A letter to shareholders of New Jersey headquartered, NASDAQ-listed – but very much India-centric – IGATE sheds some interesting light on its agreed $48 per share cash acquisition by the North American subsidiary of Paris-headquartered Capgemini (see Capgemini buys IGATE for $4bn).
It appears that Capgemini first approached private equity firm Apax (IGATE’s largest shareholder) about a possible deal last November, at which time IGATE’s shares were trading at around $34-38. The potential bid was aired at an IGATE board meeting in January. Capgemini CEO Paul Hermelin met with IGATE in February, shortly after which Capgemini made a conditional nonbinding offer for IGATE at $44.60-48.30 per share.
The IGATE board subsequently appointed investment bank BofA Merrill Lynch to advise on the transaction. BofA believed that there were two other multinational information technology firms (which they referred to as “Party A” and “Party B”) that might reasonably be interested in acquiring IGATE, "though the current valuation could pose a challenge" for potential acquirers. On 6th March the IGATE board authorised BofA to contact Party A and Party B but not other potential bidders because of the risk of leaks. Both Parties indicated interest but were worried about IGATE’s share price, which by then had reached $44 (quelle coincidence!). In 12th March, Capgemini submitted a further indicative bid to IGATE at $46-48 per share.
On 17th March, Party B bowed out on price, but Party A was still in the running and a meeting was subsequently arranged between its management and IGATE CEO Ashok Vemuri for 13th April, but no offer was forthcoming. Meanwhile the IGATE board directed its advisors to send a draft merger agreement to Capgemini.
The media caught wind of the potential deal with Capgemini around the time of the meeting, and the story hit the press on 17th April. That day Party A also bowed out. At the time, IGATE’s share price was $44.45.
A few days later, BofA advised of a new potential bidder (you guessed, “Party C”) who was mooting a cash and share deal as it was smaller than IGATE and had never done a deal of that size before. At the same time Capgemini confirmed its cash offer at $48 per share. The IGATE board decided not to explore the Party C interest any further, and the deal with Capgemini was agreed on 25th April.
Subscribers to the TechMarketView Foundation Service can read more on the Capgemini/IGATE deal in a bumper edition of OffshoreViews out next week.
Posted by Anthony Miller at '09:06'
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Monese, a FinTech start-up has secured some US$1.8m from Seedcamp, Spotify’s Shakil Khan and other angel investors.
A look at Monese’s website shows that they are offering bank accounts to EU residents over the mobile via a downloadable app (there are no branches). Accounts are opened in minutes. Charges consist of a per transaction fee (with a number of free transactions allowed per month). The company is regulated by the FCA and keeps customer money with European banks. Monese is aiming at the market for expats and immigrants who have difficulty in getting bank accounts because of residency requirements and poor credit ratings. Monese launches in Summer 2015.
This is an interesting model, leveraging the increased penetration of smartphones and addressing a specific market niche. It also points out another cost of failure of the current banking providers. Success for banks going forward will be driven by the number and quality of the accounts they hold. With the growth of the number of workers who move between countries, be they expats or immigrants, they could be missing out on a potentially lucrative customer base by being hidebound in their approach.
Posted by Peter Roe at '08:34'
Telecity’s proposed merger with Netherlands-headquartered InterXion is now formally off the table following an agreed offer for the former by Equinix. It was back in February that Telecity first announced its interest in InterXion and in March that it announced a definitive agreement to merge. However, US-based Equinix didn’t want to lose its chance to expand into Europe and in early May stepped in with a possible offer for Telecity of £11.45 per share. Telecity has now formally accepted the cash and share offer, which values the company at c£2.35bn and represents a premium of 34.9% on Telecity’s share price on the 10 February (the last business day before its proposed merger with InterXion). TCY’s shares closed last night at £10.90, giving it a market cap of £2.21bn.
John Hughes, Executive Chairman of the Board of Telecity, will join the Board of Equinix on completion of the transaction. Hughes said the deal would give Telecity customers "new global opportunities for their connected data centre requirements”.
We are not surprised there have been a few twists and turns in this tale. Scale (in terms of facilities, capabilities and geographical coverage) is of course paramount for data centre providers, and serious opportunities to improve that must not be overlooked. For Equinix, the addition of Telecity extends its presence in Europe and increases its cloud capabilities.
For comparison, Equinix generated revenue of $2.44bn (+14%) in FY14, versus Telecity’s revenue of £348.7m (+9.2%). For the full year, Telecity is forecasting revenue growth of 8%-10% on an organic currency neutral basis.
Posted by Kate Hanaghan at '08:28'
We recently met with Bell Integration (formerly known as Bell Microsystems), which is 16 years old and headquartered in Portsmouth. For 13 of those years, the company (which is privately owned and debt free) was a pure reseller (e.g. Oracle, IBM, Veritas, VMware).
However, under current CEO, Nick Petheram, (ex-Morse and most recently UK MD at 2e2 – leaving 15 months before the infamous ‘meltdown’) the last three years have seen a notable shift to IT services – with 2014 being a pivotal year of change. In that period, staff numbers have accelerated from c50 to just over 200. Likewise, the balance of revenue streams has changed. By the end of FY14, revenue was £72m with a significant portion (30%) coming from services. Key to this evolution was Bell’s take-on of 40 employees from beleaguered data centre and cloud integrator GlassHouse Technologies (about 10 customers subsequently came over to Bell). Nearly 30 2e2 employees (with specialist skills in asset management and mobility) also moved over to Bell – again boosting staff numbers and services capabilities.
Bell Integration has grown a significant capability in consultancy to help customers modernise and optimise their IT systems. This is complemented by its managed services offering, which has grown from a small base by 500% organically in the past three years.
Furthermore, the objective is for the transformation to continue. Bell aims to continue the growth in managed and consulting services, with corresponding growth in headcount to be at 300-400 staff in 18 months’ time (via recruitment, acquisition and TUPE). The company hopes to increase the services portion substantially to 50% and as a result push the EBIT margin from c3% in 2015 to c6-7% by 2018.
Bell’s objectives are very ambitious, and any company undertaking such a transformative change must take extreme care to ensure business operations keep pace (2e2’s downfall) and that customers are fully aware of how offerings are evolving. Bell has benefited from the consultancy specialists it has on-boarded alongside its ability to tease out more spend from in-house IT departments. The coming months will be very interesting, not least because we could potentially see the firm hit that magic £100m milestone.
Posted by Kate Hanaghan at '08:21'
AIM-listed GRC (governance, risk & compliance) SaaS developer, Access Intelligence, has confirmed it is in discussions to acquire two businesses from GTCR Canyon UK Investments, whose acquisition of Gorkana is currently under investigation by the UK Competition & Markets Authority (CMA) in relation to competition in the media contact database market. The two businesses, Cision UK and Vocus UK, appear to be media industry software and database suppliers which, on the face of it, look and odd match for a GRC player.
Access has been struggling a bit of late (see Access Intelligence enters another key phase) and has recently divested a non-core infrastructure services business (see Willow changes hands from Access to K3). I’m sure all will be revealed in the fullness of time so that we can be assured that plots are not getting lost (especially mine!).
Posted by Anthony Miller at '08:05'
Digital transformation and the digital business are top of mind for suppliers and enterprises. But there is a gap to be bridged between market perception and reality. The latest report from the ESASViews research stream highlights the key challenges and directions in this section of the UK market.
Making the most of the opportunities that come from digital transformation requires concentrated effort on the four ‘C’s” - convergence, co-ordination, complexity management and capacity for change. In our view, the challenge of aligning these factors is the primary reason for the digital gap. But the gap can be bridged through a focus on highly targeted, outcome-oriented solutions that can be delivered at speed. With immature business cases and return on investment proof points still a work in progress, a particular challenge for suppliers is resetting expectations—and organisational/business structures—around small, serial projects. At the same time, suppliers need to be able to bridge digital and legacy estates which means meshing asset-intense traditional approaches with emerging skills and techniques. In fact, success in the era of digital transformation does not rest on building one bridge but several interconnecting structures.
Eligible subscribers can download the ‘Mind the Digital Gap’ report here. As always, Deborah Seth (firstname.lastname@example.org) is on hand if you’re not a subscriber but would like to become one to access this and the many other gems TechMarketView has to offer.
Posted by Angela Eager at '10:28'
FinTech company Kantox has just raised US$11m from its existing Private Equity backers in a Series B funding round. Kantox customers can trade on the Foreign Exchange markets and manage their currency exposure without paying the large commissions charged by the banks. The Kantox platform matches buyers and sellers with the company taking a small commission on the deal.
Kantox is one of several companies offering peer-to-peer FX deals, with others such as TransferWise and CurrencyFair having raised money recently. With the banks still holding 99% of the market [for retail FX transactions] according to Kantox’s ex-Deloitte CEO and co-founder Philippe Gelis, there is plenty of opportunity for such start-ups. Gelis is aiming at the SME and mid-cap corporates who do not have the resources or machinery to manage their forex activity, quoting an 80% saving on the rates charged by banks and FX brokers.
Success will depend, as ever in this market, on getting scale and deal flow. Kantox may have a bit of an advantage here due to its international senior management team and the connections of its Barcelona-based development. Time will tell.
Posted by Peter Roe at '09:57'
Full year results from PayPoint plc, the broadly based payment services provider, showed revenue up 3% to £218.5m and pre-tax profits up 7.7% to £49.6m. Net revenue, after deducting pass-through costs increased strongly, by 8.3% and gross margins were more than two percentage points higher at 48.1%.
PayPoint has a network of 28,300 in-store terminals in the UK and Ireland (with 9,200 in Romania), enabling mobile top-ups, prepaid energy purchase, bill payments and a wide range of other services. Net revenue from facilitating bill payments was up by 9% (due mainly to growth in Romania) and faster growth was seen in other Retail Services, with net revenue up 20% (21% of Group net revenue). Revenue from the company’s Collect+ jv with Yodel was up 35%.
The company has decided to sell its Mobile and Online business which handles payments for parking via instore terminal or mobile (they have also launched an Apple Watch app) and the aggregation of card payments for a wide range of retail companies. This business accounted for 12% of net revenue and had declined by 4% over the year. The management cite the need for greater pace and scale as its reasons for divesting.
Focus will be increased on the retail payments and services business with further international expansion being a strategic option. PayPoint will also be offering retailers a tablet-based Point-of-Sale solution to leverage the in-store connectivity and the company’s installed base.
PayPoint ended 2014 with over £40m cash, with extra to be expected from the Mobile and Online sale. The company provides easy access to a range of services for a broad segment of the population and although not glamorous, and facing increased competition from other payment methods, we can expect sustained progress in (net) revenue and profit.
Posted by Peter Roe at '09:53'
The dramatic progress of Optimal Payments is intrinsically tied to a series of acquisitions; in 2011 NEOVIA Financial bought a Montreal-based payments processor to form Optimal Payments, adding scale to NEOVIA’s NETELLER stored value business and the NETBANX payments processing operation. In July 2014 Optimal bought Meritus Payments Solutions with its payments platform and client base (for US$210m) to accelerate the Group’s progress in the US. Then in March 2015, Optimal bought Skrill in a €1.1bn deal, see here, to build a global payment and digital wallet provider with a wide portfolio of payments services and a strong position in the online gambling market. Skrill has also recently bought Ukash, to enhance its range of secure prepaid payment solutions.
So today’s announcement of yet another deal is not really a surprise. Optimal Payments is buying another Canadian company, this time FANS Entertainment Inc., a provider of a platform to support merchandising in a venue or stadium, tracking the behaviour of spectators to present and facilitate marketing offers. No financial details were given.
All well and good. This is an interesting market opportunity and may well complement other areas of the Optimal Group. But management must avoid having too many irons in the fire and being diverted when it should be focused on getting the most out of Skrill, following a deal which has doubled the size of the business. Shareholders will be better served by getting that right than by pursuing the many niche opportunities available across the fragmented payments industry.
Posted by Peter Roe at '09:48'
London-based IT Lab has acquired Manchester-based JMC IT. JMC provides IT support, infrastructure services, software and integration and ERP services. IT Lab also provides IT support in addition to consultancy and cloud-related services (consulting, hosting and cloud-based applications such as Office 365). The company says it was JMC’s ERP and software integration services in particular that represented “the perfect complement” to its existing portfolio.
The most recent figures we have seen show that IT Lab had revenue of £9.3m (year to end September 2013 and +12% on FY12) while JMC had revenue of £11m (year to end June 2014 and +16% on FY13). However, IT Lab says the newly combined entity will have turnover approaching £30m - demonstrating there has been further organic growth in the past year or so. Between them, the companies will have 300 employees and c750 clients. The target market is small and mid-sized organisations.
Revenue of around the £10m mark is a bit of a landmark figure for small IT services providers. It can be incredibly difficult to subsequently make the step up to £20m and beyond by organic means alone. The acquisition therefore makes sense for both parties and there should be good opportunities for cross-sale into each other’s customer bases.
Terms of the deal were not disclosed.
Posted by Kate Hanaghan at '09:41'
London-based workflow management start-up Lystable has added a formidable name to its list of backers in the person of PayPal co-founder Peter Thiel, whose VC firm Valar Ventures has just led a $1.5m funding round for the company. Lystable was founded barely 6 months ago by ex-Google designer Peter Johnston with $500k in seed funding from Mark Evans of Balderton Capital, Richard Fearn and Courtney Grant.
Lystable’s focus is in managing freelancers, agencies and other services suppliers, which seems more like a specialised contact management play than ‘true’ workflow management, so at first blush I’m not sure you couldn’t do much the same with a halfway decent CRM product. But maybe I’m missing the point (Lystable’s website is neither use nor ornament).
Posted by Anthony Miller at '09:24'
There’s a lot of faith being placed – literally – in IP2IPO-backed, ‘analytics-as-a-service’ firm Actual Experience, which has just raised some £16m gross in a fairly dilutive placing. The new shares were issued at 190p, nearly 13% discount to last close, and constitute 22% of the expanded capital. Founders Dave Page (CEO) and Prof. Jonathan Pitts (CSO) gain £300k from the placing.
Actual Experience listed on AIM back in February 2014 at 54.5p (see It’s the experience, Actually) with revenues of £440k for the 14 months to Sept. 2013. The half-time score this year (to 31st March) showed revenues at £329k but with a £1m operating loss (see Lessons in Innocence and Actual Experience).
Actual Experience, which was a spin out from Queen Mary’s University of London, plays in the ‘digital supply chain management’ space and so has a clear market focus rather than just being a ‘one size fits all’ analytics play. It’s encouraging to see its backers putting a fairly handsome sum into the business (they raised £4m in Nov. 2013) so now it really is down to the management team to justify this faith.
Posted by Anthony Miller at '08:41'
Having reported in April that its two operating divisions can move ahead “without further significant restructuring or re-direction”, Parity chairman Philip Swinstead advised at yesterday’s AGM that they are “now looking at the overall Group cost structure to maximise efficiency”. The aim is still to “move towards becoming a cash generative business by year end.”
Parity also announced that Group FD Alastair Woolley had stepped down to pursue the proverbial ‘other interests’. Interim CFO career professional Paul Bergin steps into the breach pro tem.
By now just about everyone should know my views on Parity’s ‘business of two halves’ (actually more than two – see Parity - time to ditch the digital media dream). They have a well respected and successful IT recruitment business (see Parity set for slice of £40m Scotland staffing frameworks) running side-by-side with a multi-part ‘digital media’ unit which I believe detracts from the value of the enterprise.
We wait to hear more with the interims report in September.
Posted by Anthony Miller at '07:56'
It was not so much the Q1 FY16 numbers themselves that were notable from SaaS HR/financials specialist Workday but market reaction which drove the share price down by as much as 10%, pointing to unease on the part of investors who are banking on growth to counter the lack of current profits.
Although performance was solid with revenue up 57% yoy to $251m which was ahead of market estimates, as was the per share loss, billings growth (31%) was below expectations (of 35%) and forward guidance was only in line with expectations. While seasonality has played its part there are deeper factors at work, from the long sales cycles associated with back office application sales – particularly financials - to increased competition from SaaS offerings from traditional software providers. Workday CEO Aneel Bhusri called out Oracle, commenting that 'Oracle has their act together better than SAP does.” Indeed, Oracle previously put Workday into its competitive sights, deeming it to be a major threat to new business opportunities (see here). We know that the competitive lines in the market are shifting, what we are starting to see is the SaaS pure plays facing greater competition from the traditional providers.
Workday and its SaaS peers are not about to lose their market dominance. Workday’s annual run rate has passed the $1bn milestone, and other positives are customers committing to longer contracts and that churn rates seem to be one of the lowest in the sector. Their challenges do point to rising pressure from the traditionalists however (see Oracle poking the cloud in Q3 and SAP goes ‘cloud first’ with S/4HANA). The path for the SaaS pure plays is going to become harder - and the days of routinely and massively exceeding market expectations may be coming to an end which could drive a shift to more realistic valuations.
Posted by Angela Eager at '18:25'
EMC has added to its ‘federation’ of businesses with the acquisition of Virtustream for $1.2bn. Virtustream will form EMC’s new managed cloud business and will play a key role in helping EMC customers move their applications (including SAP) into cloud environments. Virtustream can count some of the world’s best-known brands as its customers, including Coca-Cola, Heinz, Kawasaki and Lexmark. The company will operate as a separate EMC business that will report directly to EMC CEO, Joe Tucci.
We consider this to be a very shrewd buy for EMC as it significantly builds on its hybrid cloud capabilities. Currently, through its “Federation Enterprise Hybrid Cloud Solution” EMC can provide customers with an on-premise private cloud that can link to public cloud services (such as its own VMware vCloud Air). With the addition of Virtustream, EMC extends that hybrid capability, and it will now be able to manage cloud environments whether they are on-premise or off-premise. And the point of this? The Holy Grail of cloud: enabling customers to move their entire application portfolio into the cloud.
Being able to create and manage the appropriate blend of on-premise and off-premise environments is one of the key enablers for organisations that want to move applications from a legacy environment into the cloud. However, while Virtustream gives EMC the technical capability to do this, it is not a magic wand. Many organisations remain committed to legacy environments for various internal reasons – e.g. they don’t feel ready to address the complexities of migration, or they’re concerned about the risks of migration. EMC’s challenge is to identify potential customers that really are committed to transitioning large swathes of their application estate into the cloud.
Posted by Kate Hanaghan at '10:01'
Less than a week ago, Daisy announced it was in “advanced talks” to buy Phoenix IT, and today the companies confirmed the transaction will go ahead. As previously outlined, Phoenix shareholders will receive 160p in cash per share – a 24% premium on the closing share price the day before the original offer was made.
Daisy’s 'bread and butter' business is in the network/telecoms space (predominantly in the mid-market) and acquisitions have formed a key part of its evolution over the years. In February it acquired Damovo to add to its IT services capabilities. However, the Phoenix acquisition provides a more extensive range of cross-sale and growth opportunities.
Furthermore, the appointment of Neil Muller as Daisy's CEO now makes even more sense (as we alluded to here). Muller played a key role in building Computacenter’s managed services business – and indeed, contributed heavily to CCC’s services successes last year. We believe that the M&A experience of Daisy's founder, Matthew Riley, alongside Muller’s services background could prove to be a very successful combination. The objective is to position Daisy as a provider of converged services. The challenge is to transform the company's financial performance, which has struggled under the weight of underperforming areas in its legacy business (see Daisy flatlines despite M&A spree).
Posted by Kate Hanaghan at '09:54'
London-based white-label, in-app printing SDK developer PRYYNT (why, why?) has raised $2m in seed funding from undisclosed investors. Media reports moot a valuation of $20m for the company which was founded in July 2013 by 29 year old veteran entrepreneur, James Washer, who also founded Squaresnaps.com (print your Instagram pics) and The Digital Signage Agency (since acquired).
There are plenty of services around to print Instagram photos, but I suspect there are few that provide such services with a standardised toolkit to let them do the printing in-app. If so - and of course if they can monetise it - PRYYNT could be a winner.
Posted by Anthony Miller at '09:10'
Today’s AGM statement from SQS, the supplier of software testing services, reaffirms the positive tone sounded in the full year results, see here, and in the statement accompanying the recent Trissential acquisition, reported here.
The company continues to make progress in two strategic directions; firstly in boosting managed services (increasing it from 45% of group revenues as shown in 2014 revenue) where new business has been written in the US with a hospitality chain and a financial services company. The US successes illustrate the second strategic objective, of expansion in that region where SQS’s delivery resources have been quadrupled by the Trissential buy. A further acquisition, of Italian Bit Media S.p.A, has boosted presence in Europe, particularly in Italian government and tax authority markets.
Market growth continues to be reinforced as companies generally increase the use of mobile and online channels and as the need for lower costs and faster time to market convince management to use specialist suppliers for testing. SQS is in a strong position to benefit from these trends and its management team talk of an encouraging start to the year, notwithstanding competition and some price pressure.
Posted by Peter Roe at '08:44'
After a 62% increase in end user spending on digital content over the company's platform in 2014, today’s AGM statement from Bango reports a further increase in the run rate. This gives management confidence in the 100%+ level for the current year as forecast with the company’s full year results, reported here.
Bango is a leading provider of Direct Carrier Billing (where payment for digital content is collected by mobile network operators via a subscriber’s bill). A key metric for management (and shareholders) is the number of activations as an MNO’s subscriber base is linked through Bango’s platform to the likes of Google Play, amazonappstore or Samsung’s GALAXY Apps. 15 new activations have been enabled this year from the year end’s pipeline of 30, adding to the year end total of over 140. More are to follow in the first half. Recent activations have included four in Latin America, building Bango’s momentum in this region.
We would expect the forecast revenue advance to positively impact the bottom line as the platform and the wider operation scales. If so we can see that shareholder patience will increasingly be rewarded.
Posted by Peter Roe at '08:38'
It’s been nearly a year since Mumbai-headquartered mid-tier offshore services firm Mastek announced its joint venture with the UK’s Law Society (see Mastek aims to soar with legal eagles) and it’s just gone live.
The conveyancing portal, called Veyo, will be available both for professionals handling conveyancing transactions and by we punters who will then be able – it seems for the first time – to track progress of our deal online or on a tablet. Conveyancers will pay a £50 p.u.p.a. admin charge and £20 per transaction. Surely anything that gives buyers and sellers more transparency on property sales and purchases has to be a good thing!
Mastek is in the process of hiving off its US software-led insurance business (see Mastek to become two companies of one half!) leaving the core offshore IT services business almost fully UK-focused. As such, the company is putting more wellie behinds its UK public sector ambitions. Subscribers to the TechMarketView PublicSectorViews research stream can read more in our recent note Mastek: Targeting UK Public Sector Business.
Posted by Anthony Miller at '08:29'
Bedford Borough Council has become the latest local authority to choose Agilisys to help it transform its digital customer services. Bedford joins a growing list of Agilisys Digital customers including Thurrock (which has just renewed its contract and extended the platform to Adult Social Care services) and Barking and Dagenham, which we understand has also just extended its contract for another five years. In fact, Agilisys has already had notable success across the business in 2015, particularly when it comes to extending and expanding existing deals (see also Agilisys: North Somerset extended and expanded and Agilisys extends partnership with City of London Corporation).
Bedford has selected Agilisys’ Digital and Engage platforms, initially for Council Tax and Benefits but with the option to roll them out to other service areas in the future. Engage will be used to track visitors’ needs as they use the website, and then serve up the most relevant content based on this knowledge.
Like other Councils, Bedford has already done a lot of work on ‘channel shift’ but it recognises that it needs to take things up a gear with the help of a partner if it’s to significantly improve the citizen’s online experience and, importantly, reduce corporate costs. That’s where Agilisys steps in for Bedford, but other SITS suppliers are also reporting high levels of activity in the digital transformation space in local government (see for example Civica: strong UK growth and new BPS win), making it one of the hotter areas of the sector at the moment.
Posted by Tola Sargeant at '08:00'
While most of its India-centric peers found their revenues going backwards last quarter (to 31st March), Mumbai-based IT services firm Tech Mahindra raced over the FY finish line with 6.5% quarterly sequential revenue growth, taking the top line for the year to $3.69bn, 19% higher than FY14. However, operating margins suffered, losing a hefty 5 points qoq to 15.1%, 6 points down yoy and the lowest among peers. FY15 operating margins at 18.3% were nearly 4 points lower than the prior year..
There’s no sign yet of the January acquisition of Swiss financial services consultancy SOFGEN moving the needle (see here). In fact, revenues in Tech Mahindra’s BFSI sector fell a tad in the quarter, but it’s still early days. Meanwhile, Tech Mahindra’s legacy Telecoms sector business continues to gain supremacy, generating over 55% of the quarter’s revenues, the highest level since Tech Mahindra merged in the Satyam business.
Posted by Anthony Miller at '18:47'
As readers know, I’ve been running a crusade over many years to get more entry-level jobs in tech created in the UK – be they for graduates, A levels, GCSEs or, indeed, no qualifications at all. The skills shortage, if anything, is getting worse as the economy recovers and demand increases. The Science Council estimates 1m additional workers with digital skills required by 2020 and City & Guilds says 75% of all employers are facing major problems in finding new staff with the right skills.
That’s why I am so keen to publish ‘good news’ on the jobs front from our major companies/clients. Tomorrow, Hewlett Packard Enterprise Services, Infrastructure Technology Outsourcing (ITO) business will be holding an open day in Glasgow with the aim of adding some 250 people with a variety of skills and expertise, including an additional 165 graduates in Erskine over the next four months. That’s on top of HP’s ever growing apprenticeship programme in the UK.
With the new Conservative Government likely to take a much stronger line on granting visas to non-EU IT workers, ‘growing our own’ becomes even more important. Indeed, as I have said countless times, we are in this skills shortage ‘pickle’ precisely because we haven’t addressed the entry-level jobs situation before. But, with the best will in the world, it will take 5+ years before this change in attitudes starts to bite. But, if we don’t start we will never get there.
Posted by Richard Holway at '12:53'
Half-year results from EDP reflect how the loss of just one customer can impact a small supplier. For the six months to the end of March 2015, the company saw revenue drop c£100k year-on-year to £2.5m. This was due to one of its customers acquiring a competitor software business and subsequently moving to that business's product. Indeed, excluding the effect of this, total revenue would have been £50k up on last year.
EDP is undertaking a cost-reduction programme that should see it achieve annual savings of £200k. £100k was recognised during the first half and it shows in the operating margin, which was 6.3% - up from 5.2% in H1 last year and almost back at the FY14 level of 6.4%.
The company is aiming to move more customers to its software hosting service and therefore a subscription payment model. In H1 steady progress was made with hosting now accounting for 50% of total revenue – up from 49%; the shift to hosted services has been particularly notable with its Vecta CRM and business intelligence product.
It’s encouraging to see an increase in EDP’s R&D expenditure (up from £460k to £540k) because small players can sometimes find themselves falling by the wayside due to a lack of funding in future growth. Indeed, all software and IT services players should take note: pressure on pricing in many areas of the market (brought on by cloud and increased automation, for example), means suppliers must develop a very clear vision for their evolution and an even clearer plan of how they will get there.
EDP is not setting the world on fire with its financial performance, but given some of the pressures it is facing things could have been worse.
Posted by Kate Hanaghan at '09:45'
The third annual TechMarketView Presentation & Dinner, sponsored by Wells Fargo Capital Finance and Avnet Technology Solutions, is to be held on 9 September 2015 in London at RIBA, Portland Place from 6pm onwards. We’d love to see you there. The event was completely sold out last year so don’t leave it until the last minute – book your place now!
The theme for this year’s event mirrors TechMarketView’s overarching research theme for 2015 - ‘Joining the Dots’. Top of the agenda will be the opportunities and challenges for technology suppliers as the number of ‘things’, datasets and systems that need to be joined together grows.
During the evening TechMarketView’s analyst team, topped and tailed by Chairman Richard Holway MBE and Managing Partner Anthony Miller, present their latest views on the UK software, IT services and business process services markets. TechMarketView’s research directors will highlight emerging trends, hot new opportunities, growing threats and suppliers worth watching, in their respective fields.
The analyst presentations will be preceded by welcome drinks and followed by a pre-dinner drinks reception and then a sumptuous three course dinner. The event, which is attended by ‘the great and the good’ in UK tech, has been a sell-out for the last two years and the networking opportunities are second to none.
Tickets for the event cost £395+VAT per person for TechMarketView subscription clients and £495+VAT for everyone else. There are also some tables of 10 available on a first come, first served basis.
To reserve your place at this year’s TechMarketView Presentation & Dinner click here or contact Tina Compton (Tel: 020 7331 2011) at techUK, who is organising the event for us.
The TechMarketView Presentation & Dinner 2015 is sponsored by
Posted by HotViews Editor at '09:44'
Publishing Technology plc (AIM: PTO), the provider of software and services into the Publishing sector reported pre-tax losses of £4m on £14.4m revenues for 2014. Revenues fell 15% on the previous year, when profits were £0.7m. A major contract delay pushed revenue into 2015, as forewarned in January. Key to the results however is the root and branch review of the company’s operations after a new CEO was installed in April 2014.
The full year statement is worth a read as it outlines many of the problems that software companies can find themselves in, which Publishing Technology apparently did; lack of skills, insufficient resources allocated to key projects, too high a degree of customisation, poor management of customers and their expectations, etc., etc.
Packaged solutions and platform development, greater market reach through value-added resellers, better utilisation of domain expertise and improved sales management are among the long list of fixes that the new CEO and several top management recruits are putting in place to turn the company around. Central will also be the ongoing cash generation and upsell opportunities provided by the installed base of the company’s long-established Vista software.
The company is raising £10m, via a placing of 7.5m shares and an offer, of a further 830k shares to existing shareholders, at 120p, a 19% discount to Friday’s closing price. This money will be used to pay down debt and to fund the proposed transformation of the business.
It is obviously too early to say whether the new management’s plans will work in a very competitive and dynamic market. However, the CEO’s underlying logic appears sound and is the product of significant industry experience, so it will make for interesting watching, and potentially a worthwhile case study for them to publish in due course.
Posted by Peter Roe at '09:00'
Boston-based life sciences technology group PureTech Health is seeking a $160m IPO on the London Stock Exchange next month, according to the Financial Times. If successful, the listing would be something of a coup for London. PureTech Health is backed by some high profile figures from life sciences and technology - including the former CEO of French pharmaceutical company Sanofi, Chris Viebhacher, Nobel laureate Robert Horitz and Sony’s Joichi Ito - and would usually be expected to list on New York’s Nasdaq. But co-founder and CEO Daphne Zohar told the FT that the UK was the best place for them because investors here understand the business model.
PureTech, which has raised $250m privately in the past, was set up to invest in a portfolio of early-stage science and technology businesses in the healthcare sector and turn them into commercial businesses. So far it’s invested in 12 companies that take an unconventional approach to healthcare issues, including the use of computer games to diagnose and treat neurological disorders. If the listing goes ahead, PureTech will join other tech incubators such as the UK’s IP Group and Imperial Innovations (see here), and US-headquartered Allied Minds, on the London markets.
PureTech is yet another example of the convergence of healthcare and technology, a trend which we’ve long said will be accelerated by the arrival of ‘wearables’ on the high street and the consumerisation of health and fitness tech. The life sciences side of the market is particularly exciting and an area where established UK SITS companies are also looking to grow their businesses. We’d love to see the UK make a name for itself in life sciences and healthcare tech, something that the government is also keen to encourage as we’ve seen with successive budget announcements and ventures such as Genomics England (see Personalised Health & Care 2020: SITS Implications & Opportunities).
Posted by Tola Sargeant at '08:48'
Several weeks ago management at Newbury-based application modernisation software firm Micro Focus unveiled its restructuring plan for the enlarged group (see here) post the November completion of the $2.4bn acquisition of US-headquartered legacy middleware giant, Attachmate (see here). Having since closed the books for the FY (30th April), management advise that the financials "comfortably" remain as expected, with full disclosure on 8th July. Meanwhile the restructuring story will be fleshed out at the company’s Capital Markets Day next month; TechMarketView will be there.
Posted by Anthony Miller at '07:50'
I’ve just returned from two weeks holiday. Before I left I had feared what might happen whilst I was away to my investments if Ed Miliband had become Prime Minister as the polls suggested. As it happened we now have a Conservative Government with a workable majority. No point in hiding the fact that this was the outcome I had wanted. Indeed the FTSE SCS Index has risen an impressive 14% this month.
My holiday consisted of a trip to Machu Picchu in Peru. I know from Facebook updates, that at least two other Hotviews readers were there that week too. What a small world!
It was a pretty amazing experience. Nobody really knows why this mountain top citadel was built in the 15th century. One theory was that it was like Silicon Valley – where new techniques were honed.
We then moved on to the Galapagos. A visit by Charles Darwin in 1837 was the spark that resulted in his Origin of Species. As we were told, it wasn’t really about evolution but the ‘Survival of the Fittest’. Perhaps yet another reminder of our tech world today – except that current day disruption does not come with the luxury of millions of years to allow for company evolution!
If I have one outstanding memory it is that the wildlife on the Galapogos is pretty much not afraid of us humans. We snorkelled off a rocky volcanic cliff in crystal clear waters teeming with brightly coloured fish. A colony of sea-lions watched us and then dived in to play. Swimming between our legs and playing ball with an avocado we had found. Amazing.
Posted by Richard Holway at '08:54'
They may own 60% of the equity but HP is getting less and less benefit from its Bangalore-based subsidiary, Mphasis.
Only 31% of Mphasis’ Rs14.2bn (c.$230m) derived from HP clients last quarter (to 31st March), the lowest since EDS acquired its original 52% stake back in 2008, and 9% lower than the prior quarter. Fortunately, Mphasis’ non-HP business grew sufficiently to just offset the precipitous decline in the HP channel, keeping quarterly headline growth just above flat. However, operating profits dropped nearly 3% trimming operating margins back 40bps to 12.6%. Mphasis recently realigned its FY from that of HP to 31st March (like most but not all India-based peers) so there are no direct comparisons to the prior FY. But for the record, FY revenues sat at Rs57.8bn (c.$950m) with operating margins at 13.4%.
Mphasis deleted the HP brand from its logo early last year (see here) giving a strong message as to the value it puts on its association with its owner. Yet in a post-results media interview, Mphasis CEO Ganesh Ayyar professed dismay at the decline in its HP business ("a very bitter pill we have to swallow") but warned that the declines are going to continue.
Nonetheless, Mphasis makes a net profit contribution to HP’s bottom line and HP management has higher priority matters to handle than worry about its renegade offshore services arm. It’s a great shame that HP never worked out how to make Mphasis work for its enterprise services business, as maybe then we wouldn’t be writing headlines like HP Enterprise Services down 10% in Q2!
Posted by Anthony Miller at '12:42'
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