar move by Monitise.
Management confidence is underwritten by recent events. The iPhone6 launch and the push by the credit card companies to more aggressively roll-out contactless (NFC) technology for payments confirms the likely success of this technology which is key to Proxama’s future. Proxama has also announced partnerships in pre-paid cards, strengthened its management team, see here, and built its US presence. As banks move more to contactless payments, particularly using the HCE (Host Card Emulation) technology which reduces the role of the mobile network operator, Proxama should see significant growth of usage of its CardGateway platform.
The mobile proximity business, centred on Proxama’s TapPoint platform has been boosted by its use in Liverpool city centre, see here, and the company is to use Norwich as a showcase implementation for its “Places” technology and offerings. Installations, and growth in usage, in airports, sports arenas and shopping malls are under way. Proxama is also building its commercial partner network.
Management forecasts strong growth in second half. Nevertheless, shareholders will have to be patient and management must ensure that it does not over-inflate expectations). Nonetheless, Proxama is an excellent play on the growth in contactless as a payment and marketing technology and well worth following.
Posted by Peter Roe at '09:51'
Attendees at the TechMarketView evening last week will have heard our views on the Internet of Things (IoT). Indeed, anyone coming to the Prince’s Trust ICT Leaders Forum at BT Tower on 1st Oct will hear the views of several CEOs at the panel discussion on the IoT that I am chairing.
Today ARM has released the Cortex M7 chip – a microcontroller chip specially designed for use in devices in the connected home, factory, car, aeroplane, ship etc. Allowing your washing machine to talk to your smart meter was one example given. But you will find these in everything from toys to thermostats to connected CCTV cameras.
You have to hand it to ARM. They really seem to know where to place the bets. ARM already has c20% of the microcontroller market. Not only is it fast growing but ARM could well significantly increase its share to become a dominant supplier.
More widely, we believe that the IoT will be game-changing and any of our readers who ignore it will not just miss out on huge opportunities but will ultimately find more agile competitors come ‘eat their lunch’.
Ultimately we believe that the IoT could number a trillion connections – not the ‘tens of billions’ currently being projected. So, for ARM, the microcontroller market could become far, far bigger than its main smartphone market. All credit to them.
Disclaimer – I’ve been a (very happy) ARM shareholder for many, many years.
Posted by Richard Holway at '09:19'
Oracle’s announcement of a partnership with data services provider Dunn & Bradstreet sounds simple enough but it is an important marker on the data driven applications journey where data becomes the force and model for the new style of data-driven applications, as explored in Does the market need Big Data driven applications?.
The partnership enables subscribers of Oracle Data Cloud, the Data-as-a-Service offering it launched at the end of July, to tap into Dunn & Bradstreet’s rich set of business, professional and social data. Things gets more interesting when you consider that Oracle Data Cloud is built on the BlueKai data management platform for marketers that Oracle acquired in February. Regular readers will recall that we said BlueKai’s data assets – a data marketplace containing around 700 consumer profiles - were the important and the most strategic part of the deal (see Big red Oracle embraces small BlueKai).
When you consider the DaaS offering, the BlueKai data assets, and the Dun & Bradstreet data partnership, it is clear that Oracle is decisively investing in its data assets and is also making a move to separate data from applications. Oracle also has its recently announced Social Relationship Management platform, which also underlines the value of data through its support of LinkedIn, and Oracle joining the LinkedIn Certified Company Page Partners programme (of which competitors Salesforce.com are Adobe are already members).
This data surge opens up a host of new opportunities for Oracle around monetising data and the creation of data-driven applications. We would expect further data-centric partnerships (Experian will probably be hoping to benefit from the trend) as Oracle builds this part of its business, and to see other providers build their data assets on the back of their cloud marketing and social media platform acquisitions.
Posted by Angela Eager at '09:19'
I think most Hotviews readers will have picked up by now that we are not great fans of Outsourcery. See Anthony’s post of 14th Aug 14. Neither is the market. When I did my share roundup for August I reported that Outsourcery shares were down over 80% YTD. Outsourcery describes itself as a ‘pure-play provider of cloud-based IT and unified communications services’.
They have fallen another 14% this morning (so that’s c90% for the year) on their interim results for the six months to 30th June 14. Revenues are up 65% to £3.4m (somewhat slower than expected) and losses amounted to £3.6m (Note -exceeding revenues...) And even that is an ‘adjusted loss’ excluding restructuring costs, employee share payment costs etc. Far more worrying still is that ‘gross cash’ had reduced from £7.3m to £1.3m in a year. Although Outsourcery claim a £4.5m financing package post period end, much of this was future cost savings rather than real cash today.
Outsourcery admits that ‘recurring revenue growth has suffered from delays in go-to-market plans of its partners’. Its larger partners have taken ‘longer than expected to ramp up sales’. Outsourcery now says it expects to be ‘EBITDA positive on a monthly basis by the end of 2015 and operational positive cash flow in the same time frame’. But ‘end 2015’ is but a lifetime away.
I’ve often quoted Outsourcery in my ‘froth stock’ lists. Joining the 90% Club puts them right at the top of such lists. One lives in hope, I guess, that they will not join that other exclusive 100% Club.
Posted by Richard Holway at '09:16'
With six weeks to go before the new CEO, Stephen Kelly, takes up the reins, see here, Sage has acquired PAI Group, Inc. (“PayChoice”) a US-based provider of payroll and HR services. The cost is just shy of £100m and the acquired company is “profitable” on turnover of c. £24m ($39m).
PayChoice sells to SMBs in the US, running its proprietary platform to provide both mobile and web-based payroll applications with 16 offices in the US and 260 employees. When looking at the Sage Americas operation (US, Canada, Brazil) which turned over £448m last year with c.3,500 employees, this is another acquisition that does not “shift the needle”. It follows on from the purchase of Exact Holding in Germany, see here, another small deal, but one which reportedly placed Sage as one of the top two players in the German payroll market. Indeed we consider that a strategy of acquisitions to build market position, drive cross-selling and accelerate growth would be a good use of some of Sage’s cash.
It may be that the PayChoice deal was driven by such motivations, or by the company’s niche position or particular angle on Cloud delivery. However, being cynical, it could also be that the US management felt the need to do something to compensate for poor performance after a slower Q3, see here. We cannot know as things stand. The point is that neither will Stephen Kelly when he takes over.
As the new kid on the block, he will have to deal with a relatively loose federation of businesses that will each be manoeuvring for position and attention. In our view he will have his work cut out as he tries to build a coherent growth strategy which does shift the needle in Group terms.
Posted by Peter Roe at '09:31'
It has been another positive year for customer engagement software provider Netcall as it explores the possibilities from its combination of software plus business process automation capabilities.
Total revenue was up 5% yoy to £16.9m, although underlying core growth was up a more appealing 9% (see here for the year ago comparative). Recurring revenue is a welcome 64% of total revenue. PBT was down from £2.26m to £1.89m but included £1.07m of accelerated share based payment charges; adjusted EBITDA was up 16% to £4.93m.
The company reports double digit percentage increase in sales order inflow, high levels of cross and upselling which is an ongoing focus for the company and consistently produces results (two thirds of ‘new’ business during the year was from existing customers), and strong demand for its Liberty platform from new and existing customers.
Liberty is the next gen version of its core platform, which 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. This blend of software and business process automation is appealing because it creates a direct link between front and back office with the ability to deal with complex scenarios. It is Netcall’s secret sauce and enables it to play in the high growth business process market which is a positive counterpart to the low growth software market (see UK SITS Market Trends & Forecasts 2014). It also positions it squarely within customer-centric digital transformation which is also a high growth area and a high priority across all industry sectors.
The overt blending of front and back office as part of the customer engagement play, in conjunction with the combination of software and business process capability seems to be gathering momentum, with back office/contact centre optimisation providers like eg Solutions and AOMi also benefitting and is something we plan to take a deeper look into over coming months.
Posted by Angela Eager at '09:22'
Looks as though my first reaction to the Apple launch on 8th Sept – See Apple first impressions? – WOW! – was one shared by…well at least 10m others. Because that’s the number of new iPhone 6s sold in the first weekend. This is an Apple record. This beats the previous record of 5m iPhone 5s. Tim Cook said Apple could have sold even more if they had had the stock.
Will be really interesting to see what the initial orders for the Apple Watch will be next year. My prediction that Apple’s entry into the ‘wearables’ market will set off one of the fastest uptakes in the history of technology was greeted with the usual scepticism last week. Much the same as the initial reaction to most of Holway’s mad cap predictions in the past! The question I keep getting asked is “Why would I want a smart watch?”. Very similar to ‘Why would I want a tablet?” or “Why would I want a mobile phone?”. I could even go back to the 1970s and 1980s when most leaders in our sector could not see any need for PCs and certainly no need for a computer in the home.
Posted by Richard Holway at '08:34'
KBC Advanced Technologies, the specialist provider of software and services to the hydrocarbon industry, is still working on its upward turn and H1 (to June 30 2014) shows an improvement compared to its year end results (see here), but there is still volatility and varying performance within the business.
Revenue was up 9% to £34.3m and within that the troublesome consulting division was up 17% and its suffering margins also saw an improvement, but technology was down 13%, although against a strong comparative period. PBT was flat at £2.9m, but up 64% to £3.6m when adjusted for currency rate changes.
The company is pulling multiple levers to strengthen its position and is making some progress. Consulting is back in profit for example, and it is acquiring software IP to broaden its market reach, including purchasing UK business FEESA in July 2014. It also undertook a share placing in May to gain capital to fund acquisitions. The root of its volatility is that its market is shifting from mature areas such as North America to South America, Middle East and parts of Asia (it has gained new business in Saudi Arabia, Kuwait, Jordan and Thailand recently for example) so KBC is having to shift its resources to serve these growth areas. That is a tricky transition that takes time to solidify.
Posted by Angela Eager at '08:22'
Insurance-focused business process services (BPS) and software provider The Innovation Group (TIG) is making an interesting bolt-on US acquisition, taking over Driven Solutions Inc (Driven), which manages roadside assistance networks across the US.
TIG is paying up to $7.2m (£4.3m) in cash for Driven, although just $0.9m (£0.6m) upfront while it awaits a liability settlement ‘over the next 2 to 4 years’. Although revenue wasn’t disclosed, TIG is getting its hands on a business with gross assets worth $37.0m (£21.8m). Although Driven made a pre-tax loss of $0.3m (£0.2m) in FY13, TIG expects it to be profitable this year, to the tune of $1.6m (£1.0m). We assume this will be driven by cutting costs.
The strategy behind the acquisition makes sense. It gives TIG access to some 30,000 towing and roadside assistance providers that will work direct with insurers and fleet operators. Owning the intermediary will also mean TIG gets to keep more of the business and margin derived by managing the insurance services supply chain.
This may be a small deal in value terms, but it shows TIG’s commitment to expansion in the US BPS market, and it should help broaden the reach of TIG's offerings into new sectors of the insurance ecosystem.
It also shows that TIG is really upping the M&A stakes this year. In February it bought two larger UK businesses (see TIG splashes £50m on M&A brace), and it is still in negotiations on the purchase of a UK motor BPS business, which should conclude by the end of the year. However, with lots of acquisitions come increased operational risks.
Posted by John O'Brien at '08:04'
Declaration – As I have declared countless times, I’ve been a NED and shareholder of Allianz Technology Trust (#ATT – was RCM Technology Trust until renamed last month) since 2007. I’m pleased that ATT has performed better than almost every tech fund in that period. Indeed I’ve seen a 150% rise in my own personal shareholding since I bought in Feb 2007.
I should make clear that NEDs have no role in individual stock picking. That’s up to the Fund Manager – Walter Price in this case. But obviously the board does set the overall investment strategy.
The reason I declare this is that ATT was given a reasonable allocation of Alibaba shares in the IPO last week at $68. Last night they closed at $90 – up 32%.
I’ve written about Alibaba before – most recently Will Alibaba turn out to be Frog or Prince? So far Alibaba has turned out to be quite a Prince! Because of the demand, Alibaba yesterday increased the number of shares available at the $68 IPO price. So in the end Alibaba raised $25b – a world all-comers record for an IPO. Alibaba is now ‘worth’ $220b – so exceeding Facebook, Amazon or eBay.
The Prince in all this turned out to be founder, Jack Ma, who was often compared to Steve Jobs for some reason. They appear to me to be very different!
As I said both in HotViews and my various comments to the press, if you want to have a stake in the largest ecommerce market in the world – China – then clearly Alibaba has to be part of your portfolio. I also like their profits, profit margins and growth. What I like less is their lack of governance (although Tesco has all the Western governance there is and look what has happened to them!) and the obvious dependence on the Chinese market which shows distinct signs for concern.
The other point that I seem to be making constantly about Alibaba is that investors look at it as a stock. We at TechMarketView look at it as a company. These are quite different viewpoints. There are many current digital media and even SaaS plays that have proved to be great short term stocks where we would be highly critical of their longer term viability as companies.
Anyway, as an indirect Alibaba shareholder, I’m pretty happy – for now.
Posted by Richard Holway at '07:39'
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