In late May, HPE announced its plan to spin out its Enterprise Services business (i.e. what began life as the 2008 EDS acquisition) to merge with CSC and create a new services company. The new combined entity (worth $26bn in revenue globally) will be what HPE/CSC describe as being a “pure-play” services firm – emphasising their view that the optimal way to deliver services it to not combine them with product capabilities.
HPE is currently the largest provider – in revenue terms – of infrastructure services to the UK market. The spin-merge, therefore, is very significant. In this research note we examine the implications of the spin-merger for buyers and suppliers, and take a look at what the new entity could shape up to be in terms of its market placing.
Subscribers to our ever-popular InfrastructureViews research stream can read the piece here: HPE ES/CSC spin-merge: Impact on Infrastructure Services.
Posted by Kate Hanaghan at '09:46'
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Business process services provider Equiniti is the latest big SITS player to acquire one of TechMarketView’s Little British Battlers (LBBs) (see Civica bags WTG for leg into Whitehall).
Equiniti has acquired Gloucestershire-based Toplevel Computing (Toplevel) for £2.8m (net of cash), which is one of our inaugural batch of LBBs from 2012 (see Little British Battlers – first report). Toplevel is a specialist in secure digital case management solutions and provides a commercial off-the-shelf (COTS) product Outreach – allowing it to compete against the bespoke solutions offered by the big SIs. It has worked with a number of major central government departments, and existing contracts include an online childminder registration solution for Ofsted, an online grants application tool for the Heritage Lottery Fund and processing £600m in legal aid transactions for the Legal Aid Agency.
Equiniti also released its H1, which showed topline revenue growth of 5.9% to £191.9m, and organic growth of 4.3%. EBIT profits were up almost a quarter to £15.3m (8% margin vs. 7% last time). (see Equiniti on track to hit 5% organic).
The big question is around the outlook post-Brexit, particularly with rival and market leader Capita announcing delays in financial services, in areas where Equiniti also plays, like sharedealing and IPOs (see Post-Brexit delays and uncertainty for Capita).
Equiniti's CE Guy Wakeley has quite a different view, that 'on balance...Brexit will be ‘neutral for our core regulated businesses’. Management expect any reduction in IPOs to be offset with other transactions, and a focus on cross-selling to help drive the business forwards. Certainly, cross-selling helped in H1, with 12% growth coming from the top 32 accounts.
This is a bullish position to take, given the uncertainties in the economy. Whether Equiniti is right will depend a lot on both how the market fares, and its customers continue to invest, over the coming months.
Posted by John O'Brien at '09:44'
Offshore centric BPS supplier EXL Service is continuing to see very strong growth from analytics services (up 30% in Q2) as it shifts its business towards higher value services.
In the quarter ended 30 June, revenues were up 11.4% in constant currency at $170.5m, and up 1.9% qoq. Operations management (aka BPO) grew 6.6% to $130.9m and analytics reached $39.6m from $30.6m last time. Analytics is also where the majority of wins are now taking place – 5 in the quarter vs. 2 in operations management.
Earlier this month, EXL made a small bolt-on acquisition in the UK, acquiring life and pensions platform provider LISS Systems (see here). In the investor call, CE Rohit Kapoor said he is also looking at ‘more acquisitions in UK and Europe to further diversify our geographic footprint’.
In analytics, EXL is focusing on ‘improving data driven, decision making in order to help clients drive revenue growth, lower cost and ensure regulatory compliance’. It is also providing EXL with entry into new market sectors like retail, and deeper in to the technology space too - it’s no surprise that it recently hired its first CTO. EXL is for instance, now using sensors and mobile to track customers across different sections of the physical retail environment. The insights will then be used to develop an online customer profile and mobile apps for a unified online/offline experience.
This is a very different type of engagement for EXL. As larger full service competitors like Wipro and TCS expand further into digital transformation it’s critical that pure plays like EXL move fast (see Wipro’s design on digital).
Posted by John O'Brien at '09:38'
Fujitsu cited poor global economic conditions and a rise in the value of the yen for disappointing financial results in the first quarter ending 30th June 2016, with revenue down 7.4% to 987bn yen (£7.2bn). Pre-tax losses were 13.2bn yen (£97m), though this represented a 21%, 3.5bn yen (£26m) improvement on Q115. Earnings per share dipped to 6.79 yen from 9.14 yen a year earlier.
The Japanese company attributed part of the blame to sluggish sales from infrastructure services in the US and Europe. The UK did not get a mention but like other large IS suppliers, we think Fujitsu continues to struggle with the absence of large infrastructure deals in the UK market and the intense price competition to win the few remaining.
It is also fighting off a broader shift to cloud hosted services amongst customers (clients of our InfrastructureViews service can get a more detailed breakdown of Fujitsu’s UK business here). Those effects can be mitigated by migrating existing clients onto Fujitsu’s own infrastructure (IaaS) and platform as a service (PaaS) propositions whilst exploiting demand for hybrid cloud infrastructure and hosted security services.
TechMarketView launched a new research stream, SecureConnectViews, analysing the increasingly close integration between supplier cloud, networking and data security portfolios. We think Fujitsu can do much to halt the current decline in IS sales by combining these elements into single service packages that support the broader digital transformation initiatives currently ongoing amongst public and private sector organisations.
Posted by Martin Courtney at '08:53'
Second quarter results from Amazon show that growth in its Amazon Web Services cloud business slowed versus Q1. Revenue grew 58% (to $2.88bn) over the equivalent quarter last year, a slower rate than the 64% it registered in Q1 2016.
However, looking at the profit line, the numbers are even more impressive. Operating income was up 135% (136% constant currency) to $718m. Outpacing revenue growth at that rate resulted in an increase in the margin from 16.7% to 24.9%. Who wouldn’t be envious of those figures?
During the quarter, AWS inked a $400m deal with Salesforce.com that will see the latter shift more of its services onto AWS - including Sales Cloud, Service Cloud, App Cloud, Community Cloud, and Analytics Cloud.
We know more about the performance of AWS than its competitors. Google’s cloud revenue is buried (see Alphabet exceeds expectations), and while we know that Microsoft’s Azure revenue was up 102% in its last quarter, this was from an unknown base.
Our view is that AWS is growing at a slower rate in the UK specifically, and in “Brexit implications: Infrastructure Services” we talk about the possible future implications of the UK’s departure from the EU. That said, AWS is outpacing the market and most of the other players.
Subscribers can see exactly where AWS ranks on our leader board of UK Software and IT services suppliers, here: UK SITS Supplier Rankings 2016.
If you’re not a subscriber but would like to be, please contact Deb Seth.
Posted by Kate Hanaghan at '08:44'
Alphabet (or still Google to you and me) has continued the run of great tech earnings results in the current reporting season. Revenues grew 21.3% to £21.5b yoy - higher than expected. Would have been an even higher 25% growth if you strip out currency fluctuations. Ad revenue was up 19.5% and paid clicks were up 29%. Looks like Google is finally scoring in mobile ads too. CEO Sundar Pichai said "The strength of the figures is in mobile". Half of Google searches now come from mobile devices and that proportion might apply to Google's ad revenue too. Indeed together with Facebook (See - Awesome Facebook from yesterday) it really does look as if these two giants have something close to a monopoly in the global mobile ad market.
Profits rose 24% to $4.88b as new CFO Ruth Porat kept a cap on costs which rose at a slightly slower pace (20%) than revenues. Indeed capital expenditure fell although 2,460 staff were added. Google now employs 66,575 people.
The OtherBets bit – which includes all those new ventures from Fiber to Nest to Google self-driving cars – grew 150% to $185m but managed to lose a staggering $859m in the process.
Anyway, after missing expectations in 8 out of the last 12 quarters, the market seems to be back in love with Google - marking the shares up c4% after hours.
Posted by Richard Holway at '21:43'
Tech M&A coming thick and fast now. Today it is Oracle buying the shares Larry Ellison and his family don’t already own in Netsuite for $9.3b cash; around a 30% premium on Tuesday’s close. The deal had been rumoured for weeks and had already pushed the shares up. When Elon Musk’s Tesla did a similar deal with SolarCity a few weeks back, there was a kerfuffle about conflict of interest etc. Like Musk, Ellison says he and his family will abstain their c40% stake in any shareholder vote to approve the deal. But, at c9x next year’s revenues, I doubt he’ll get much opposition.
I guess Ellison might think he owns Netsuite already having set it up in 1998. Netsuite is run by Zach Nelson who ran Oracle’s marketing operations in the 1990s.
There is a big race on at the moment for the ‘on premise’ enterprise vendors to buy cloud turf. I expect we will report on many more such transactions this year.
Netsuite also reported Q2 revenues up 30% at $230.8m but an increased loss yoy from $32.3m to $37.7m – such is the state of SaaS suppliers that continued, long-term losses come with the territory.
Posted by Richard Holway at '21:23'
I wouldn’t have gone so far as calling them ‘stellar’ results, as was trumpeted in today's financial release. But it was at least pleasing to see the decline in growth rate reversed at Mumbai-headquartered mid-tier offshore services firm, Hexaware Technologies.
Headline revenues grew by 6.9% in Q2 (to 30th June), to $129.7m, an impressive 6.6% above the prior quarter. Having said that, revenues had declined by almost 2% sequentially in Q1 so really they were making up lost ground. And it was also pleasing to see the decline in operating margins reversed as well, gaining a point qoq to 14.0%, though still down 160bps yoy. The margin gain countered the trend reported by mid-tier peers Mindtree and NIIT Technologies, and indeed the top-tier players too.
But growth – indeed profitable growth – may well remain elusive. Hexaware added $5.6m to the top line in H1 2016, compared with $6.8m in H1 2015, and at lower margins. They, like peers, will just have to pedal faster.
Posted by Anthony Miller at '18:46'
Not wishing to be left behind in the scrummage for boutique ‘digital agencies’, New Jersey-headquartered Indian pure-play Cognizant has pitched in with the acquisition of Idea Couture, a 170-person strong digital consultancy based in Toronto. Terms were not disclosed.
This follows Mumbai-based Tech Mahindra’s acquisition of London-based digital consultancy The BIO Agency (see Indian Tech Mahindra goes digital with British BIO), Bangalore-based Wipro’s acquisition of Danish Designit (see Wipro’s Design on Digital) amongst others. Cognizant had previously acquired pharma, meditech and biotech-focused digital media agency, Cadient, back in 2014 (see Cognizant goes ‘digital’ with Cadient).
Buy now while stocks last!
Posted by Anthony Miller at '15:03'
Once again, in its H116 results, the UK was the worst performing region for Sopra Steria. The UK posted an organic revenue decline of 0.9% to €483.4m (total revenue decline was 6.7%). The UK represents 26% of total revenues. This compared to organic growth in France, which now represents 41% of total revenues, of 9.5%, and growth in the rest of Europe at 2.7%. The good news is that things improved in the UK in H2; the organic decline in Q1 had been 2.3% (see Sopra Steria acquires in France as UK slips further), but in Q2 the region reported growth of 0.6%. The region’s operating margin on business activity improved in first-half 2016, amounting to 7.3% (6.4% in first-half 2015).
The release paints a useful picture of the UK’s revenue profile: 78% of revenues based on “relatively non-cyclical multi-year contracts”; public sector activities generating 68% of revenues; and the two joint ventures (SSCL and NHS SBS) making up 50% of the public sector business. Notably, those JVs combined reported 0.8% revenue growth. Private sector activities were down 4% - expected as the reorganisation continues. By our calculations, that means that the public sector business, in total, grew by about 0.7%.
The Group continues to drive for 3-5% organic revenue growth in FY16 and an operating margin (on business activity i.e. adjusted) of “more than 7.5%” followed by an increase in margin to 8-9% the following year. In H1 at Group level, the organic growth was 5.4% and the adjusted operating margin reached 7.1%. So, the full year targets do not seem unrealistic. The UK, though, continues to be in a tough period; struggling to grow its core JVs while trying to find the right focus for its commercial business. Moreover, Sopra Steria is light in terms of its offshore resource (“16.9% working in X-Shore zones”, compared to Capgemini with 55% (see Capgemini UJK: H116 private sector strength) and Atos with 27% (see Atos UK: Confident for full year). This is reflective of the proportion of its business within France; but pushing towards those 2017 operating margins may be a tall order.
Posted by Georgina O'Toole at '10:07'
I note with interest that video search and advertising technology provider RhythmOne (previously known as ex-Autonomy spin-out, Blinkx) has just appointed a ‘Chief Revenue Officer’, responsible for ‘scaling RhythmOne's unified programmatic platform and extending the Company's commercial footprint into global markets’.
Given its recent mounting losses (see Blinkx treading shifting sands to get to solid Core), one wonders if they will seek a Chief Profit Officer to join him.
Posted by Anthony Miller at '10:01'
London-based self-styled ‘app commerce’ startup, Poq, has raised $4m in a Series A funding round, led by US-headquartered private equity firm, Beringea. Prior seed investors, Seedcamp and Venrex, also participated.
Founded in 2011, Poq runs a mobile commerce development platform for top brand retailers such as House of Fraser and Liberty, amongst others. Poq claims ‘app revenues’ of £100m, which I would imagine is the total run-rate of orders taken through the platform, rather than the revenues accrued to Poq.
Have they ‘built a better mousetrap’? Clearly Poq's marquee clients (and Beringea, of course) must think so.
Posted by Anthony Miller at '09:40'
Sophos’ Q1 results issued today showed strong growth in billings – up 25% yoy at $141.9m with a 12% growth in revenues to $127.4m with EBITDA up 55% at $25.6m. EMEA billings were the star – up 35% at $78.2m with the America’s and API up more modestly – up 10% at $42.8m and 11% at $20.9m respectively.
The higher billings growth re revenue growth results from a larger than normal deal in Europe which looks as though it was also for a longer period than normal – good on both counts. Sophos ‘sweet spot’ is in the mid market – only 18% of its revenues come from clients with 5K+ employees. Most of Sophos’ competitors deal in the higher end of the corporate sector. Or alternatively direct to consumers.
Cyber security has been considered to be a really hot market sector worth c$38b globally. Also every survey of CIOs etc puts security as their #1 priority. So in some ways it is surprising that the market is growing ‘only’ between 6-8%. Pa. On this measure Sophos has beaten market growth consistently. Many of the other players in the security market have disappointed the market of late – resulting in some dramatic falls in share prices. I think, in comparison, this shows Sophos in a very good light. Firstly they seem to execute well and are now meeting/exceeding expectations. Secondly, their mid market focus, with a multitude of small to mid-sized clients, is much more ‘secure’ than those competitors who rely on a small number of large deals. I guess the only issue here is that their competitors move down into Sophos‘ space.
I asked Nick Bray (CFO) what impact BREXIT might have. Only 12% of Sophos’ revenues are from the UK and around 20% of their investments are in sterling. So they are truly a global company. Exchange rate/investment swings are largely neutral.
The outlook for the year to 31st Mar 17 was for ‘mid teens’ growth in billings – again probably twice predicted market growth - and a small increase in margins resulting in a doubling of free cash flow.
Sophos IPOed in June 2015 at 225p and have been on something of a rollercoaster since. Arriving back to close yesterday at 229p – pretty much where they started. But these excellent Q1 results pushed the shares up 11p/5% in early trading.
CEO Kris Hagerman was asked on the call about acquisitions. No ‘massive acquisition’ was contemplated. But clearly smaller strategic buys might sensibly be made. My view is that Sophos’ greatest issue is if it becomes an acquisition target itself. Just like my views on ARM, that would be a great shame as Sophos is a truly great UK-HQed global tech company with a market value now of over £1b/$1.3b. We have very few of them left.
Declaration – Holway has been a Sophos shareholder since the IPO
Posted by Richard Holway at '09:37'
It just keeps getting tastier for UK-headquartered, international food delivery marketplace, Just Eat. They processed over £1b in orders during first half (to 30th June), 57% higher yoy. This translated into 59% headline revenue growth (57% ‘forex neutral’), to £171.6m, and a 153% jump in operating profit to £34.4m, boosting margins from 12.6% to 20%. While the UK remains Just Eat’s largest market, some 64% of total revenues, its international business mix has grown from 29% to 36%.
This must bring tears of joy to the eyes of new CFO, Paul Harrison, who joined Just Eat last month after doing penance at perpetual loss-making ‘big data’ play, WANdisco (see Harrison swaps big data for meals on wheels). Indeed he has just raised Just Eat’s revenue outlook by £10m for the year, to £368m, albeit a chunk of which is due to FX moves.
But I am sure management are not being complacent about the threats posed by Just Eat’s many rivals, not least of which, UberEATS, which recently launched in London (and see UberEATS – SpoonRocket chokes). However, UberEATS seems at first blush more a threat to Deliveroo, both offering food delivery from restaurants that don’t have their own delivery service. In contrast, Just Eat is ‘logistics light’ as it relies on the restaurants’ own delivery people. And it has very strong brand recognition. Onwards and upwards!
Posted by Anthony Miller at '09:09'
On Monday August 1st, Skyscape Cloud Services will become UKCloud. Why? Well, a little bit of digging (see here) reveals that, for the last couple of years, Skyscape has been in a legal dispute with Sky Plc over its company name. Sky likes to flex its muscles when it comes to its trademark. Skyscape is just one in a long line of companies that it has pursued. Another example in the tech world is Sky forcing Microsoft to change the name of its cloud storage service from “SkyDrive” to “OneDrive” after trademark infringement claim.
Too cut a long story short, with the prospect of Sky not giving up, Skyscape decided fighting against the broadcasting giant was no longer worth the time or the expense. And so UKCloud is born. The name may not be quite as distinctive but the company will be ‘doing what it says on the tin’. With the launch of the new name on Monday, there will also have a new set of branding; the company is using the event to communicate some new crisp messages about its differentiators and core markets.
As CEO, Simon Hansford, states, “Our vision is to be the power behind public sector technology”. The aim is to be the leading provider of secure public cloud for the UK public sector. So far, the company has had great success: it is the leading Infrastructure-as-a-Service supplier through the G-Cloud framework, with a 34% share of spend. As a result, in its last financial year it almost doubled its revenues (see Skyscape doubles revenues in a year). Often competitors are keen to criticise Skyscape (no surprise there) but, interestingly, Skyscape is the first to admit that it “has faced some technical issues in (its) supply chain that has impacted on some of (its) clients”. That is actually quite refreshing; we suspect many clients and prospects will welcome the openness about such challenges and the commitment to work through them. Already, according to Skyscape, 84% of customers are pleased with their decision to use the company' cloud platform. But Skyscape is using its rebranding to reiterate its investment in the improvement of its service offering.
We will have more on the advancement of Skyscape/UKCloud (and other cloud services providers in the market) in an upcoming PublicSectorViews report looking at cloud services adoption in Whitehall. Watch this space.
Posted by Georgina O'Toole at '08:41'
BT’s first quarter revenue grew 35% yoy to £5.8bn, buoyed by the performance of its newly integrated EE mobile subsidiary and strong growth in its business and public sector and consumer divisions. Pre-tax profits too rose 13% to £717m, though earnings per share fell slightly to 5.9p.
The £12.5bn EE acquisition added £1.2bn turnover and £84m of profit to BT’s Q1 coffers, going some way to justifying the purchase price and repaying the debt ran up to fund it.
It is the 18% yoy growth in the business and public sector division turnover (£1.2bn) which really catches our eye. That suggests BT did a good job of selling contracts into central/local government, defence, healthcare and police clients as well as smaller UK businesses (recent wins included Oracle, London’s tri-borough and Exact). However the recent reorganisation may have seen the division simply absorb more BT Global Services and EE contracts than we first thought.
The eye watering fees BT Sport paid for English Premier, Champions and Europa League broadcasting rights continue to yield a good return. Strong take-up of BT fibre broadband services by football fans boosted consumer revenue 9% to £1.2bn.
Even BT global services, a weak element in FY16 and now focussed purely on multinationals, showed modest growth. Revenue rose 5% yoy (3% in the UK) to £1.3bn though again the numbers include newly added EE MNC customers. Revenue for the Openreach infrastructure division - which BT insists will not be split out into a separate company despite pressure from the regulator - was flat at £1.3bn, with downward price pressure taking its toll.
Cut any way you please we think this is a strong set of results for BT that leave the teclo well placed to capitalise on future demand for converged fixed/mobile services from consumer and business customers.
Posted by Martin Courtney at '08:33'
Having finally seen the light on the structural flaw in services marketplace blur Group’s business model, founding CEO, Philip Letts, ‘pivoted’ operations towards a lower risk model (see blur’s new model comes late into focus). Now the race is on to turn the fortunes of the company around before the cash runs out.
Cash burn reduced in Q2 (to 30th June) to $1.1m leaving $4.3m in the bank (‘including unrealised foreign exchange movements’ – blur reports in US dollars). In line with the new strategy, project numbers plummeted as blur switched focus to ‘enterprise’ clients (50 employees and above). However, the numbers in this category were not promising: project listings down 60%, project starts down 61%, completed projects down 10% (all yoy).
As ever, Lett’s glass was more half full than half empty, with his trademark upbeat assessment of the potential opportunity for blur’s services, pitched against the reality of longer sales cycles and wide variations in project volumes and values.
It looks a close call.
Posted by Anthony Miller at '08:20'
What a difference three weeks makes. Earlier this month, Robert Walters, CEO of the eponymous UK-headquartered, international recruitment firm, referred to the performance of the UK business as ‘solid results against an uncertain backdrop’ (see here). But now the half-time numbers are out, his tone has changed, alluding to ‘an uncertain economic and political backdrop … which has impacted client and candidate confidence and the speed of decision-making’.
Witness a dramatic 35% decline in UK pre-tax profit in H1 (to 30th June), to £1.85m, against an impressive 20% increase in revenues, to £220.6m, but with just 4% growth in gross profit, to £40.2m. Walters called out the Financial Services sector as most affected.
Across the group, headline revenues grew by 20% (17% at constant currency) to £451.4m, with gross profit growth lagging at 12% (9% ccy) to reach £128.1m. Headline operating profit grew by 12% to £10.1m but this represented a 2% decline at constant currency. Walters expects to make the FY numbers despite UK market uncertainty.
Recruitment peers such as Hays and PageGroup and SThree had also issued results and trading statements earlier this month of the ‘too early to tell about BREXIT’ ilk. Let’s see if their tones also change when they report their next set of numbers.
Posted by Anthony Miller at '07:54'
TechMarketView is continuing its extensive analysis of the implications of the Brexit decision with this latest report looking at the impact on the important Financial Services sector. The City is a vital contributor to the nation's economy as well as having been the ideal location for US and Asian companies to set up operations and so access the European Single Market. Indeed many of the larger European institutions have built extensive operations in London.
The decision to Leave the EU now puts a question mark against the future of the City with potentially serious repercussions for the UK Software and IT Services industry, which depends on the Financial Services sector for around one-quarter of its business.
The report, Brexit implications: UK Financial Services SITS considers the short, medium and longer-term consequences of the UK’s EU Referendum result. It examines how the changes could affect our forecasts and who are the likely winners and losers within the Software and IT Services industry. The report also considers the sector-specific issues of passporting, the future structure of the payments sector, access to skills, the transfer of data and the future of UK Fintech.
The report is available to subscribers to our FinancialServicesViews research stream. If you want to enquire about a subscription, please contact Deb Seth of our Client Services team.
Posted by Peter Roe at '23:19'
You do have to live in awe of Facebook nowadays. Q2 results tonight are pretty ‘awesome’ with revenues up 59% yoy at $6.44b and profits up 184% at $2.05b. Ad revenue was $6.24b – significantly ahead of the $5.8b expected. Mobile was 84% of that – up 81% yoy. eMarketer reckons Facebook will take 68% of all social advertising spend worldwide this year. Is that a monopoly??
Over a billion people use Facebook EVERYDAY on their mobiles (up 22% yoy) with 1.17b daily users on all devices (up 17% yoy). So Facebook now makes $3.82 per active user – eat your heart out Twitter, LinkedIn and every other aspiring social media player.
Having mastered mobile – against the doomsayers – Zuckerberg is now ‘particularly pleased with our progress in video’. Indeed, even Olde Holway posts video on his Facebook feed now.
It’s not just Facebook. Messenger now has a monthly user base of over 1b and Instagram has 500m monthly users.
These results were all ahead of expectations and Facebook shares were up c7% at $133 in after-hours trading. Facebook IPOed at just $38 in May 2012.
Can Facebook maintain this dominant position? At first sight, they look unassailable. But remember all the others that ‘were the future once’. Now the upstart snapping at the leaders heels is Snapchat. But I guess, if worst comes to worse, Facebook could just buy them with its current $23b cash pile…
Declaration – Holway is a Facebook shareholder.
Posted by Richard Holway at '21:59'
Following the release of this morning’s results from Atos, which revealed the highest level of organic growth for the business since restructuring began in Q114, we had a catch-up with UK&I CEO, Adrian Gregory (pictured).
He was in a positive mood; the recovery in the Q2 results, following an unusual Q1 (see Q116: Revenue dip as expected), was as he had promised. And, importantly, Gregory confirms that the UK business has secured all of the major contracts it needs to return to growth in H216 and, hence, maintain revenues at FY15 levels over the full year.
TechMarketView subscribers can learn more about how the UK business is achieving these results, and the business unit's prospects, in the UKHotViewsExtra article, Atos UK: Confident for the full year. If you are not yet a TechMarketView subscriber, don't hestitate to contact Deb Seth to find out how to rectify the situation.
Posted by Georgina O'Toole at '18:02'
Just over a month has passed since the electorate voted for the UK to leave the EU, and today we publish our analysis on how the decision could impact the Enterprise Software & Application Services (ESAS) market. While there is slightly less political uncertainty than in the immediate days following the referendum result, there are still many unknowns and much uncertainty.
In this research note we take look at what sort of environment suppliers will be operating in and examine the likely market scenarios in the short term (the rest of 2016), the medium term (2017-2018), and the longer term (2019 and onwards).
While there are deep and valid concerns, it is also possible to take positives from the situation. For example, potential accelerated demand for SaaS or a faster move to digital transformation in order to prepare for change/new markets.
The research also explores which suppliers are likely to be the winners and the losers in both the short and longer term.
Subscribers to our ESASViews research stream can read the note here: BREXIT implications: UK Enterprise Software & Application Services
Read our Brexit analysis of other parts of the Software and IT Services market, here (subscription required):
To become a subscriber, please contact Deb Seth.
Posted by HotViews Editor at '15:43'
CGI’s Q3 results (to end June 2016) reveal just 0.6% growth on a constant currency basis, to CAN$2.7b. Foreign exchange fluctuations pushed the growth rate up to 4.2% at the headline level. Notably, this is the first positive organic growth rate reported by the company for quite some time (see CGI Q116: UK reports solid revenue growth). Declines have been a constant feature of the landscape since the beginning of 2014, when planned revenue run-offs started impacting performance. There’s also positive news on the adjusted EBIT front – the 14.6% margin (up 10bps) takes the level back to pre Logica acquisition days.
Michael Roach, CEO, indicates that it is clients working with CGI within transformational outsourcing agreements, releasing “run” costs to invest in their “change” agendas, that is having the positive impact. We have written extensively about CGI’s digital strengths, including its growing portfolio of IP solutions, in a variety of reports (see CGI simplifying digital complexities and Digital transitions: supplier progress). It looks like the UK is having particular success. Following a strong Q2, the second half has got off to an impressive start. UK revenues increased by 11.4% at constant currency to CAN$370m (headline growth was 9.4%). But it does always seem to be a different vertical which is the star of the quarter; this time it’s the turn of the government and financial markets (new business) and the telco and utilities markets (higher volumes). Other geographies that grew were France and the offshore operations in Asia Pac.
In terms of the UK’s adjusted EBIT (up from 8.6% to 10.4%), we see a consistent story across the results of all the major SIs reporting in the last 24 hours (see Capgemini H116: Private sector strength and Atos raises full year expectations). All have reported improvements in their operating margins. And all have mentioned the productivity improvements they have made in their infrastructure/managed services businesses, through automation and industrialisation. It is the ability of the onshore players to improve their efficiencies so effectively through the application of new technologies, that is giving the Indian Pure Plays (IPPs) a run for their money (see Offshore Views Q116).
Posted by Georgina O'Toole at '14:45'
Great to see Fairsail being applauded at the Partners Day at the Sage Summit in Chicago earlier this week.
Looks like Fairsail is really motoring with revenue up about 90% yoy in H1 with 25 new clients adding to the tally of 150 midsize multinationals with 100,000 active users in over 130 countries – including, of course, Sage itself which uses its HR Management System for some 13,000 employees. Indeed the Fairsail platform is the HCM Platform of Choice for SageX3. The reason why Sage invested £10m for a 20.7% minority stake in Fairsail back in May 16.
FY2016 revenues are now 'on track' to hit $13.2m - 100% up on FY15.
I’ve been a Fairsail shareholder ever since Adam Hale joined some 3+ years ago. Adam has done a great job with revenue growth of 1200% in that period. The shares have performed pretty well too!
It will be interesting to see how the ‘corporate ownership’ of both Sage and Fairsail evolves in the next few years…
Posted by Richard Holway at '11:35'
Capgemini appears in a confident mood as it announces its H116 results. A similar picture has emerged to the one we saw at in Q1 (see Capgemini’s digital business continues to motor). The group’s revenues, at €6.3b, were up 11.6% on a reported basis, up 14.4% at constant exchange rates, and up 3.3% organically (constant scope and exchange rate; iGate has been part of the Group since January). Organic growth was better in Q2 at 3.8%. The Group maintains its guidance for the full year of revenue growth between 7.5% and 9.5% at constant exchange rates (Capgemini comments that it is “closely monitoring the impact of Brexit" but has so far seen no change in market demand”). The adjusted operating margin improved by 1.5pts to 10.2%, with improvement across all regions and businesses (guidance for full year has been raised to 11.5%). Capgemini continues to benefit from its focus on margin progression, which includes ramping up its offshore resource (now 55% of employees); indeed, Nasscom now has Capgemini as the fifth largest IT-BPM employer in India (displacing HCL) (see here)!
Below the top-line, unusually Capgemini doesn’t report its regional and business performance organically. So, it is really difficult to understand the underlying performance (excluding iGate). All business lines were boosted by the iGate acquisition. Even the managed services business grew strongly, despite the anticipated negative impact of changes to the HMRC Aspire contract; once the iGate impact is included, reported growth was 9.3% at constant exchange rates.
For the record, UK&I, which now accounts for 17% of Group revenues, grew 8.6% (ccy). The operating margin improved 180bp to 14.5%. The emphasis in the results statement is on the private sector; contract wins are highlighted and the fact that the private sector now accounts for more than half of revenues. Indeed, organically, the private sector business achieved double-digit organic growth, while public sector was “down as anticipated”. Overall, we estimate a slight organic decline in the UK business. Where Capgemini continues to make great progress is in its cloud and digital business. Significant investment is really helping increase the company’s credibility here (see Capgemini’s Applied Innovation Exchange comes to London). At Group level, cloud and digital revenue growth was 32% - this part of the business now accounts for 28% of revenues. And it looks like the repositioning of the consulting business around digital transformation has really helped the UK performance.
Posted by Georgina O'Toole at '10:14'
UK SITS and BPS market leader Capita is experiencing ‘increased uncertainty’ and ‘delays’ as a result of Brexit, particularly in the financial services sector.
In the H1 investor call, CE Andy Parker said Capita’s Asset Services business in shares, funds and trusts is being directly impacted because people aren’t looking to launch IPOs or funds, and it’s unclear when that might change. He is also cautious about the prospects for the property business, and sees private sector more uncertain across the board.
However, Parker sees the impact being short-term. He is bullish about Capita’s medium-term prospects, identifying ‘incremental opportunities’ from clients responding to the impacts of the UK leaving the EU.
Capita’s sound financial management has helped it deliver improved underlying organic growth of 5% in H1, despite a disappointing start to the year (see Capita finding life tougher and work back). There’s been more internal re-organisation, disposals and acquisitions to help get here (see Capita acquires Trustmarque from Liberata and work back).
Underlying revenue growth on a like for like basis was up 8.8%, and up 5% at the headline level to £2,405m. Meanwhile, underlying operating profits were up 10% to £317.6m – helping push the margin up around two basis points to 13.2%.
Capita has done a decent job of improving the bid pipeline too, which now stands at £5.1bn (February 2016: £4.7bn). However, H1 was tough on the deals front, with just £879m of major wins vs. £1.6bn last time. If the market deteriorates further, H2 is going to be tougher still, putting the 4% FY16 organic growth target at risk.
In our report Brexit implications for Business Process Services we assess the risks and opportunities for BPS providers like Capita post-Brexit.
Posted by John O'Brien at '09:42'
First half figures from Worldline, the payments and transactional services business spun out of Atos, deliver on two fronts. The underlying business showed strong growth and margin improvement and the Group’s strategic development continues as the Equens merger nears completion.
Headline numbers showed revenue of €615m, up 6%, with all three divisions reporting progress in international markets. The fastest reported growth was in Merchant Services and Terminals (34% of Group revenue, up 9%). Mobility & e-Transactional Services declared growth of only 4%, as it was hit by the ending of the UK VOSA contract. Excluding VOSA, the advance would have been 14.9%. Group operating margin before Depreciation and Amortisation rose to 19.1% (18.2% in H1 2015). Net cash continued to improve.
There is an acceleration in the take-up of new services such as the Connected Living portfolio where Worldline offers a device agnostic approach and a pay-per-use model to support IoT implementations connecting homes, cars, buildings etc. This should bolster long term growth and profitability.
The Equens merger, see here, is expected to close “before the end of the summer”. This deal will significantly strengthen Worldline’s position in European Payments, with improved scale in transactions processing and merchant acquiring.
Since the spin-out from Atos, the Worldline management has been able to inject some more pace into the business. This includes building scale in more conventional payments markets with the Equens deal, accelerating cost improvement plans and developing new services that leverage the more sophisticated ecosystems of modern commerce. The management have raised their guidance for 2016 revenue growth (although the termination of the large French “Radar” contract will take the shine off full year figures). The progress made is reflected in the Worldline share price which is up over 45% over the past year.
Posted by Peter Roe at '09:27'
German vehicle manufacturer Daimler has acquired a 60% share in London-founded taxi hailing startup, Hailo, and will merge it into previously acquired taxi app, MyTaxi. According to TechCrunch, no cash changed hands.
Hailo was founded in 2011 originally as a ‘black cab’ hailing app, and later expanded to Ireland, Japan and Spain. According to Business Insider, it all started to go terribly wrong for Hailo in 2013 when it tried to conquer the New York cab market, and has struggled ever since.
Hailo had raised over $100m in venture funding since its founding, and will reportedly retain its original shareholders. All R&D will move to Germany.
The taxi app battleground now seems to be one between automotive manufacturers, with Toyota investing in Uber, GM investing in Lyft, and VW in Gett, all, we must assume, in anticipation of the eventual car-ownerless society. We’ll see.
Meanwhile, another UK tech startup - and all its innovation - leaves our shores. I guess another triumph for ‘inward investment’.
Posted by Anthony Miller at '09:15'
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Orange Business Services (OBS), the enterprise division of French telco Orange, saw revenue grow 0.6% to €3.2bn in H116.
IT and integration service revenue grew by 8% to just over €1bn due to “strong growth” in security services and cloud, glossing over figures for voice (€757m) and data services (€1.4bn) which were down slightly on H115.
The figures indicate a sustained if modest turnaround for OBS which has now seen slight revenue growth for the second quarter in a row, though parent company Orange does not split the numbers by geography.
Most, if not all, of OBS’ UK turnover comes from the supply of IT services and network connectivity to the local branches of multinational customers. The contract OBS won to provide network connectivity to German headquartered global chemical, pharmaceutical and life sciences group Merck last month is a typical example.
OBS is showing signs that it is picking up more of this type of contract. But we think that significant revenue growth will only come if it can move beyond network connectivity into more profitable cloud, security, application hosting and IoT deals. The acquisition of specialist desktop as a service (DaaS) player Log’in Consultants earlier this month certainly demonstrates OBS’ cloud ambitions and the company must now use this asset to drive further into the hosting business.
Overall results for Orange, which provides additional broadband and fixed/mobile voice services in countries across €ope, Africa and the Middle East, were equally understated. The telco saw revenue flat yoy at €20.1bn with EBITDA also static. Net income after tax grew to €3.3bn, but only after Orange received €4.5bn in net cash from the sale of EE to BT.
Posted by Martin Courtney at '08:57'
I really don’t know why it took me quite to so long to meet up with Rod Flavell, the dapper founding CEO of veteran IT staffing firm FDM Group, as I’ve been tracking the company since I first started working with Richard Holway back in 1997. But meet we did just a couple of weeks ago. And everything I saw and heard only served to boost my admiration for his pretty much unique ‘employed contractor’ model (they’re called ‘Mounties’ after FDM’s progenitor business, Mountfield Software). Flavell manages this business within an inch of its life and incredibly successfully so.
But let the numbers speak for themselves. Half-time revenues (to 30th June) grew by 16% (all organic) to £86.5m, with gross margins leaping from 38.6% to a truly stunning 45.9%. Operating margins gained 20bps to 17.9% despite a 56% increase in SG&A as Flavell ploughed significant additional investment into new training academies (yes, FDM trains its people within an inch of their lives too). These are Indian pure-play margins from an entirely onshore-based project services business.
FDM re-listed on the London Stock Exchange just over two years ago at 287p a share (see FDM Mounties remount to the Main Market). Its shares now sit at 565p. Class act.
Posted by Anthony Miller at '08:35'
Second quarter results out overnight from Unisys are positive on both the revenue and profit fronts. The company achieved a commendable 6.6% operating margin – quite a transformation from the 6.5% decline of Q2 last year (which included a $53m charge for restructuring). The bottom line has been boosted by cost-cutting efforts during the year, but also a better contribution from high margin revenue.
Overall revenue dipped less than 1% (at constant currency) to $748.9.m, saved by strong revenue growth in the Technology business, and in particular from the company’s ClearPath Forward product line.
However, over in the Services business (which accounts for around 80% of revenue) the picture is not so pretty. Revenue declined 6.1% at constant currency, while the operating margin also declined and was all but flat (i.e. creeping towards a loss). Management says this was down to investments made to help the business “reach longer-term profitability goals”.
Unisys has some technology nuggets but its position as a provider of generic infrastructure services is putting a stranglehold on growth prospects. One of Peter Altabef’s (CEO) strategic aims is to provide “security in everything we do”, alongside improving the company’s vertically aligned approach to market. For example, the company has just launched its digital banking platform designed to enable financial institutions to provide more secure banking services. These are exactly the right moves to make. If you’re an IT services supplier that doesn’t have scale, you’ve got to differentiate strongly from the crowd. Unisys has some really interesting puzzle pieces, but too much of the overall picture is dominated by low growth/low margin business.
Posted by Kate Hanaghan at '08:27'
Very little to report on ARM’s Q2 as last week’s SoftBank deal (See Sadness as ARM falls to SoftBank) meant that no forward guidance could be given.
PBT grew 1% to £95.9m on revenues up 17% at £267.6m. Dividend to be boosted by 20%.
In normal circumstances, the ‘read across’ from Apple results (See Pleasant surprises from Apple) would have given reassurance to ARM’s investors. But ARM’s future is now more in the IoTs – and autoTech could figure strongly here – than in smartphones.
Personally I think the ARM board was wrong to sell out to SoftBank. ARM is a great UK tech company and I – for one – had every intention of backing it into the future.
Posted by Richard Holway at '07:54'
Sage CEO and chief showman Stephen Kelly sure knows how to throw a party. Today will be Day Three of the 2016 Sage Summit in Chicago, with an all-star cast helping him bang the drum. It rather reminds me of the once (and only once, thank goodness) I attended a marketing jamboree held by CA in New Orleans many years ago when (then) CEO Charles Wang literally burst onto stage riding a motorcycle (for reasons which escaped me then as now) and featured ex-US President Jimmy Carter as one of the keynote speakers. I must admit, I thought those sorts of circuses were well past their use-by dates, but there we go.
All this is prelude to Sage’s Q3 trading update which reported an easing of organic growth to 6.0%, compared to the 6.2% recorded at half-time (see Sage successfully hunting subscriptions in H1). Nonetheless, management ‘remains confident’ of reaching its 6.0% organic growth FY guidance, along with a 27% ‘organic’ operating margin. Management is not expecting a ‘material impact’ due to BREXIT – indeed, the fall in the pound will favour Sage, which generates almost 80% of its revenue from outside of the UK.
Meanwhile, back to the show, where ringmaster Kelly announced lots of new stuff yesterday in his ‘vision for the tech revolution’. I just never knew that accounting software could be this exciting.
Posted by Anthony Miller at '07:49'
Atos’ H1 results are strong: revenue up 18% at constant exchange rates and up 1.7% organically (to €5,697m). Momentum seemed to continue into Q2 when organic growth stood at 1.8%. Operating profit also improved in H1, growing 23%, and pushing the margin up to 7.8%. The strong performance has given Atos cause to raise its expectations for the full year (for revenue, profit and free cash flow) – at the revenue level, organic growth is expected to be between 1.5% and 2.0% (vs. the 0.4% previously expected). Notably, the company believes it will see very little Brexit impact, “due to our low exposure to discretionary IT spending in financial services in the UK”. Time will tell, of course.
All service lines were in positive territory, albeit only marginally in the dominating parts of the business: managed services (+0.6%) and consulting & systems integration (+0.5%). The strongest growth area, though from a low base, was “big data & cyber security” (the closest that Atos gets to reporting on its ‘digital’ progress – see Measuring Digital Services), which grew revenues 12.8% to €302m; growth was in all geographies with particular strength in the public sector. Atos makes the comment that it is being successful in leveraging its position in Managed Services in order to cross-sell the skills and expertise of all service lines. Growth, it says, is being driven by both cloud migration projects and digital transformation projects.
In the UK, the H1 performance was impacted by the expected Q1 revenue dip (see Q116: Revenue dip as expected). As a result, UK&I was one of only two regions (the other being Benelux & the Nordics) to suffer a decline in the period – revenues fell 4.6% to €918m. The operating margin in the UK fell from 10.3% to 9.7%. However, improvement in Q2 is apparent – the decline in the last reported quarter was just 1.5%, or just €7m, to €471m. It looks like consulting and SI has picked up in UK&I – the global book to bill ratio of 106% in this area was put down to “several contract wins in UK & Ireland in particular”. Atos also renewed its large Personal Independence Payments (PIP) contract with DWP over the period, which will have positively impacted Managed Services. We will be speaking to UK CEO, Adrian Gregory, and will have more later…
Posted by Georgina O'Toole at '07:36'
As Apple pleased the market, so Twitter disappointed…again. So much so that Twitter stock sank 10% in after-hours trading. The problem is that user growth has ground to a halt – up just 3% in the latest quarter on top of an even lower 1% growth in the quarter before that. So, at 313m users, that’s a minuscule 9m extra in a whole year since CEO Jack Dorsey regained the reins. On the same measure 1.65b people sign into Facebook each month.
Twitter still has a tiny % of digital ad spend (c1.4% according to eMarketer). It seems to be having great difficulty in getting the all-important ‘engagement’ with users and therefore monetising its services.
At least Twitter managed to lower its losses to $107m from $136m last year. But, after all these years, it is depressing that Twitter is STILL loss-making at all!
I’ve expressed my own views on Twitter before. I think it is cluttered and difficult to use. Although I do use it for some tasks – and, indeed, TechMarketView has a loyal band of Twitter users - I can’t remember seeing an ad or ,even less, engaging with one. The Facebook ad experience is quite, quite different. Also, whereas I use Facebook several times a day, I tend to turn to Twitter when an ‘event’ occurs – everything from a terrorist atrocity to broadband outage. I guess that’s why the outlook of £590-$610m for Q3 was so disappointing which in turn led to the stock ‘crash’.
If I was Dorsey, I’d be looking to do a LinkedIn right now…
Posted by Richard Holway at '06:40'
Reports of Apple’s demise were proven wide of the mark tonight as Q3 results beat expectations and Apple stock immediately rose c7% in after-hours trading to over $103. The first time it’s been over $100 in a long while.
Revenues of $42.4b were better than expected - albeit down 14.6% yoy and the second quarter of revenue decline. Profits also declined from $10.7b to $7.8b yoy – but again better than expected. It was sales of 40.4m iPhones that really pleased the market. Looks like the iPhone SE was a real hit – but its lower selling price hit average unit prices.
Revenues from Apple Services rose 19% yoy to a massive $6b – or as CFO Luca Maestri said, ‘Services will be as big as Fortune 100 company next year’. We rather like services – particularly those involving recurring revenue like the iCloud, Apple Pay etc. The App Store grew revenues by 37% with particularly strong revenues from music subscription services. You can earn it whether you are using the latest – or an old - Apple device. So this big rock of revenue bodes well.
Although iPad unit sales declined from 10.9m to 9.95m, revenues grew by 7% to $4.88b thus demonstrating that users are going for the higher priced iPad models like the Pro. Mac units slipped 11% yoy and sales were down 13% yoy at $5.24b. I guess many a PC maker would probably think that was quite good!
The outlook for Q4 was also better than expected. Highly significant as it would cover the first weekend of iPhone7 sales in Sept. On the call, Apple said Q2 would be seen as the ‘low point’.
What Apple needs is a NBT. Clearly the Watch is not it. See Smartwatch market plummets. But continued leaked news about the Apple Car (or Apple’s entre into the autoTECH sector) continues to excite. The autoTECH market will be many times the size of the smartphone market and Apple really could rejuvenate itself here. Whether it does it alone or via a partner/acquisition is open to debate. With an ever growing cash hoard, Apple certainly has the means to buy anything that took its fancy.
Footnote – Apple was asked on the call about the UK (which is c5% of their global revenues) post BREXIT. “We have not seen any meaningful impact on our business in the UK’.
Declaration – I’ve been an Apple shareholder since 2004 and have no intention of selling.
Posted by Richard Holway at '06:27'
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Posted by IP EXPO Europe at '00:00'
Telecoms watchdog Ofcom again fell short of forcing BT to split up, instead insisting that its Openreach network infrastructure division become a legally separate company within the BT Group.
BT agreed to the re-organisation of Openreach but not a full-blown separation. Instead the telco will appoint an Openreach Board featuring a majority of independent members in consultation with Ofcom to maintain greater autonomy, and add an obligation to serve all its customers equally to its Articles of Association.
That sounds like BT going through the motions to appease Ofcom whilst keeping Openreach very much under its wing and fighting a break-up of the BT Group. But equally, splitting up BT would be a long, messy process that would damage UK broadband infrastructure investment in the short-term.
Ofcom’s original proposal is unlikely to have satisfied rival broadband service providers that currently lease BT’s “last mile” DSL network to connect their own customers anyway. TalkTalk, Sky, Vodafone and others have long complained that BT has no incentive to deliver the speed of access and service levels they require. A report by the Culture, Media and Sport Select Committee criticised BT for under-investment in Openreach and poor service last week, though we suspect its publication was carefully timed to add to the pressure from Ofcom.
The fear for UK businesses, and broadband service providers, is that BT’s current three year, £6bn investment programme will focus on fibre and mobile networks at the expense of the existing DSL network and improving customer service.
In the year to March 2016 Openreach generated £2.7m of EBITDA and Operating Free Cash Flow of £1.4bn (after capex of £1.4bn). The true indication of BT Group’s commitment to an independent Openreach will be the extent to which Openreach is allowed to invest its own cash.
Posted by Martin Courtney at '09:42'
Information management provider Idox is making another acquisition, this time entering the social care and health space, acquiring Open Objects Software Ltd (Open Objects), for up to £5.2m (see Idox grows 26% in H1).
Open Objects adds last year’s acquisitions of Cloud Amber and Reading Room - and all part of CE Richard Kellett-Clarke’s ambition to turn Idox into a £100m business in the 'short term to medium term'.
Idox is paying 1.7x revenue for Cambridge-based Open Objects, which employs 36 staff, and generated revenue of £2.9m in the year ended 31 March 2016, and an operating margin of 22%. It specialises in the adult social care and family services space, where customers include ‘60% of the top tier local authorities in England’ including Manchester City Council, Kent County Council, Staffordshire County Council and LB Hackney.
Open Objects offers managed cloud services such as information, advice and guidance hubs, social care marketplaces, special educational needs hubs, online care assessments and practitioner portals. It also offers a self-serve information management platform called Atelus for the broader public sector.
Open Objects is cited as a competitor to one of Little British Battlers (LBBs), social care specialist Quickheart, who we assess in Little British Battlers – The Fifth Dimension. There are huge pressures on the NHS to reform; to react to increasing demands on the system as a result of a growing and aging population. TechMarketView subscribers can read our analysis of where we see the future opportunities in our report IoT and analytics opportunities in health and care.
Posted by John O'Brien at '09:15'
When we wrote last year about the new funding round for Silicon Roundabout-based data consultancy and training start-up, Big Data Partnership, we ended with the comment ‘Right time, right place’ (see Beringea goes bigger on Big Data Partnership).
Clearly Teradata, the US-based data warehousing giant, thought so too, as it has just acquired the company. Terms were not disclosed, though it is unlikely that the price paid would make a visible dent in Teradata’s near-billion-dollar cash pile, given that the startup had raised little over £4m since its founding in 2012. Teradata, currently nursing losses, had revenues last year of $2.5b, 7% lower than in 2014.
The acquisition raises questions on the future of London-based TechMarketView Little British Battler startup, Massive Analytic, which flagged Big Data Partnership as an R&D partner (see Massive Analytic: big data for mere mortals and Little British Battlers – The Third Wave). Earlier this year, Massive Analytic, founded in 2010, was one of the winners of the UK Ministry of Defence Growth Partnership Innovation Challenge, sharing a slice of a £2m ‘big data’ contract. By the end of 2013 the startup had raised some £600k in angel funding and grants, and we believe they undertook a further £1m+ funding round last year. One suspects approaches will be made...
Posted by Anthony Miller at '08:48'
GB Group, the Identity data intelligence specialist, has appeared in HotViews recently with results showing organic revenues up 16% (see GB Group reaping rewards…) and its recent acquisition of IDscan Biometrics (see here). And according to today’s AGM statement things are still going well.
Trading performance is meeting expectations, boosted by the growth vectors of rising cross-border e-commerce, increasing fraud and tougher compliance requirements. Two new contract wins, with Creditsafe (a supplier of company credit cards) and the new gambling venture fronted by the Sun newspaper, should also spur growth.
Last year, overall revenue growth totalled 28%, the additional 12%pts being supplied by acquisitions, principally the US-based Loqate business. Current year figures will be further embellished by IDscan, which although relatively small in revenue terms does offer good cross-sell opportunities. GBG remains on the hunt for further deals.
The key question of who will be CEO as Richard Law departs remains unanswered, but the company holds out the prospect of an end-September appointment. With rapid organic growth and the need to manage acquisitions, the sooner the better.
Posted by Peter Roe at '08:32'
The UK decision to leave the European Union added to the general volatility in the market and caused an immediate drop in stock values around the world. Most stocks quickly recovered, but with only a week before the end of the quarter, the differing speeds of recovery of some stocks led to a rather distorted view of the underlying performance.
In the latest edition of IndustryViews Quoted Sector, we look at the performance of key UK tech-related stocks during Q2 and contrast with leading European, US and Indian peers.
And as ever, there’s our ranking of the Top and Bottom Twenty UK software and IT services stocks, along with a summary of the ‘Dearly Departed’ who have exited the London markets and the Newly Arrived.
All this and more in six chart-packed pages can be yours – but only if you subscribe to the TechMarketView Foundation Service. Those that do can download IndustryViews Quoted Sector Q2 2016 here. Those that don’t should not tarry in contacting our Client Services team to find out more.
Posted by HotViews Editor at '07:47'
We do love to hear of the successes of our previous Little British Battlers (LBB). This time it is Pythagoras (see Little British Battler Report – the Magnificent Seventh) that has come up trumps, announcing a partnership with the British Museum’s International Engagement team to deliver a new customer relationship management (CRM) system. The aim being to improve the Museum’s management and engagement with global partners on international projects.
The project involves the Museum’s first implementation of Microsoft Dynamics. Readers will remember that, as a Microsoft Gold Partner, Pythagoras’ raison d’être is enabling clients to maximise their investment in technology and Microsoft environments (see LBB Pythagoras Communications – delivering the Microsoft stack). When we met Pythagoras the company was growing strongly and it sounds like the success has continued. Other recent projects have been with Enfield Council and a “major northern university”.
Posted by Georgina O'Toole at '18:23'
The mission to ‘join up justice’ in the UK seems to be a hot topic of conversation at the moment, as pressure to improve the workings of our Courts system increases. Unfortunately, the action so far hasn’t really lived up to the rhetoric. However, Northgate Public Services is ensuring it has the solutions that will sit at the heart of the system… and perhaps start to accelerate progress if adopted. It has developed an end-to-end digital evidence solution, covering the period from initial investigation through to sentencing. The solution is called “CONNECT Digital Assets” and enables the user to build a multimedia Crown Prosecution Service case file from the array of media now available, including body-worn video and CCTV. It has partnered with Fotoware (for its Digital Asset Management Platform) and its partner, MediaLogix, to develop a solution ready for the UK market.
Northgate already has a strong footprint in criminal justice, earning estimated turnover of c£33m from the police sector alone last year. It has invested heavily in its integrated operational policing system (the Connect platform) (see Public Sector Opportunities Bulletin – June/July 2015) and has been one of the software partners on the Home Office Police National Database (PND) contract since its inception. Indeed, much of the company’s public sector success has been due to its investment in relevant and repeatable IP in its target sectors. This latest investment targets the requirement for police forces and prosecutors to prepare Digital Case Files as set out in the CJS Efficiency Programme; the programme has been working with police forces to help them develop the capability. We have already seen evidence of police forces investing in this area (see Public Sector Opportunities Bulletin – January 2015.
CONNECT Digital Assets can operate as a stand-alone system but, importantly, it can also integrate with operational policing systems (or with NPS’ Socrates Forensic Case Management System). The system will allow for simultaneous searches across a range of multimedia evidence based systems, including those focused on cybercrime or those capturing evidence from the public (e.g. via social media). We will follow its progress with interest.
Posted by Georgina O'Toole at '18:05'
After all the rumour and anticipation, it was almost an anti-climax when it was announced that Verizon would buy the ‘core’ of Yahoo for c$5b. Just to be clear, the deal excludes Yahoo’s stake in Alibaba and Yahoo Japan – or indeed Yahoo’s cash and its non-core patents. Given that these bits are worth c$40b v Yahoo’s market cap on Friday of c$37.4b, it will be interesting to see where Yahoo shares open in the next hour.
No news yet on the fate of CEO Marissa Mayer – other than that she if she left it would be with a severance payout of $57m. Talk about rewards for failure… My views on Mayer are well known so I will not repeat them here.
I guess it might make some sense as Verizon bought AOL for $4.4b last year although the old adage ‘Buying two turkeys does not an eagle make’ comes to mind. These are Yesterday’s Companies. I just cannot see how anyone is going to turn them around. AOL still make a lot of their revenues from subscribers who have never moved off dial-up internet access! Yahoo is great for News, Finance etc but has NEVER found a way of monetising it. Will Verizon fare any better? Or perhaps it just doesn’t care? OK, Verizon makes it dosh from comms – mobile in particular. But I am just as likely to rake up the minutes using Facebook – or Pokeman GO – than Yahoo.
Anyway, yet another dot.com high-flyer effectively bites the dust.
Update - I've just received the official Press Release. Mayer seems to think she is staying on! Uses such phrases as 'It's poetic to be joining forces with AOL and Verizon..." and "I couldn't be prouder of our achievements to date..". I am speechless!
Posted by Richard Holway at '13:12'
- 1 comment
Civica continues its pursuit of digital prowess in central government. First it was Web Technology Group (WTG – see Civica bags WTG for leg-up into Whitehall). Then it was IPL (see IPL part of digital solution for ambitious Civica). Now it has made its next move with the acquisition of SFW. SFW made revenues in FY16 (to end March) of £12.5m (up from £11.9m), so will significantly boost Civica’s central government business, which accounted for 10%, or £30m, of Civica's turnover in its FY16 (see Civica: planning for growth).
We have written previously about Woking-based SFW. It was one of the early winners under the UK Government’s G-Cloud framework (see UK Government G-Cloud: Meeting its objectives), predominantly for agile development services (in Lot 4: Specialist Cloud Services). Over 2015/16 the company underwent a “major transformation” to focus strategically on digital services in the public sector; this resulted in four core practices – customer relationship and case management; content and collaboration; digital engagement; and public sector cloud. Whitehall clients include the Home Office, Defra and DECC, as well as non-departmental public bodies such as the Environment Agency, Acas and the Electoral Commission. Also amongst its 70 clients are organisations in the local government and regulated markets.
Adding SFW’s capabilities in digital engagement, CRM-based applications and workforce collaboration means that almost a third of Civica’s 3,500 employees have specialist digital capability. Interestingly, SFW also boasts an offshore delivery centre in Vadodara, India (see How SMEs are playing the offshore game’); a platform that Civica states will be important in terms of supporting the development of a flexible “right-shoring model”. It doesn’t look like the model has always been successful for SFW. In FY15 (to end March), the company’s operating margin was just 0.5%. Enhanced project controls and a new financial reporting framework have since been implemented, leading SFW to significantly improve the margin to 6% in FY16. But it looks like an area which Civica will need to look at carefully. We know, though, that Civica is well-practiced at integrating acquisitions; it has had plenty of experience.
Posted by Georgina O'Toole at '09:55'
In March we wrote about Gresham Computing’s excellent performance throughout 2015, see here, where they launched a cloud-based, as-a-Service option for their Clareti transaction control and data integrity software (CTC) and announced 11 new customer wins.
Now the management team indicates that this strong progress has continued throughout the first half of 2016, with six new CTC customers added, three of whom are in the US. Overall group revenue growth is expected to be 10% over the first half of 2015. This does represent a slow-down from the 16% growth reported in 2015, but this will be largely due to the phasing of legacy contracts. CTC revenue growth remains very strong, up 44%, with recurring licence revenues up 47%, albeit showing a small decline on the 51% reported last year. The continued revenue growth and the shift away from project-based consultancy services should also enable an improvement in EBITDA margins.
In addition to new customer signings, we would also expect good news about greater share of wallet and additional benefit from focusing on customers in the capital markets and transaction banking sector.
The interim results are expected on August 24th.
Posted by Peter Roe at '09:52'
Recently troubled Tungsten Corporation, the provider of e-invoicing, purchase order and financing services, announces its results for the year to end April 2016.
Revenue was up 16% to £26.1m and Adjusted EBITDA losses were cut by a quarter, to £18.7m. After tax losses however totalled £27.9m after a £6.8m write off after agreeing to sell off Tungsten Bank, bought in a soon-to-regretted deal in early 2015, see here. The sale should complete by the end of October, generating £30m cash and reducing costs by £2m p.a.
The new management is focusing on its core e-invoicing network business and driving its portfolio with services such as early payment financing and analytics. The strategy of focus and tighter cost management was implemented in the second half and management considers that through this, the rate of growth improved significantly and has established a good foundation for the current year.
The intention is to automate the end-to-end transaction process and thus assist the digitalisation of their customers. Some 34 buyers (from a total of 175) have renewed their contracts, with an average rate increase of 64% and 11 new buyers have been added, with the connected supplier network growing by 22k to 203k. Network invoicing value increased by 13% to £133bn.
Tungsten is operating in a very competitive market, but management appears to be focusing on the correct issues to create a more sustainable business, in terms of more efficient on-boarding, avoiding rate discounting and extending the services portfolio. However, the scale of profit improvement required is still daunting and £10m further investment will be needed to improve internal processes, new services and technology. Management expect of £12-14m loss for the current year, but look to reach EBITDA breakeven on a monthly basis during 2017.
Posted by Peter Roe at '09:49'
As Proxama holds its AGM today, its management will update shareholders on the expanding beacon network where it is focusing its attention and which it hopes will guide it to profitable growth.
Recent successes include the building out of the beacon network to Premiership football grounds and nearby watering-holes and across commuter and tourist hot-spots in London, adding 1,000 locations in a few weeks. In addition, Proxama is partnering with media companies to drive advertising campaigns and also to monetise the network more effectively by working with PubMatic.
The company’s plans to dispose of its payments business appear to be progressing, but it this taking time, see here. The plan is to transform the business by focusing on proximity marketing and to be trading cash positively by the end of 2017. The progress of the numerous partnerships, as well as getting usage numbers up across the beacon networks, will be fundamental to the successful realisation of this strategy.
Posted by Peter Roe at '09:46'
It appears that the sale to Blackstone of HPE’s ~60% controlling interest in Bangalore-based mid-tier offshore services firm, Mphasis, is not yet complete (see Blackstone gets go-ahead for Mphasis deal), but meanwhile there’s business to be done.
Perhaps not surprisingly, growth slammed to a halt, with headline revenues in Q1 (to 30th June) unchanged from the prior quarter at Rs15.17b (~$226m). However, Mphasis continued its operating margin march, which at 15.2% was 250bps higher yoy and 70bps up qoq. Also not surprising was the continued drift away from HPE’s customers, from whom Mphasis derived 23% of its revenues vs 29% 12 months prior.
The mid-tier Indian pure-plays are having rough time just now (e.g. see Margins squeezed again at Mindtree and Weak start to new FY for NIIT Technologies) so Blackstone will have a bit of a job on its hands kick-starting growth at its new ward. But with Blackstone’s deep pockets, one assumes that acquisitions will be on the agenda. There’s certainly many targets to choose from.
Posted by Anthony Miller at '08:44'
AIM-listed network service provider CityFibre enjoyed strong momentum in the first half of the year. Its latest trading update estimates contract value totalled £53.8m in H116, up 664% from £8.1m in H15 and more than double the number for the whole of FY15.
CityFibre offers a mix of high speed fibre broadband services to both business and consumer customers in multiple UK cities - and 1Gbit/s links in Aberdeen Coventry, Edinburgh, Glasgow and York - where alternative fibre or xDSL links from rival providers are either slow or unavailable.
We would kill for bandwidth like that here at TechMarketView (if only we could get it) and it looks to us like CityFibre is doing a good job of both signing new customers and upselling extensions or upgrades to key existing accounts. An network connectivity contract with Serco in Peterborough was extended earlier this year; 109 schools and public sector sites were linked within its Capita IT Services agreement, and CityFibre also signed a Master Services Agreement (MSA) with Level 3 Communications.
The company continues to expand its reach through service provider relationships and enlarge its fibre network footprint to open up sales opportunities in new UK cities. CityFibre has borrowed heavily to fund that expansion (£90m on the acquisition of KCOM Group assets alone) as it seeks to establish itself as a viable competitor to BT Openreach and Virgin Media.
If it continues on the current upward trajectory, we think CityFibre may even turn a profit this year after two years of consecutive losses since its IPO in 2013.
Posted by Martin Courtney at '08:30'
NetDimensions shares have slumped by almost a quarter after warning on both first half and full year 2016 revenues.
Management of the performance, knowledge and learning management provider, said delays in deal roll outs meant revenue for the H1 period was broadly unchanged on H115, and this looks likely to continue into the second half of the year. This time last year, Netdimension achieved 16% revenue growth, and 12% in the full year (see Netdimensions solid in high consequence industries). So a rapid reversal in fortunes.
The company is wisely keeping a tight control on costs to weather this dowturn, with H1 EBITDA losses being trimmed to -$1m vs. -$1.8m last time.
Posted by John O'Brien at '08:24'
Will you be joining us for drinks, dinner and a stimulating debate on the disruptive trends and suppliers shaping the UK software and IT services sector on September 8?
Our fourth annual ‘Evening with TechMarketView’, which is sponsored this year by NetSuite, will take place in London on Thursday 8 September 2016. If you'd like to join us there don't leave it too late - you can book by clicking here.
Following the success of the sell-out 2015 TechMarketView Presentation & Dinner, this year’s event will once again be held in the magnificent premises of the Royal Institute of British Architects (RIBA) in Portland Place, London, from 6.15pm.
The evening, which will be centred around our 2016 research theme ‘Surfing the Waves of Disruption’, will commence with short, insightful presentations from the TechMarketView analyst team highlighting key trends in the UK software and IT services market. As in previous years there will also be a guest appearance from the CEO of a disruptive ‘Little British Battler’ company.
The formal part of the evening will be followed by ample time for networking over pre-dinner drinks, sponsored by Wells Fargo, and a sumptuous three course dinner with your peers.
We’re expecting a similar audience to the previous three years with around 250 ‘movers and shakers’ from the UK tech scene, for what has been described by previous C-level attendees as “the best networking event in the industry”.
TechMarketView Presentation & Dinner 2016
Venue: Royal Institute of British Architects (RIBA), Portland Place, London
Date & time: Thursday 8 September 2016, from 6.15pm
Ticket price: £395+VAT per person for TechMarketView research subscription clients and £495+VAT per person for everyone else.
There are also a few tables of ten still available at £3,950+VAT – ideal if you fancy bringing the team along or entertaining clients and prospects.
To secure your place, please click here to book or email tx2 Events who are organising the evening for us on firstname.lastname@example.org.
The TechMarketView Presentation & Dinner 2016 is proudly sponsored by:
Posted by HotViews Editor at '08:00'
How much of your IT services business is ‘digital’? Twenty percent? More? Less? None? All? Don’t really know?
We’ve seen almost all these responses (unsurprisingly except ’None’!) in public statements made by some of the leading suppliers of IT services as they jockey for position in the digital services market.
The question is, what are they measuring and how?
TechMarketView Managing Partner, Anthony Miller takes a passing look at vendor claims for their digital businesses to see if we can divine any meaningful measures of digital services.
Subscribers to the TechMarketView Foundation Service can download Measuring Digital Services here. The otherwise unenlightened should drop an email to our Client Services team to find out more.
Posted by HotViews Editor at '07:32'
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Posted by NetSuite at '00:00'
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