After my many articles on Unicorns and today's post on Are we heading for a Start up Crash? one of our readers sent me a link to Caterina Fake's article The Age of The Cockroach. It is a really 'good read' and I commend you to it.
In the downturn that is increasingly expected, Fake asks "Who will survive? As always, the less glamorous, but very hardy Cockroaches. Cockroaches have outlasted doomsday asteroids and dinosaur extinctions. They can live for six weeks without food. They are not choosy about what they eat; they don’t need sugar, which other insects crave. They can subsist on grease, hair, or glue. They lack glamour and are ugly and unassuming".
"Companies that want to outlast the coming funding crisis will need to move fast, cut costs, and plan for a future without much money in it. They will have to lay off staff, move their pricy downtown office to the unsexy suburbs, pivot into revenue-generating business models, kill projects going nowhere, live with less. It’s always time to be the ant and not the bee"
"If you need to get acquired, you should already have done so. The best time to start was six months ago. Next best time is now".
I really couldn't have put it better myself.
Posted by Richard Holway at '11:58'
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I read the article in the FT today– Amazon makes a Dash to take lead in the Internet of Things – with interest. Basically a whole host of appliance manufacturers are going to build Amazon Dash Replenishment Service into their devices. Whirlpool is launching a smart washer/dryer that somehow will reorder detergent. Brita is launching a water jug that reorders filters.
I think I must be getting old and cynical because I remember decades ago seeing a demo of a fridge that reordered milk when it got low. It never caught on. And, bluntly, I don’t think this will either. In our household, reordering detergent is not a major issue. Anyway, we tend to buy in bulk and shop around. My experience on water filters is that they last a lot longer than the manufacturers say. So an auto reordering will cost us even more.
Last year Amazon launched Dash Wand which enables you to scan bar codes to reorder products. As far as I know that didn’t catch on either.
That said, there are clearly great opportunities in the integration of ‘things’ in the connected home. Like making my gates and garage doors open from my smart phone rather than the two dedicated devices I need at the moment. Same applies to my heating controls, burglar alarm, air con, internal & external lighting, video and audio devices etc. I’d love to have them all controlled via my smart phone. I’d love a ‘bulb blown’ alert for all our lighting systems just like I get in my car.
These things would be really useful. But I don’t think my life will change with auto ordering of detergent.
Posted by Richard Holway at '11:30'
Elektron Technology Plc first came to our notice as the company rebuffed the advances of Microgen in mid 2014 (see Elektron repels Microgen). Today they embark on the sale of a cloud-based system to monitor food safety to move growth prospects to a new orbit and at the same time justify the decision to fight off the larger Microgen.
First half figures published last month showed revenue flat at £22m, but with an £0.9m improvement at the pre-tax level, producing a profit of £0.3m. Full year figures for the year to January 2015 had shown pre-tax profits of £0.2m on revenue of £44m.
Over half of the company’s revenue is derived from electronic components (connectors, switches and fuseholders) with a further 40% from a wide range of Instrumentation, Monitoring and Control products. As a result, the company doesn’t appear in TechMarketView’s normal universe. However, this could change with its move to sell the “Checkit” systems to monitor food safety, simplify compliance with hygiene and reporting standards and facilitate the use of more standardised and cost-efficient processes. This service is cloud-based with the complete system including hardware, software, service and support provided on a subscription basis.
The issue of food safety is important and global and Elektron is targeting an area with significant potential having spent £2.3m and two years developing the system. The management talk of a UK addressable market of £200m, with opportunities in other geographies and industries, potentially leveraging their global network of relationships. Elektron will find that selling a cloud-based system via subscriptions is a far cry from its legacy components business, but a targeted, standardised offer is the way to go and this move could transform the company’s outlook.
Posted by Peter Roe at '09:49'
Provider of hosted managed and cloud computing services, Nasstar, has acquired VESK Group (consisting of VESK Virtual Desktop LLP, Appiam Ltd and Vesk Ltd). VESK is described as “one of the largest pure play hosted desktop providers in the UK”. Total consideration is £7.8m to be paid predominantly in cash up front. VESK will also issue shares to satisfy the remaining £1.432m.
The acquisition is in line with Nasstar’s stated expansion strategy: organic growth augmented by selective acquisitions to add IP, technical expertise or sector knowledge. Notably, the acquisition expands Nasstar’s footprint in one of its key verticals - the legal sector (see Nasstar builds on its potential in H1), accelerates its penetration of one of its newer verticals – logistics, and provides an entrée into a brand new vertical – public sector. VESK is a provider on the UK Government’s G-Cloud framework and states it is the “first hosted desktop provider in the UK to procure directly to UK Government up to Business Impact Level (BIL) 3”. It is able to store and process data for schools, LAs and fire & rescue services. However, looking at the G-Cloud sales records, VESK's success has been limited (records show one virtual desktop hosting PoC sale to the Department of Business, Innovation& & Skills in 2012); so the hope must be that being part of a larger Group will accelerate progress. Geographically, VESK provides additional data centres in both London and Singapore, offering new opportunities for the Group in Asia.
VESK has a strong financial record, having doubled in size over the last four years. In its last financial year to 31st May 2015, turnover stood at £2.5m, pre-tax profits were £0.6m and net assets were £0.8m. The acquisition is expected to be immediately earnings enhancing. Nasstar has grown rapidly over the last year or so, embarking on two acquisitions in FY14, which resulted in full year revenues shooting up from £2.5m to £11.2m (see Nasstar delivers in FY14 and shows FY15 potential). However, while there has been an improvement in profitability, the Group has remained in the red at the operating level. There will, therefore, be great emphasis on realising the potential for datacentre consolidation, as well as targeting the VESK Group customer base with the expanded product portfolio. James Mackie, MD and co-Founder of VESK, stays on and has a long-term incentive plan in place.
Posted by Georgina O'Toole at '09:46'
Just a week ago we reported on eServGlobal’s disappointing trading update which warned of contract delays, cost overruns and postponed profits, see “Revival hopes in jeopardy…..”. This provider of end-to-end mobile financial services also reported looming cash flow difficulties, exacerbated by the need to fund the purchase of shares in the HomeSend business. This would enable eServGlobal to maintain its percentage holding in this operation as its majority shareholder (MasterCard) sought additional funds.
Talks with a major shareholder to find the money have however borne fruit and the company announces today that Alphagen Capital Limited (part of Henderson Global Investors) will provide a loan facility of up to £5m, adding to the earlier £5m loan announced in June.
All well and good, but Henderson (already a 17.5% shareholder in the business) is not doing this deal out of a sense of charity. The granting of new options following this new deal would enable Henderson to increase its stake up to 28.3% of the company at a favourable price, the interest rate on the new loan is 9.6% and part of the loan is secured. (The deal and its securitisation is made more complex as eServGlobal is dual-listed in the UK and US and has a National Australia Bank as a secured creditor.)
The moral of this story is that if things begin to go wrong and potential is deferred, the costs of getting out of the hole you’re in can be very substantial indeed. The pressure on the current eServGlobal management will be even more intense and we look to them for some better news flow. They were talking more positively about 2016, but there is little, if any, room for further disappointment.
Posted by Peter Roe at '09:45'
As we said in Deloitte UK: Solid FY15, the firm is making positive headway in responding to the demand for digital capabilities and is continuing to crank up its digital assets. The latest move sees Deloitte Digital partner with SAP and social media monitoring software provider Sprinklr to offer a “cloud-based customer service transformation offering”.
The offering will combine SAP Cloud for Service , SAP hybris Commerce, and the SAP Jam social software platform, along with Sprinklr’s social media listening software, into a pre-configured solution aimed at improving the way organisations engage with customers. Deloitte Digital will also add industry-specific knowledge and insights from its work in the consumer products, medical and life sciences, and wholesale distribution industries.
A customer service solution aimed at customer engagement will resonate with market but the more notable aspect of the partnership is the willingness to bring together disparate cloud solutions, across large and smaller suppliers, into a pre-configured solution. Collaboration and integration around a specific business outcome is needed to move cloud solutions to a new level and maintain high growth levels in the SaaS market.
Deloitte has other initiatives in the cloud area—earlier this month it announced the addition of Salesforce.com and Informatica to its CloudMix framework, which creates connections across the cloud ecosystem and provides pre-configured, pre-integrated cloud services.
The firm is building the relationships and multi-supplier services but to further build its credentials in the cloud market it needs to ensure coherency across its offerings (i.e. it is not clear whether the Deloitte Digital SAP/Sprinklr service is part of the mainstream Deloitte CloudMix framework), and how they fit together.
Posted by Angela Eager at '09:40'
Xchanging’s shares have rocketed almost 60% today on the news of dual bids from Capita and private equity (PE) firm Apollo Global Management (see here).
It’s a dramatic sign of a UK business process services market going through rapid consolidation and change.
Last week, Equiniti announced its intention to IPO, rather than sell to a competitor (see Equiniti to float on the LSE). Serco finally announced the sale of its Private Sector BPO business to PE provider Blackstone (see Serco smaller and more focused post Private Sector BPO sale). Meanwhile, The Innovation Group, Xchanging's insurance BPS partner (and potential competitor), is being sold to PE provider Carlyle Group (see here).
Apollo and Capita's bids offer Xchanging two very clear sale options: either pursue the private equity route where Xchanging can continue as an independent business, out of the glare of the public markets. Or, it can become part of Capita, the UK’s largest software and services provider and BPS market leader.
Capita’s rationale is to become ‘one of the leading providers of technology enabled business process services in the attractive international insurance and asset administration industries’. Insurance is an area where Capita has been very weak in recent years, and where we have urged it to take action to turn things around (see UK Business Process Services Supplier Landscape 2015).
Xchanging would boost Capita’s increasing international focus too - approximately one-third of Xchanging’s net revenues (or FY14: £132m) are made outside the UK. Xchanging would also take Capita into the international procurement services space, where rivals like Accenture are seeing significant growth (see Accenture FY15 update: focus shifting to digital).
Xchanging’s shares are now trading at 170 pence - the same price as the Apollo bid, and 10 pence higher than Capita's. Will one or both parties up their offers again to stay in the running? We will keep you posted..
Posted by John O'Brien at '08:41'
I got to know Duane Jackson over 13 years ago when the Prince’s Trust helped him set-up his new business KashFlow after he had spent time in prison for drug dealing. I not only got to know him and his lovely wife but followed his progress closely. I was even invited to become a shareholder and kick myself that I didn’t take up the offer as in 2013 KashFlow was sold to IRIS for c£20m. Jackson donated £100K of that back to the Prince’s Trust.
On Friday, Jackson emailed me with details of his new venture www.Supdate.com – ‘a tool to help new businesses keep with their investors informed of business progress’. Jackson had invested in several start-ups since 2013 but ‘was struck by how badly these businesses keep their seed investors updated’. Supdate starts as a free product with more advanced features being paid for. Further features are added based on user experience/suggestions – much like KashFlow. My only ‘problem’ with the concept is volume. Are there really enough startups to sustain this product?
We wish Duane well.
Footnote - Photo shows Duane Jackson receiving the Pride of Britain Award last week from Ozzy and Sharon Osbourne.
Posted by Richard Holway at '08:40'
We are clearly in the Age of the Startup – particularly in the UK. Everyday we receive much Start-up News . Eg today we have the UK’s Bizzby (provision of handymen) announcing a £26m fundraising all the way through to Apple acquiring Cambridge-based speech technology company VocalIQ for ‘between $50-100m’ . This is Apple’s third UK start-up acquisition in as many months.
Sherry Coutu remarked in the Sunday Times this weekend that “the UK has gone from having far fewer start-ups per thousand of the population than the US, to having more than the US”. Indeed the number of start-ups on both sides of the pond has exploded. Carole Cadwalladr, writing in The Guardian, pointed out that the first TechCruch Conference eight years back had 45 start-ups pitching for funding. This year there were 5,000.
The initial view would surely be ‘isn’t that great?’. But it is all getting too reminiscent of those crazy dot.com days of 1999/2000. Then anyone with an crazy idea could raise half a million by producing an excel spreadsheet of ‘eye-balls to site’ rising exponentially. Indeed, some readers might remember by jolly FreeJellyBeanz.com spoof at the time.
Now, once again, we have investors lining up to throw money into any, often crazy, start up venture. The Bizzby fundraising above was apparently for a drone delivery service… Again, as was often the case back in 2000, the business plan will be to exit quickly by selling to one of the majors like Facebook or Google. Back in 2000 the aim was to sell to Microsoft. I’m all for funding for viable tech start-ups but I fear we are heading for a crash if we aren’t more choosy.
I do agree with Sherry Coutu (who I both know and admire) that we need to encourage more ‘scale-ups’. It always seems that the best of the UK’s start-ups get snapped up too quickly. To use a gardening metaphor, we seem to have created a great climate in the UK for seeds to germinate. But then they get pricked out and developed in some overseas greenhouse where they help the new owner to grow even larger and more powerful on the global stage.
Even when the UK seeds are allowed to grow to maturity, they almost always fail to realise their full potential. They languish as medium –sized businesses before they too are snapped up in someone else’s consolidation exercise. Innovation Group and, possibly, Xchanging are this week’s examples
Posted by Richard Holway at '08:14'
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Further to our post earlier today – See News reports that Xchanging to be taken private – Xchanging has since confirmed that it has received bids from Apollo Global Management AND from Capita. Apollo’s offer was 170p per share in cash. Capita has made four proposals since Aug but its latest offer was at a lower 160p per share. Obviously both of these are in excess of the 110p closing price on Friday.
I’m still in the dark over where Craig Wilson stands in all this. If the Capita bid started in Aug, one surely must assume that he was told and became an insider. It would be a bit amiss if he was kept in the dark when he was making such a major personal decision as this. But what would Wilson’s position be, in particular, if the Capita bid was successful?
Posted by Richard Holway at '18:20'
Many of Sunday papers report (sourced to Sky News) that Xchanging is in takeover talks with Private Equity companies that might see the company taken private. Apollo Management is mentioned. A price of 160p per share – a 55% premium to Friday’s closing price – is mentioned inferring a value of c£400m.
As readers know we welcomed the news of the appointment of HP’s Craig Wilson as CEO (who we rate highly) on 16th Sept – just two weeks ago - and, indeed, the bringing forward of his start date. Exactly how this would stack if Xchanging was taken private is unclear.
Xchanging has made no comment on these reports but is bound to make some kind of announcement on Monday morning.
Footnote – I declared that when the announcement of Craig Wilson’s appointment was made, I bought shares in Xchanging @ 93p. They had already registered a gain of 18%. Although I don’t really want to write another ‘Dearly Departed...’ note, a 70% gain in two weeks might soften the blow!
Posted by Richard Holway at '07:05'
If you are an investor, you don’t need me to tell you that September has been a pretty torrid month. Indeed the last quarter, and now the whole year, is in serious ‘negative territory’ for most of the indices we track.
But, just for once, the exceptions to the gloom are in UK HQed tech. Whereas NASDAQ is now down 2.5% YTD, the TechMark100 is still up 5.42%. But the real star is still UK HQed SITS. The FTSE SCS Index is up a whopping 17% YTD.
But all the indices suffered declines in Sept to some extent.
The gainers in Sept were mostly companies making some kind of recovery. Blur was up 45% on reduced losses but still off 55% YTD. See Blurred beyond all recognition. Digital Barriers was up 33% but still down 15% YTD as it announced a whole slew of new contracts. See Hot streak continues and work back. . IS Solutions rose 39.4% irradiating the losses it had previously been showing YTD as it announced an Excellent start to FY16.
Great to see Xchanging rise 13.3% on news of Craig Wilson’s appointment as CEO. We rate Wilson highly – so highly that I bought Xchanging shares on the news. Even so Xchanging is still showing a 31% decline YTD.
At the other end of the scale poor old Monitise crashed another 54% (and joined the 90% Club YTD) See Triple Whammy for Monitise on the surprise departure of their CEO, tripled losses and a worsening outlook
Outsourcery also crashed 32% (54% YTD). Never our favourite company. See Outsourcery running out of magic.
Amongst the global SITS stocks, none stood out as all traded + or -10%. I see this as a sign of maturity. The larger SITS players may not be as ‘exciting’ as the ‘froth stocks’ we constantly have to feature as their share prices vary so widely. But there are times when making profits and generating cash is appreciated. Like NOW.
Posted by Richard Holway at '13:55'
In our HotView on Universe’s recent first half results, see here, we cautioned that this provider of point-of-sale, payment and loyalty systems had a lot to do in the next few months to meet growth expectations and justify the management’s confidence.
However today’s announcement of a 3-year, £4.3m deal with Conviviality Retail Plc, the chain of franchised off-licences and convenience stores, is a major step forward. Universe will be supplying a comprehensive end-to-end solution for in-store payments, sales processing, online sales and management reporting to over 600 stores, many of which trade under the banner “Bargain Booze”.
This deal is another endorsement of Universe’s measured strategy of building broad expertise in supporting the convenience stores segment. We would not be surprised if the management had further good news to announce as the second half progresses, perhaps justifying another trip to the off-licence!
Posted by Peter Roe at '10:07'
Two weeks after WorldPay announced that it would ignore a £6.6bn take-over from France’s Ingenico and continue with its October IPO plans, US payments giant First Data has launched its own IPO, valuing the equity at US$17bn and raising US$3bn to pay down some of the company’s debt mountain.
First Data’s trading performance is fairly pedestrian, with Q2 yoy growth of only 1% (although reported figures were hit by currency movements and the EBITDA margin is a healthy 40%). Worldwide revenues in 2014 reached US$11.2bn (£7.4bn), up 3%, with an overall net loss of US$265m. Total UK revenues are c.£180m, with the Group’s international business generating an EBITDA margin of 30%.
WorldPay is roughly half the size of First Data, with total revenues of £3.65bn but with a much lower EBITDA margin of 11%. The company’s structure is different to that of First Data, having separated out its e-commerce business into the GlobaleCom division serving the verticals of Airlines, Digital Content, Online gaming, Global Retail and Travel. Here revenue growth was 15% in 2014 and EBITDA around 22%. WorldPay’s US operation generates revenue of £1.66bn, roughly 45% of the Group total.
Both companies are bullish about prospects, but as we found from a recent visit to Worldline, the recently IPO’d payments arm of Atos, customers are demanding much more from their payments providers in terms of understanding of their businesses and how to drive additional revenue.
While these giants will probably find many willing investors looking for yield and solid if uninspiring returns, they will increasingly need to focus on the newer areas of Big Data and disruptive technologies. Here they will find many brash newcomers who will be looking to take market share, and also towards their own IPOs.
Posted by Peter Roe at '09:36'
A brief note from customer experience management provider SDL announces that founder and CEO Mark Lancaster is stepping down from his role with immediate effect and will leave the company at the end of October. Non exec chairman David Clayton will look after shop while SDL searches for a replacement.
Lancaster stepped back from the CEO role in 2010 before returning in 2012 (on an interim basis it was said at the time) to help put SDL back on track. The road has not been easy since then as it wrestled with strategic and operational changes, kick-started much needed re-investment in the products, and took on the task of bringing its language assets together with its content management and acquired Alterian technologies to craft an integrated customer experience play. While the Language division continued to perform, there has been no consistency within the Technology division, which is integral to its growth prospects. Despite some improvements over the past year it has been disappointing: although Technology revenue grew 3% in H1, it underperformed and bookings were down 6% yoy (see here). Yet customer experience solutions are attracting budget in the wider market.The company has been taking steps to improve execution and expected to deliver results in H2 but this move suggests they are not coming fast enough despite the company providing an update stating that the full year is in line with expectations.
Posted by Angela Eager at '09:24'
Some really good news for the UK IT services and FinTech markets today, with the announcement that business process services (BPS) provider Equiniti is going to IPO on the London Stock Exchange (LSE).
Equiniti will become the second major UK technology listing on the LSE in six months, following security player Sophos in June (see here). With Worldpay's pending IPO this month (see here), it looks like we are (finally) seeing a marked uptick in UK tech IPO's (see Herds of starving unicorns...).
Equiniti is a top ten UK BPS provider (see UK BPS Supplier Landscape 2015), which competes against the likes of Capita, Accenture, AON Hewitt and Computershare in the pensions, investments and share registrations space. It has turned into a success story under the ownership of private equity player Advent International, and CEO Guy Wakeley, who we spoke to this morning to discuss the detail and the strategy going forwards.
There’s quite a background to this story, where it looked like Equiniti was going to succumb to a takeover by one of its competitors (see Bidders circling Equiniti). Wakeley admitted conversations had taken place, but that he is ‘delighted and thrilled’ that Equiniti will instead be pursuing an IPO. He said it is the proper and right thing to do for the business.
Equiniti's adjusted revenue for the trailing twelve months to June 2015, was £350m. For that period, adjusted EBITDA was £82m. This adjusted figure includes the full benefit of the myCSP pensions shared service business, which it increased its stake in from 40% to 51% in September 2014 (see Equiniti’s mutual attraction).
Wakeley said that Equiniti will start trading on the LSE in the next 3-4 weeks, depending on the market conditions.
We will provide a more detailed analysis for TechMarketView subscribers in UKHotViewsExtra later.
Note from our chairman Richard Holway:
Excellent to see another new tech/SITS IPO on the London Stock Exchange. Indeed, the FT postulates a valuation of c£1b. So this is a Sterling Unicorn – somewhat superior to those ‘two a penny’ Unicorns they breed over the pond! See Herds of starving unicorns... This really is to be applauded. We seem to have spent all our time in recent years writing ‘Dearly departed’ notices and too few ‘New arrivals’. But 2015 seems to be heading for a bumper year of new UK HQed IPOs. I cannot be happier.
Posted by John O'Brien at '09:20'
Applications for TechMarketView’s Magnificent Seventh Little British Battler event (LBB7) close today. To apply click here and complete a simple pre-qualification form.
Over 70 aspiring UK tech growth companies have already joined the ranks of the TechMarketView Little British Battler brigade and yours could be next. We’ll be holding the seventh TechMarketView Little British Battler day on Thursday 12th November 2015 in London.
Founders, CEOs and board executives from twelve SMEs will have their chance to share their aspirations and challenges, and get valuable opinion and advice on their business plans, in confidential sessions with TechMarketView research directors and senior partners of our sponsors, MXC Capital, the tech focused, AIM-quoted merchant bank.
Raise your company's profile & receive free expert advice
The 12 companies selected to participate in LBB7 will be featured in TechMarketView UKHotViews, the leading daily source of opinion and comment on the UK tech scene. UKHotViews reaches many thousands of senior executives and professionals in the tech industry, government and investment community, and has brought many exciting but unknown UK tech companies to the attention of the market. The companies will also be profiled in the next Little British Battler Report, available only to TechMarketView subscription service clients.
LBB7 is open to independent, privately held, UK-owned tech companies with annualised revenues under £20m. Publicly quoted companies, or subsidiaries of public or private companies (whether UK or international), are ineligible. There is no charge to apply or to participate.
Applying is easy!
To register your application for LBB7, please complete the simple web-based Pre-Qualification Form by clicking here.
Applications must be submitted by Friday 2nd October and we will notify the companies selected to participate by 23rd October. If you were unsuccessful last time and believe your company plays to the ‘digital journey’ theme, then please do apply again.
Feel free to contact our LBB coordinator Deb Seth for further information.
Posted by HotViews Editor at '09:15'
After announcing the sale of the Private Sector BPO business to private equity firm Blackstone earlier this month (see here), Serco will have two divisions in the UK & Europe - Central Government (run by Kevin Craven) and Local Regional Government (LRG), run by Liz Benison.
We met with Liz Benison and her management team just after the announcement, to hear the new strategy, and see how things have progressed since our earlier analysis in March Serco's long road to recovery.
TechMarketView subscribers can read our views on whether the plans proposed have a realistic chance of success in our UKHotviewsExtra comment: Serco: smaller but more focused post Private Sector BPO sale.
Those readers who are not yet TechMarketView subscribers can find out how to subscribe by emailing Deborah Seth.
Posted by Michael Larner at '07:50'
We were intrigued by yesterday’s announcement by Capgemini of a new partnership with the Dutch sustainable energy company Eneco Group.
Utilities are responsible for around 5% of global IT spend and we pointed out the strong growth in demand in UK BPS from the sector, in our Business Process Services Market Trends and Forecasts report, published yesterday and available here.
Companies in the energy and utilities sector increasingly look to their suppliers for more sophisticated solutions and higher levels of advice and insight. Energy companies are having to cope with large swings in prices and the expansion of renewable energy (helped by rapid price declines in solar panels, the increased population of wind farms and better storage options), with all utilities seeking ways to cope with more data, smarter metering and the potential of the Internet of Things. In addition, utility companies have to deal with ever-increasing demands for better customer service, personalised offers and improved user experience, with a much higher level of customer interaction through mobile and online channels.
These trends require a rapid change in the sector’s underlying IT and its relationship with Software and IT Services Suppliers. This is another industry facing greater challenges in “Joining the Dots” (TechMarketView’s theme for 2015). This phenomenon also prompted us to discuss the rise of digital design and customer experience, as well as to recognise the increased role of Business Process Consulting in our Business Process Services Supplier Landscape report, available here.
Capgemini’s new partnership is aimed at transforming Eneco’s IT landscape and to enable new propositions in home energy management, electric vehicle charging, local energy generation and digital customer services. As such it signals closer cooperation between utilities and SITS suppliers which we expect will increasingly be replicated across this changing sector.
Posted by Peter Roe at '09:35'
There are only two days left to get your application in for TechMarketView's 'Little British Battler' (LBB) programme. Applications close on Friday, so don't put it off until tomorrow - complete the simple Pre Qualification Form today by clicking here.
We're looking for 12 outstanding SMEs to join us in London on Thursday 12th November 2015 and become part of the Little British Battler Programme. Over 70 aspiring UK tech growth companies have already joined the ranks of the TechMarketView Little British Battler brigade and yours could be next. Here’s what the CEOs of just some of our LBBs have said about the programme:
“Obtaining the coveted LBB status has helped to promote our business to the extensive readership base of the TechMarketView.”
“Being an LBB applicant put us on the 'map' with several large firms who ordinarily would not have known about us. This has allowed us to form business partnerships that today are driving business for the company.”
“The ability to network with fellow LBBs and gain some genuine business advantage by working with them has been an unexpected benefit of our LBB success."
The seventh TechMarketView Little British Battler event will be held on Thursday 12th November at techUK, London. Successful applicants will have the opportunity to share their aspirations and challenges, and get valuable opinion and advice on their business plans, in confidential sessions with TechMarketView research directors and senior partners of MXC Capital, the tech focused, AIM quoted merchant bank that actively invests in and advises companies in the UK tech sector.
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 £20m. Companies must derive the substantial majority of their revenues from software, IT services or business process services.
To apply, just click here and fill in the Pre Qualification form. And don't forget, the deadline for registrations is tomorrow, Friday 2nd October.
Posted by HotViews Editor at '09:11'
This week we attended Unisys’ EMEA analyst and advisor summit, where we heard from top management about the strategy and direction Unisys is taking under the leadership of CEO Peter Altabef. We will provide detailed analysis of this next week for TechMarketView subscribers.
One of the standout sessions on Day 2 was with partner Capita, whose executive director Martin Prescott discussed working together on their £325m platform BPO deal at The Co-Operative Bank (see Capita cooperates with Co-op).
Prescott explained that both started with the view that they aren’t competitors in the BPO space. From our conversations, it’s clear Unisys is no longer in the market for straight BPO within the UK.
As the prime contractor, Capita has overall responsibility for the Co-Op deal, providing ‘certainty of outcome’ i.e. bearing the risk of delivery, performance and of course cost savings. To do this, it needed best of breed partners.
Unisys was chosen to provide the core back-office lending platform, and Vertex Financial Services for its Omiga front-end mortgage origination platform. Capita has since acquired Vertex FS (see Capita acquires Vertex mortgage services), which now gives it its own platform-IP within the mortgage administration market (see Business Process Platform Opportunities in Digital Transformation). Unisys leads the platform migration from three different legacy Co-Op platforms.
This approach allows Capita to focus on delivering customer business outcomes. This means not just running the mortgage book more efficiently. It also means adding value elsewhere, for instance deploying its Euristix analytics platform to perform debt analytics, that can avoid customers actually getting into debt.
There look to be plenty of future mortgage opportunities for both companies as partners. Meanwhile the unsecured loans market could also be also opening up, where there are lots of books currently being traded. Re-platforming and administering these loans could be another significant opportunity to come.
These perspectives from Unisys and Capita validate our increasingly optimistic view on the shift to platform-based delivery models within the UK BPS market (see UK Business Process Services Market Trends & Forecasts 2015).
Posted by John O'Brien at '09:04'
Analytics-as-a-service provider Actual Experience (AE) has created the new role of COO as it attempts to build a global operation to support its international customer base.
Non-exec Robin Young is taking on the role, having gained CIO, COO, technology and operations experience, at companies like Mitchells & Butlers, GlaxoSmithKline, Proctor & Gamble and Ford Motor Company.
AE is a really interesting emerging player, that sits in a hot space, helping its customers to pin-point where problems lie in their digital supply chains, and deliver consistent service quality (see Actual Experience – the stories not yet in the numbers). In doing so AE is building up a good list of customer names and international partners (see Getting Actual Experience with Verizon). To capitalise on the emerging opportunity, AE is right to be thinking bigger and taking the operation to the next level. We just caution overstretching itself too soon.
Posted by John O'Brien at '08:58'
Both Islington and Camden Councils have agreed the plan to create a shared Information and Communications Technology (ICT) service by April 2016 (see here).
The shared service has a good chance of succeeding because both councils have similar views regarding how digital technologies can enhance services and help local authorities cope with budget cuts. Furthermore the agreement confirms our view, highlighted in Local Government Shared Services: Where are we now? , that proposed shared services are more likely to be succeed when the participants have previously worked together.
TechMarketView subscribers can read our thoughts on the plan in UKHotViewsExtra: 'Camden and Islington coming together'. Those readers who are not yet TechMarketView subscribers can find out how to subscribe by emailing Deborah Seth.
Posted by Michael Larner at '08:36'
Suppliers looking to effect digital transformation on behalf on their clients need to look at the complete digital value chain. While it is tempting to focus on the front office and customer facing areas of the business, this only addresses part of the digital change requirement—the back office is as much of an enabler of change as the front office. Certain operational areas are under recognised contributors and HR is one of them.
The latest research from ESASViews analyses the changing role of HR as it becomes more strategic and more dynamic, changes that would not be possible without the cloud and SaaS HR systems. SaaS HR is well positioned to surface the SMAC digital enabling technologies and present them in a business context, within a defined operational area. In this way it addresses one of the fundamental questions around digital transformation—where to begin. It also holds the promise of high volume usage and therefore high revenue, plus the extensive services potential. As if that wasn’t enough it is also a perfect example of the importance of Joining the Dots.
ESASViews subscribers can find out more about the opportunities in this market by downloading Six Reasons to Pay Attention to SaaS HR here. If you are not part of the TechMarketView ESASViews family contact Deb Seth and she will help you join.
Posted by Angela Eager at '19:07'
UK-headquartered, international recruitment, outsourcing and offshoring firm, Harvey Nash, reports improved profits in the first half despite fighting ‘currency headwinds’. Gross margins increased significantly to 13.7% (2014: 12.3%) building on the improvements we saw last year (see Better profit story at Harvey Nash). Underlying gross profit was up by 6.1%, or 9.4% on a constant currency basis, to £46.3m. That’s all on revenues that were down by 5.3% to £337m but broadly flat on a constant currency basis.
The USA and Asia Pac were star performers. In the USA, revenues were up by 21% to £27m and gross profit increased by nearly 35% to £7.2m. Asia Pac was the fastest growing geographic region, albeit from a small base – revenues increased by 78% to £4.3m.
We’re pleased to see the UK & Ireland also performed well with revenue up by 2.4% to £117m, gross profit up by 7.1% to £19m and operating profits up by 9.5% to £2.1m. Scotland apparently reported particularly strong results and overall contract demand for technology specialists was robust as the acute skills shortage continued.
Underlying results in Mainland Europe were broadly stable on a constant currency basis but the loss making German outsourcing business continues to cause problems. Revenue there dropped 6.4% (ccy) in the first half and gross profit slipped to £1.7m (2014: £2.2m). Expect further restructuring to this part of the business in the second half to reduce costs again.
All in all, Harvey Nash can be pleased with the improvement in profits over the last six months or so, but it’s not out of the woods yet. Although positive about the outlook for the remainder of the financial year, it has to contend with global macro-economic uncertainty and continuing currency headwinds. The drag on results through currency headwinds is expected to be around 5%, but thanks to improved performance in other areas the annual operating profit budget has been adjusted downward by ‘just’ 2%.
Posted by Tola Sargeant at '10:10'
Results for the first half of the year show that AIM listed Corero Network Security’s trials and tribulations are still in evidence. Although revenue rose slightly from $3.7m to $4m (reflecting new customer wins), the loss before tax deepened somewhat too, shifting from $5.2m to $5.6m. Meanwhile the cash situation deteriorated notably, dropping from $5m in the year ago period to just £0.5m, hence the post period action to raise $7.7m (see here).
There were positives during H1 (to June 30 2015) including a $0.5m+ contract with a large US ISP for the flagship SmartWall Threat Defence System (TDS), along with trials with three out of the top ten US ISPs for the product. In addition, a partnership with Verisign to deliver hybrid Distributed Denial of Service (DDoS) protection solutions holds the promise of wider market reach.
Corero has been repositioning the business and H1 represents the first full six months following its decision to focus the business exclusively on the SmartWall TDS product. Change costs and brings uncertainty. For Corero it comes after a long and painful period (see here for the history) and it is not out of the woods yet.
Posted by Angela Eager at '10:08'
We now have a real view of what Quindell now looks like as a business, from its H115 results, the first issued without the benefit of the Professional Services Division (PSD). And it’s not pretty.
For the six months ended 30 June, Quindell’s revenue was £35.3m (down 17.5% on last year), and operating losses were £34.9m (vs. £35.5m last time).
Quindell’s net gain (what it calls retained profit) shows £414.5m, which includes profit on the sale of the PSD of £485.9m. In total, Quindell now has some £524m in cash at hand; of which up to £500m is to be distributed to its long-suffering shareholders.
Looking at the continuing business, it’s clear that there are still some significant issues for management to address. The Candian rehab business PT Health, which it recently bought a majority stake in (see Quindell goes back in to Canadian rehab), saw revenue decline 10% to £12.9m. Meanwhile, the technology and property services businesses saw revenues fall by 35% to £8.7m due to Government policy and subsidy changes significantly impacting its energy efficiency related installations.
Even the supposedly high growth telematics and auto insurance technology assets only achieved £13m (vs. £13.4m). This was due to a fall in revenue from its usage based insurance software Himex in the US, and unsurprisingly, a slowdown in new software sales in the UK and Canada, due to issues concerning the Quindell brand.
Chairman Richard Rose and new CEO Indro Mukerjee are in the process of ‘creating a strong and clear value proposition and ‘go to market’ strategy’ for Quindell. However this won’t be made public till the ‘turn of the year’. In the meantime there’s just the small matter of the Serious Fraud Office (SFO) investigation, and pending legal actions (see Quindell to ‘vigorously defend’ itself) to occupy management’s attention.
Posted by John O'Brien at '09:45'
IBM’s acquisition this week of specialist Workday partner Meteorix is a good deal for all parties. IBM gets to extend its cloud services (and offer a cloud native alternative to SAP and Oracle), Meteorix gets access to a rich corporate customer base, while Workday gains access to a larger channel to market and a partner with scale.
We don’t know the cost of this win-win situation as terms of the deal were not disclosed but we do know that Meteorix, which was founded in 2011, has 200 experienced and certified Workday consultants who will help IBM build its Workday practise. The plan is to combine Meteorix’s Workday implementation skills with IBM’s “industry and transformational expertise” within which its cloud portfolio and services loom large.
What is particularly interesting is the emphasis IBM is putting on combining Workday’s HR capabilities with its analytics and cognitive computing assets. Cloud-based HR solutions are experiencing high growth overall and across all segments of the market (see Fairsail makes its presence felt, and Workday’s latest results) but there is scope for even higher growth within certain areas and HR analytics (or workforce analytics as it is also known) is one. This is one of the topics we address in our report on the HR market, which will be available to subscribers within the next few days.
Posted by Angela Eager at '09:30'
AIM-listed field service management software specialist ServicePower has performed as expected in the first half reporting respectable revenue growth, reducing losses and continued progress on the operational front with 11 new deals, a number of new strategic partnerships and continued product innovation during the period.
As presaged in its July trading update (see ServicePower returns to growth in H1), revenue increased by 13% in the first half of the year to £6.9m, of which nearly 82% was recurring and 71% was deployed on a SaaS basis. Within that, revenue from the ServiceOperations division increased by 33% to £3.2m, but ServiceScheduling revenue was flat at £3.8m as delays to some global rollouts caused a reduction in professional services billings despite 83% growth in product sales. ServiceScheduling also continues to be impacted by the move from a perpetual license to SaaS model.
We’re pleased to see that profitability is also moving in the right direction. Gross profits increased by 26% to £3.4m and operating losses lessened to £0.5m (H114: £0.9m), reflecting the timing of ServiceScheduling licence deals and £0.2m of additional IT cloud transition costs. Net cash at the end of June was £0.7m. Encouragingly, management expects a return to positive EBITDA and a significant improvement in ServicePower’s cash position in H2 2015.
Overall, ServicePower looks to have made good progress in the first half of the year and a healthy organic pipeline coupled with its newly extended partner ecosystem suggest the second half should show growth too.
Posted by Tola Sargeant at '09:13'
Redcentric, the IT managed services provider, will publish its interim results on November 9th. In today’s pre-close trading update the management team ticked some useful boxes showing real progress over the past six months, building on the good foundations laid in the previous year, see here.
Revenue and new business growth has continued strongly, with five £1m+ deals being won including the £3.5m deal for Database as a Service deal in the healthcare sector, see here. The integration of the April-acquired Calyx Managed Services is on plan and cash generation remains strong.
Redcentric is also announcing a change of CEO. The current CEO Tony Weaver, a founder of MXC Capital (which along with being the sponsor of our Little British Battler programme is a major Redcentric shareholder), will step back to an NED position. Fraser Fisher, the current Redcentric COO, will take on the Chief Executive role.
Posted by Peter Roe at '08:59'
The shift away from its legacy and low margin aggregation business is working out well for mobile marketing and digital entertainment provider InternetQ judging by its H1 performance, which saw revenue jump 10% to €71m, and PBT rise from €3.5m to €5.3m.
It is still a business of two distinct halves however. The action and growth potential is in the B2B part of the business, particularly the Minimob ad server platform where revenue ballooned by 400% to €35m. This area of the business is all about the rapidly developing app-related advertising space and the move towards app-related campaigns. InternetQ cites figures indicating this part of the market will be worth c$30bn in 2015 and will triple over the next three years, eventually making up over 70% of mobile ad spend globally. Even adjusting for vested interests, this suggests a healthy growth market, suggesting the €25m InternetQ has invested in Minimob will be money well spent.
The B2B part of the business is made up of the Akazoo digital music platform and despite delivering growth (16%), its position is not so certain. The recent €17m cash injection by the Toscafund Asset Management LLP and Penta Capital LLP led consortium and merger with R&R Music (see here) is described as enabling further development of the platform and to drive growth across new verticals, but we think it is still positioned for a sale. It is competing with brand name music providers like Spotify and Apple so it has to scale up fast and that would be easier as a separate entity, especially given the fast pace of the app-related mobile campaign sector which InternetQ needs to focus its attention on.
Posted by Angela Eager at '08:28'
Only three months after the delayed publication of full year accounts we now have the interim figures to the end of June for e-commerce marketplace blur Group. Headline figures show a decline in revenue, of 9% to US$1.67m and a 13% decline in gross profit to US$349k. EBITDA improved due to cost cutting, with losses falling by nearly a quarter, to US$4.2m.
The figures and the company’s practices have shifted as a result of changes in revenue recognition and tighter controls on the companies accessing the marketplace (to favour larger companies). A newer version of the company’s technology platform has been launched, to add more automation and re-use in Services-based ERP systems.
Readers of HotViews will be acquainted with our consistent concerns over Blur’s business model and execution (you can read here and work back). We welcome the changes in revenue recognition policy to more accurately reflect the risk within the business model. Nevertheless, the company’s results give us no immediate reason to change our views, the decline in adjusted top line revenue in the first half only adding to our pessimism. The cash reserves have halved to £12.4m over the year and the newly enlarged management team have much to do to turn the business round.
Posted by Peter Roe at '08:21'
Cloud infrastructure services player Outsourcery appears to be running out of magic, or more precisely cash. In H115 (30 June), cash had dived from £1.3m in H114 to just £300k. On top of that management admitted that the business has experienced ‘a slower than anticipated revenue build’.
The £4m loan from Vodafone made at the start of July (see here), and an extension to another £1m loan from Etive Capital Ltd, should however help to keep the magic alive for a bit longer.
In H115, the operating losses were £2.9m vs. -£3.6m last time. Revenue meanwhile, grew 20.6% to £4.1m.
Outsourcery sees itself as the UK market leader in providing Skype for Business services (formerly Microsoft Lync), via channel partners like Vodafone and Virgin Media Business. Partners like this are going to be a vital for Outsourcery to help drive down the cost of sale. Unfortunately to date, chairman Ken Olisa said the partner route has progressed a ‘slower than ideal rate’.
Outsourcery needs to find a way of conjuring up profits - and a channel partner route could in time help. As things stand today however, that is still some way off.
Posted by John O'Brien at '08:14'
The UK Business Process Services (BPS) market achieved mid-single digit growth in 2014, albeit a slower pace of growth than we have seen in recent years (see UK BPS Market Trends & Forecasts, 2014).
Strong growth in sectors like central government shared services, retail and energy & utilities, were offset by sluggish performances from suppliers in more mature markets like insurance and life and pensions.
Cost reduction remains as ever a high priority, which is great news for BPS demand at the macro level. But organisations are now looking at ways to free up spend to invest in digital technologies and services (social, mobile, analytics, cloud – and increasingly automation and artificial intelligence) in order to compete in a rapidly changing market (see TMV Evening Slidedeck - September 2015).
We now see digital technologies driving a more rapid adoption of platform-based delivery models such as platform BPO and Business Process as-a-Service (BPaaS) over the next few years, at the expense of traditional lift, shift and transform approaches. This will create both deflationary effects in outsourced operations, as well as new inflationary market opportunities, even opening up new markets to BPS —making for a time of dramatic change ahead.
Subscribers to TechMarketView’s BusinessProcessViews research stream can read the analysis and insights in our new report UK Business Process Services Market Trends & Forecasts 2015. The accompanying forecasts data and charts can be found here.
If you’re not yet a subscriber, please contact Deb Seth (firstname.lastname@example.org) who will be happy to help.
Posted by John O'Brien at '07:00'
Our fifth Public Sector Opportunities Bulletin looks at a number of opportunities that highlight how government organisations are beginning to realise the benefits of ‘Joining the Dots’, whether that is by improving their internal operations (as at the Crown Prosecution Service) or by delivering the vision of a ‘Smart Place’ (as is evident across a range of local government opportunities), or by improving insight (as at the British Council and Birmingham University). Often our view is that the potential may extend far beyond this initial, sometimes small, contract.
PublicSectorViews subscribers can download the 10-page Bulletin from today by clicking here (once logged in).
If you're unsure whether your organisation subscribes to PublicSectorViews, or you'd like details of our subscription packages, please email email@example.com and a member of our Client Services team will get back to you.
Posted by HotViews Editor at '12:27'
There are only four days left to get your application in for TechMarketView's 'Little British Battler' (LBB) programme. Applications close on Friday, so don't put it off till tomorrow, complete the simple Pre Qualification Form today by clicking here.
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To apply, just click here and fill in the Pre Qualification form. And don't forget, the deadline for registrations is this Friday, 2nd October.
Posted by HotViews Editor at '09:53'
AIM listed e-learning provider Learning Technologies Group has ambitions to be a £50m revenue business. With revenue of £8.4m in H1 (to June 30 2015) it has a long way to go but 29% revenue growth during the period (including 8% organic) shows the right trajectory. Chief executive Johnathan Satchell expects the company to reach a £50m run rate by the end of 2017 – and do it profitably.
The reborn company (formerly EPIC) has set up as a buy and build operation, aiming to provide end-to-end e-learning technologies. With several acquisitions completed, starting with a reverse takeover that enabled it to list in 2014 (see here), followed by LINE Communications and Preloaded (see here), and most recently the post period Eukleia Training which took it into GRC within the financial services sector (see here), it is scaling up rapidly. It needs to ensure it does not move too fast or too furiously in terms of the size and number of acquisitions. At the moment operating profits are wafer thin at £0.3m (vs. £0.1m in the year ago period) but the company is in profit and is not carrying debt. Reassuringly, Satchell and his team are focussed on the margins and the bottom line, not pursuing revenue growth at any cost and acquisitions have to meet strict criteria including the ability to be brought up to Learning Technologies’ margin goals.
There are a lot of positives in terms of the operations of this Brighton-born business, from a partnership with KPMG that has generated a “substantial” central government contract, to growth within its Brazilian JV following a tricky period. The US business has been sluggish but with a new VP on board it is picking up. As we said previously, Learning Technologies Group is a company that bears watching, particularly as it is intent on international growth as much as home market progress.
Posted by Angela Eager at '09:48'
After good progress in 2014, see here, where revenue advanced by 31%, the first half year for Universe Group, this developer of point-of-sale, payment and loyalty systems showed revenue flat at £8.8m, but with improved EBITDA, up 14% to £1.24m. The company needs to more than repeat last year’s excellent second half performance (with four large system roll-outs) in order to fulfil market expectations of continued revenue and profits growth. This is placing a substantial load on the contracting and deployment teams over the next eight weeks or so before the retail industry freezes any capex and system changes as Christmas approaches.
Nevertheless, the management is confident and the re-vamping of the companies on-line loyalty solution, the success of a range of new outdoor payment terminals and the successful launch of a Point-to-Point Encryption service to provide additional security have generated additional momentum. The April move to buy Spedinorcon, see here, to access expertise, customer base and pipeline in the convenience store sector should also boost second half revenue.
Universe Group has a fairly broad product base for a company of its size, but is capitalising on this as many retailers want to avoid dealing with multiple suppliers. The company is also placing great emphasis on customer service and support to develop a loyal and returning customer base as new product functionality is developed. A new back-office system is soon to be made available for customer deployment.
The company appears to have a sound strategy to provide its customers with stability and assurance in a competitive and often turbulent market. The recently strengthened management team (and potential in-fill acquisitions?) should also boost growth. Although near term prospects depend on meeting tight deadlines re contracting and deployment, we look for continued growth and improving profitability.
Posted by Peter Roe at '09:46'
AIM-listed Instem continues to benefit from buoyant conditions in the global pharmaceutical industry, particularly in the earlier phases of development in which it specialises. Results for the first half of 2015 (to end June) show a continuation of trends seen in the second half of 2014 with strong revenue and profit growth (see Pharma market recovery boosts Instem). Revenues increased by 31% to £7.5m in the first half, some 67% of which is recurring, and EBITDA was £0.9m (H114: £0.1m).
Instem entered 2015 poised for continued growth with a solid backlog of existing orders, high levels of customer retention and a growing prospect pipeline. It is, however, equally well positioned for further growth in the second half and into 2016. Growth in the pharmaceutical industry – in terms of the number of enterprises working in the sector, the number of substances undergoing research and the number of successful product launches – provides a very positive market backdrop. Instem’s 2016 and 2017 performance should also be boosted by it becoming compulsory to submit SEND regulatory data electronically.
Despite this backdrop, Instem wouldn’t be succeeding if its software wasn’t meeting a real need; helping client productivity by automating study-related processes and offering the ability to generate new knowledge by extracting and harmonising scientific information. We’re particularly interested in the new service-based solution that Instem is currently piloting. ‘KnowledgeScan’, as it’s known, is designed to leverage Instem’s big data technology to answer important questions that arise during a typical drug development programme. This intersection between healthcare, in its broadest sense, and big data represents a tremendous opportunity for SITS suppliers.
Posted by Tola Sargeant at '09:46'
Earthport, the global payments company, has reported on a year of good progress and although losses continue to mount, the momentum provided by the growing customer roll should result in both continued growth and improved profitability.
For the year to June, revenue was up 78% to £19.3m with a 90% increase in gross profit, to £15.7m. Pre-tax losses however continued to increase, by nearly 40%, to £8.7m. Like for like revenue was up 55% with transactions driving over 84% of the total. Year-end cash totalled over £30m. As forecast, Earthport moved into positive operational cash flow during the second half.
A key driver of growth is the on-boarding of large financial institutions that are using Earthport’s global network cloud for cross-border payments offering significantly lower costs than traditional providers. 22 new clients went live during the year, with 31 new clients signed up. Earthport is also expanding its value proposition with particular focus on e-commerce and international payments to play the role of a “one-stop shop” for cross-border payments execution and innovation. You can read our Hotviews on Earthport’s recent innovation here. The move into e-commerce has led to the recruitment of a broader range of companies, e.g. Stripe, as customers. The recent placing, to raise a further £26.6m, will be used to fund further geographical expansion and new product offerings as well as to strengthen the balance sheet to support client acquisition and regulatory compliance.
The Earthport management are very ambitious and see the opportunity to build a significantly larger organisation with a broad and deep geographical reach and a market-leading service portfolio. Further acquisitions and high levels of investment can be expected as the company pursues its target of accelerated growth over the medium term, which should in turn generate improving profitability.
Posted by Peter Roe at '09:44'
In the latest instalment to the on-going Quindell saga (see Quindell goes back into Canadian rehab), the embattled insurance software and services player has been issued with a 'notice of intended claim' from an unnamed law firm, which is considering commencing legal action.
The law firm is acting for a claimant group, anticipating a total value of claims against Quindell of £9m, before costs. There could also be another £9m claim from the same law firm, which has apparently been approached by other potential claimants. However these have not yet been taken forward.
There are no guarantees that legal action will actually be taken. But Quindell said it will 'vigorously defend all such claims'.
We will follow developments closely, if they unfold.
Posted by John O'Brien at '09:33'
We spoke with Netcall’s management this morning on its FY15 results, and aborted takeover by Eckoh (see Eckoh hangs up on Netcall).
But rather than becoming the acquired in a fast consolidating call centre software and business process management (BPM) space, CEO Henrik Bang sees plenty of new opportunities for Netcall to act as the consolidator. With £13.7m in cash to help fund deals Netcall should have plenty of room for manoeuvre.
The top line could certainly do with a kick start. Revenue for the year ended 30 June, creeped up 1.8% to £17.2m, meanwhile adjusted EBITDA (before all the nasty bits) increased 5% to £5.16m (2014: £4.93m). Excluding the declining non-core Movieline business, Netcall’s underlying core business grew 4%.
Bang told us that the big push in the next twelve months will be a significant increase in R&D to accelerate its cloud/SaaS revenues. R&D will increase from c£1.7m currently to c£3.5m in 2016, as Netcall brings on board more people in development and delivery and infrastructure services.
There's room for Netcall to do more in cloud/SaaS. Currently SaaS revenues are just £1.4m, and actually declined in the year due to a contract shifting to an outsourced provider. SaaS revenues should start to pick up in FY16 however thanks to some recent new deals, including a UK university and its largest to date, a £1.4m five-year cloud contact centre deal announced last month (see A win for Netcall).
Netcall is right to be making more investment in SaaS to get better visibility on revenues, and provide customers with greater flexibility and choice. But the challenge will be doing so while ensuring profitability continues heading in the right direction. Well chosen (aka profitable) acquisitions may just be the key to help Netcall smooth out this uncertainty.
Posted by John O'Brien at '09:19'
There’s no stopping Globo, the AIM listed provider of enterprise mobility management (EMM) and application development platforms and services, as it continues to soar. In H1, it achieved revenue that rose an impressive 56% to €72.4m and profits are also heading upwards with PBT up 37% to €22m and the gross margin edging up one percentage point to 59%.
In terms of markets, the US continues to fuel Globo’s growth – the region delivered 611% revenue growth to €15.2m and represents 21% of group revenue – and as we have highlighted before (see here) this is a strategically important market for the company and it is expanding its operations here accordingly. Globo is also rising on the apparently insatiable demand for mobile devices and applications and this is a trend that will not slow for some time yet. Enterprise demand is high, as indicated by the 126% increase in revenue from the GO!Enterprise product taking it to €45m, but consumer demand is more muted with CitronGo! and GO!Social growing revenue by 6% to €21.5m.
With new customers coming on board and a $1m+ contract win that has the potential to spawn further business, Globo has a lot of appeal and growth potential and is demonstrating its ability to compete successfully against US-based mobile solutions providers.
Posted by Angela Eager at '08:55'
Mid-sized management consultancy, PA Consulting, has announced that global alternative asset manager Carlyle Group is set to invest in the Group for a 51% shareholding in the company. The Group has stressed that continued employee share ownership is an important feature of the deal. The transaction, which, if everything goes to plan, should close in December this year, values PA Consulting at $1b.
PA Consulting, which has 2,500 employees worldwide, generated fee income of £360m in FY14, half of which came from the public sector. Management consultancies have been experiencing strong growth; the Management Consultancies Association (MCA) reported that in 2014 its members (representing 60% of the industry) reported growth of 8.4%. Over the same period, PA Consulting reported an increase in net fee income of 7%, driven by growth 11% for the UK. Today’s announcement highlights that the Carlyle partnership will help PA accelerate its growth plan through geographic expansion across the Americas, Europe and the Middle East.
As a result of Carlyle’s investment, we should also expect to see PA targeting the acquisition of consultant teams and smaller firms. The announcement acknowledges the difficulty that consultancies have when bringing two cultures together, but asserts that PA will retain its current culture, brand and values. Maintaining employee ownership should be an advantage. In addition, as the Financial Times highlights, Carlyle has a track record with management consultancies; in 2008 it made a large $910m investment to buy a majority stake in Booz Allen’s government consulting business. According to Forbes, by 2013, Carlyle had made $2b in realised and unrealised profits. But, as a people company, maintaining PA Consulting’s culture will be crucial if Carlyle is to prevent talent leaving the organisation. We understand this has been a particular challenge for Booz Allen since Carlyle became involved.
Posted by Georgina O'Toole at '08:49'
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IT services firms are making moves to grow their capabilities in the cyber security market; some are choosing to ‘build’, some are choosing to ‘buy’ and some are choosing to ‘partner’. Earlier this month, for example, we wrote about a new partnership between Fujitsu and Mitie to tackle the convergence between physical and cyber security (Fujitsu & Mitie: Recognising convergence in physical and cyber security). Meanwhile, over the summer Accenture acquired FusionX to add advanced cyber security capabilities (see Accenture acquires FusionX for cyber security).
Now it is the turn of Atos to make an announcement. It has announced a strategic partnership agreement with Airbus Defence and Space, a company already well known in the cyber security arena, involving a worldwide distribution channel partner agreement. It will focus on a wide range of industries including banking and insurance as well as the public sector, “notably the defence market”.
The companies will team up to work on research, development and provision of a range of products, services and solutions to battle cyber attacks and protect their customers’ infrastructure. One focus will be the development of security solutions for extended enterprises (group, subsidiaries and supply chain); the MoD has cracked down on ‘defence of the supply chain’ over the last few years, so Airbus will have had experience in this area.
Atos gained expertise in big data & cyber security through its acquisition of Bull (see Atos takes Bull by the horns). Since then it has sought to build on those capabilities, for example through investment in its big data & analytics platform (see Atos: investing in big data & analytics). In H115 (see Atos UK does it again), the strongest area of growth was ‘Big Data & Cyber Security”, which increased revenue by 4.2%. However, this still represented a tiny proportion of the business at €270m. We expect recent investments to accelerate this growth over the next couple of years.
Posted by Georgina O'Toole at '07:52'
The 11% jump in group level revenue to £20m for the six months to June 30 2015 for heritage recruitment and HR software and managed services provider Bond International cannot disguise the challenge the core software business is facing.
The HR software division only saw a 2.2% increase, while the HR and Payroll software segment saw a 6.1% decline in revenue, although this was due in part to a shift to recurring revenue. It was the outsourced HR and Payroll Services division where there was the most notable growth - 19% - taking revenue to £5.9m. This division includes the Eurowage managed payroll service, which was acquired in May 2014.
PBT was a low £0.86m vs. £0.77m in the year ago period, although operating profit was up 4% to £1.75m. The latest interim results continue the improvement seen in the year ago period (see here).
Bond International is making the shift from a predominantly software, to a combined software and services provider but has not yet worked out how to make the most of its assets. The results of a strategic review initiated in March 2015 are expected “in the near future”. The review is described as “wide ranging” and the results need to be sweeping to unify the Bond components and take the business forward.
Posted by Angela Eager at '09:31'
Those who attended the TechMarketView Annual Presentation & Dinner on 9th September will remember, in our presentation on the UK public sector software and IT services (SITS) market, we emphasised the importance of data to enable civil service reform (see TMV Evening Slide Deck). Therefore, it’s worthy of note that, on Friday, the Government Digital Service (GDS) blogged about ‘What’s happening with data’. GDS has three interconnected areas of focus: digital, technology and data.
Back in March 2015, Mike Bracken was appointed Chief Digital Officer (CDO) (see Mike Bracken was appointed Government CDO). But, in August Bracken announced his departure from Whitehall (see Mike Bracken: Shock departure from GDS). Though there has been no decision on the CDO role, the latest GDS blog announces the appointment of Paul Maltby (pictured) as GDS’ Director of Data, leading the data workstream. Maltby had been working as Director of Open Data and Government Innovation in the Cabinet Office since 2013.
Friday’s blog supports or view that: “getting data right is a fundamental part of the next phase of digital reform”. It also, importantly, acknowledges that, to date, GDS has not communicated enough about its work around data or its plans for the future and commits to getting better at this going forwards. This is very important, as suppliers have become increasingly confused about the role of GDS and, for example, the buy vs. build argument when it comes to the Government-as-a-Platform initiative. The latest blog highlights “we’re not trying to build a data empire at GDS” but acknowledges the need for policy, governance and controls at the centre. Also interesting is Maltby’s statement on his twitter account that “the link beyond Whitehall is crucial”. This is music to our ears after Bracken has previously said that local government was outside his remit.
Posted by Georgina O'Toole at '09:20'
At the interim results in June, see here, the eServGlobal management were talking up the prospects for the second half given cost savings, their new standardised PayMobile 3 platform and a strong pipeline from new and existing customers. The company clearly set expectations for revenue and EBITDA at least equal to those of the previous year.
Today’s update however warns of delays in signing key opportunities and cost overruns, putting full year revenue and EBITDA expectations in substantial jeopardy. More details will be available nearer the year end but this indicates another significant setback in a troubled recent history, marked by a drumbeat of major management departures (see here and work back).
To make matters worse, the contract delays are pressuring cash flow and the Board is looking to raise £2.5m soon and up to a total of £5m by April 2016 (This is in the context of a £30m market capitalisation). The second tranche of money is sought to enable eServGlobal to maintain its 35% holding in HomeSend, the consortium now led by MasterCard enabling cross-border remittances. HomeSend has more than trebled volumes since last year and has increased the number of “corridors” to connect sending and receiving countries. The consortium is now looking to raise £10m to fund a PCI DSS-compliant payments functionality, extending its value proposition.
eServGlobal is in talks with a major shareholder regarding a possible loan to raise the necessary funds which might be just as well as the share price performance (down 80% since its February 2014 peak) shows that most shareholders have lost patience.
Posted by Peter Roe at '09:02'
After Accenture’s stellar results for FY15 last week (see Accenture beats FY15 target; nears double-digit organic growth), we’ve now taken a deeper dive into the detail and considered management comments, to assess what are the significant factors ahead for Accenture in FY16.
Acquisitions have of course played an increasingly important role in the past twelve to eighteen months, changing Accenture's focus onto higher growth digital technologies and services. However these are also helping drive growth back into the core/traditional business.
TechMarketView subscription research clients can read the analysis and implications in UKHotViewsExtra in Accenture FY15 update: Focus shifting to Digital.
Posted by John O'Brien at '08:54'
ONLY 5 DAYS TO GO - APPLY FOR LBB7 NOW!
We're looking for 12 outstanding SMEs to join us in London on Thursday 12th November 2015 and become part of TechMarketView's 'Little British Battler' (LBB) programme.
Over 70 aspiring UK tech growth companies have already joined the ranks of the TechMarketView Little British Battler brigade and yours could be next. We’ll be holding the seventh TechMarketView Little British Battler day (LBB7) on Thursday 12th November 2015 in London.
How to apply...
Posted by HotViews Editor at '08:30'
AIM-listed traffic management software and services provider Tracsis has completed another acquisition since snapping up mobile analytics provider Citi Logik earlier this month (see here).
This time Tracsis has acquired one of its partners, SEP Ltd and SEP Events Ltd (SEP), which provides traffic planning and management services for the UK events industry, such as Royal Ascot, T in the Park, The Grand National, and the Wings and Wheels air show.
Tracsis is paying up to £2.6m in cash and shares for SEP, which had revenue of £4m in FY14, and pre-tax profits of £300k. SEP employs 30 permanent staff who will become part of Tracsis, but it also deploys ‘several thousand contract workers’ at its events throughout the year. So SEP also has a significant resourcing business to support.
This makes SEP an interesting bolt on for Tracsis, which plays to a number of our themes in ‘Joining the Dots’ via its data analytics and ‘smart’ transport spaces, with its three divisions – one focused on software and consulting (based around its optimisation software); second on remote condition monitoring (for real-time preventative infrastructure maintenance); and the third on traffic and data services (collation and analytics in traffic and pedestrian rich environments).
SEP will become part of Tracsis’ Traffic & Data Services division where it sees strong cross sell and upsell opportunities ‘in the fullness of time’. So it’s clearly a speculative play at this stage. But with SEP’s large resourcing demands, there should be opportunities for Tracsis to drive efficiencies and performance improvements in the near term.
Posted by John O'Brien at '08:12'
The total value of venture capital investment in UK and Irish tech companies reached a record level of £669m in Q2, up 8% over the previous quarter and more than double the same period in 2014. London based companies received the highest level of investment with 72 companies attracting 66% of the funds in the quarter, according to latest data from corporate finance firm, Ascendant.
A total of 29 UK/Irish software companies raised £83m in VC funding last quarter, 53% higher by number and 77% by value yoy. However, this was dwarfed by investment in the Internet Services sector in which 56 companies received total funding of £459m. In total, £669m was invested in 117 deals over £500k in UK/Irish tech companies, 110% higher by value and 41% higher by volume compared to Q2 2014. Ascendant CEO, Stuart McKnight, expects total funding for the year to come in at around £2.2bn, more than 50% higher than in 2014.
Subscribers to TechMarketView's Foundation Service can read our full analysis with details of the deals in our latest IndustryViews report, IndustryViews Venture Capital Q2 2015, which is available for download from today here.
If you don't yet subscribe to the Foundation Service and you'd like details of our Subscription Packages please email Deb Seth in our Client Services team.
Posted by HotViews Editor at '08:00'
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