After yesterday’s results from BT, see here, we were pleased to note that management and analysts paid greater attention to the fortunes of Global Services. It had seemed that all the news flow and new investment over the past year or so had been centred on BT Vision, broadband and Consumer mobile ambitions. So it is also good to report that BT Global Services has now added two UK data centres to the BT Compute portfolio to support its Cloud of Cloud Proposition (TechMarketView subscribers can see our HotViewsExtra on this proposition here).
Capex has been under pressure at Global Services for some time, falling 6%, 4% and 9% in successive years since Fiscal 2012, declining again in Q1, and the UK operation would have been particularly affected. Cost cutting programmes have been equally severe. Global Services could emerge as a leaner, more agile organisation, but if the company is to succeed in generating growth, margin and value in its UK operations some additional investment will be required.
Cloud of Clouds is a good step forward and plays to BT’s strengths. The securing of capacity in new, highly secure and efficient data centres (provided by Ark Data Centres) is a further step in the right direction. The greater proportion of a customer’s traffic and computing load that BT can manage directly within its own infrastructure the more secure and efficient the service, the lower the cost to serve and the greater the margin available to BT.
Posted by Peter Roe at '09:52'
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Sophos Group delivered a sweet message with its first trading update since its large and welcome £1bn London IPO in June (see here). Q116 (to June 30 2015) showed growth across all regions and products, despite currency headwinds.
In terms of the numbers, revenue was up 8.4% yoy to $113.5m, with billings rising 11.5% to $113.3m (or 24.7% currency adjusted). Cash EBITDA was marginally down - $16.5m vs. $16.7m - but the company says that was due to a change in the phasing of marketing spend as it moved to spread spending more equally over the year in FY16 compared to the H1 bias in FY15. Sophos is still expecting a cash EBITDA margin no lower than the 21.3% of FY15.
Adjusted billings were on an upward trajectory during FY15 (9% in Q1, 16% in Q2, 18% in Q3 and 24% in Q4), so the challenge is maintaining momentum post IPO. The 24.7% of Q116 was a good start and guidance for the full year is maintained at the mid-teens level, against strong comparatives.
Security is a rising market but as Symantec’s (lack of) performance shows, suppliers have to work to make progress and Sophos is doing just that. What is reassuring is the growth in Sophos network security solutions (up 18.3% reported, 33.6% adjusted), its focus on unified threat management and work on Project Galileo, its next generation integrated endpoint protection solution which is due this year. These are all high growth areas with further potential to fuel organic growth. Sophos is also looking at acquisitions (in addition to the $15m purchase of cloud security provider Reflexion Networks in June 2015) to broaden its capabilities in areas such as integrated cloud security for example. Competition is rife but Sophos has a lot to play for and is in a good place.
Posted by Angela Eager at '09:51'
Iwoca, the UK-based SME lending platform has raised US$20m in a funding round with CommerzVentures, the VC arm of Commerzbank, taking a stake in the business.
Iwoca’s website offers credit facilities to small businesses for up to £100k, with the promise of rapid quotations and decisions and the money transferred into the SMB’s account within hours. Iwoca can typically lend up to one month’s revenue for the client business. This approach to lending decisions and customer experience is a far cry from typical incumbent banking practice, presumably heightening Commerzbank’s interest. As the market for alternative lending grows, there is the prospect of good organic growth by lenders such as Iwoca, but the real prize would be the absorption of the entire operation into a major incumbent as they seek to modernise quickly.
CommerzVentures was founded in October 2014 and the only other investment they have announced is that in eToro Group which runs the social investment and trading platform “OpenBook”.
Posted by Peter Roe at '09:46'
It’s been a busy few days for Stripe, the online and mobile payments systems provider. The first objective was to conclude a new round of financing, reputedly valuing the company at US$5bn and raising up to US$100m, having raised US$70m in December. According to TechCrunch, Stripe has also signed a formal cooperation agreement with VISA Inc which participated in the placing. VISA’s participation shows another facet of its move to open up several development strands, for example moving away from its link with Monitise and deciding to expand its own development centres. VISA Inc is also looking to buy back the VISA Europe operation which had been separated from the US business in 2007. VISA Europe is owned by the banks participating in the VISA system.
The relationship with VISA will broaden Stripe’s geographical reach and penetration into VISA’s merchant base. VISA should in turn benefit from Stripe’s technology in terms of ease of use and security as well as its extensive capability in APIs which enable the Stripe system to inter-operate across devices and with other systems. This could prove to be a very important development for both organisations.
Stripe has also announced that it is to use Earthport to provide global payments delivery and distribution. Whether this opens the door to a closer collaboration between Earthport and VISA remains to be seen.
Posted by Peter Roe at '09:36'
Learning Technologies Group (LTG), the Brighton-based, born-again e-learning business formerly known as Epic (see Epic – what goes around comes around), has made another acquisition and will pay the cash element with the proceeds from a new share placing.
LTG is to acquire London-based Eukleia Training for up to £11m, with £6m cash and £1.5m in LTG shares up front, and the rest on revenue-based earn-out. LTG is raising £7.5m gross through a share placing at 21p, a 10% discount to last close.
Eukleia, founded in 2005 and wholly owned by management and senior employees, specialises in GRC (Governance, Risk and Compliance) training (e-learning and classroom) for the financial services market. Eukleia had revenues of £4.9m last year, with EBITDA of £0.6m and PBT of £0.5m. LTG is due to report its FY15 results next month having recorded half-time revenues of £6.5m (see Learning Technologies: managing its appetite).
On the face of it, Eukleia looks a good fit – right place, right time, right topic!
Posted by Anthony Miller at '09:33'
At the beginning of the month, Colt announced that it would exit IT services – see Colt throws in towel on IT services – focusing on Network, Voice and Data Centre Services. We can start to see the impact of the change in strategy on the H1 results. Group revenue for the period increased by 2.6% to €790.8m, but the increase was predominantly down to currency movements. On a constant currency basis, revenue declined 1.3% (though ‘underlying’ revenue growth, including proforma revenue from Colt Asia and excluding low margin voice carrier contracts (being exited), was 0.2%. Within the mix, the core Network Services business grew 4.5% to €433.9m and Data Centre Services grew 1.3% to €57.5m, but Voice Services declined 28.7% to €186.1m, as the Group withdrew from the aforementioned low-margin carrier voice trading contracts (another strategic decision). In total, revenues from the “Core Business” increased from €732.9m to €757.5m. Meanwhile, the now non-core IT services business saw revenues fall 11.2% to €33.3m.
The exit of the IT services business also impacted on the profit line. The Group recognised €128.4m of exceptional expenses during H1 2015 including a non-cash impairment expense of €87.1m in relation to the exit of IT Services, and associated restructuring expenses of €32.2m. On a constant currency basis Group EBITDA grew 6.7%. The IT services business generated an EBITDA loss of €7.7m though this was an improvement on H114 as lower personnel costs were recorded. The exit of the IT services business will continue over the next two to three years, as Colt continues to honour existing contracts. And doubtless we can expect more strategic announcements once the acquisition of Colt by Fidelity is approved – see Fidelity in bid to buy rest of Colt.
Posted by Georgina O'Toole at '09:17'
Thank goodness Coms plc - the rebranded infrastructure services remnants of AIM-listed Redstone – managed to find a buyer for its Telephony Services business as it is a disaster story. But even the £13.6m in losses that Telephony accounted for in the FY results (to 31st Jan. 2015 – ‘only’ 6 months after close!) would still have left Coms under water.
Coms is now left with the original Redstone business, which generated £29.5m in revenues but just £246k segment profit, and animation studio Darkside Studios (snappy motto: "Come over to the Darkside"), with revenues of £1.1m and £51k segment profit.
It would be fair to say that new CEO Mark Braund (see InterQuest CEO defects to ‘night job’) has a heck of a job ahead of him, including sorting out a legal dispute with Coms’ former CEO, along with resolving potential claims and disputes relating to the Telephony Services division.
No distractions there, then.
Posted by Anthony Miller at '08:59'
Accenture has renewed a long-term business process services (BPS) contract with BT Group, to continue administering the BT Pension Scheme (BTPS) for another eight years.
BTPS is one of the of the largest private sector pension schemes in the UK, with a fund worth more than £40bn (June 2014), and with more than 300,000 members. Although the contract value isn’t disclosed, this is clearly a major award – we estimate worth in excess of £100m to Accenture over the period. It will delivered primarily from Accenture’s dedicated pensions services centre in Chesterfield, and supported by a smaller team in Bangalore, India.
Accenture and BT’s relationship in BPS goes back 15 years to 2000, when they set up a 50:50 HR joint venture called e-peopleserve, designed to support both companies with recruitment, payroll and pensions, and go to market for new business. BT decided to pull out shortly after in 2002 to pay down debts, and instead contract with Accenture for HR. e-peopleserve then formed the base of Accenture’s HR services business, and which is now one of the global market leaders alongside the likes of IBM, AON Hewitt and NGA HR.
Over time, the mix of services provided to BT has clearly narrowed down to pensions administration – an area for which Accenture is less well known in the UK market than largest players Capita and Equiniti, both of whom we would expect to have bid hard for the deal (see UK Business Process Services Supplier Landscape 2015). The renewal is therefore testament to a successful long-term relationship between Accenture and BT.
Posted by John O'Brien at '08:49'
Offshore business process services (BPS) pure play EXL Service has raised guidance for FY15 following its three recent acquisitions (see EXL buys insurance analytics player for $74m and work back). It's also clear that the M&A spree is helping drive renewed organic growth for EXL.
Headline revenues, excluding disentanglement cost and transitioning clients, were up 24% to $155.6m, of which 14.2% was organic growth in constant currency (ccy). EXL now expects FY15 headline growth of 16%-19%, despite a currency headwind.
Growth is being driven by EXL’s analytics & business transformation services division, which grew 69% yoy (22% organically) to $43m (and 31% qoq) - and now accounts for around a third of the business. Operations management (which includes traditional BPO and newer platform and cloud-based services in areas like insurance and F&A) makes up the other two-thirds of the business. This grew 19% to $112.6m.
Profitability has been under pressure for some time now. However things are looking a little more encouraging. Operating margins were 9.8% vs. 5.1% last time, and up marginally from 9.4% in the previous quarter. Nonetheless, there’s still some way to go to achieve the double-digits being achieved by offshore rivals Genpact and WNS (see here and here).
EXL has five ‘strategic priorities’ according to CE Rohit Kapoor – winning strategic deals via its proprietary framework and BPaaS solutions; strengthening analytics and healthcare; integrating new acquisitions; diversifying its geographic footprint and improving profitability. It's making headway on some of these. We think much higher priority needs to be given to Business Process Automation (BPA) and Robotics - all the while rivals like Wipro, WNS and Genpact are building out strategies and implementation paths to remain competitive and retain customers (see Business Process Automation - a brave new world for BPS providers). EXL risks being left behind.
Posted by John O'Brien at '08:30'
It’s a hard slog at mid-tier, US headquartered consulting, services and outsourcing company Ciber. Now a year into a restructuring plan – and with a few months to go till it’s over – new CEO Michael Boustridge is starting to see some sort of a result (see Ciber Q1 shows some progress).
Progress in Q2 was mixed, with a slight improvement in constant currency revenue growth (+2%) though headline revenues, at $198m, were still 8% down yoy. But at least Ciber is still in profit, though the 1.5% operating margin was about half that of the prior quarter.
Ciber is hoping to make a mark here in the UK, with ex-BT executive Andy Nicholson leading the charge. But as a relatively unknown entrant into our market, they face stiff competition from the many local and international players fighting for turf in the enterprise space.
Posted by Anthony Miller at '08:15'
When you keep the customers happy they tend to ask for more. Such is the case for Fujitsu at Bidvest Foosdservice UK, the local subsidiary of the South African international services, trading and distribution giant, which has just extended a five year contract with Fujitsu for a further three years. The new deal will see Fujitsu host and manage Bidvest Foodservice's UK IT infrastructure and provide an IT service desk. Terms were not disclosed but we estimate the value could break into double-digit £m. It’s deals like these that keep the boilers stoked. Good stuff!
Posted by Anthony Miller at '07:46'
We recently attended an event where representatives from HP outlined the company’s Analytics and Data Management (A&DM) proposition; one of the seven practice areas in HP Enterprise Services. HP is looking to help deliver the data driven enterprise, chiming with our theme for 2015 - Joining the Dots.
Big Data allied with Analytics promises to help organisations get value from their data to deliver competitive advantage or improve public services. In this research note we take a close look at HP’s approach and consider its competitive positioning in the market. Subscribers to TechMarketView’s Foundation Service can download the research note – HP: Operationalising Analytics – now. If you do no subscribe to this research stream, please contact Deb Seth to find out more.
Posted by HotViews Editor at '19:44'
The growing pains that were evident in WANdisco’s Q1 (see here) continued into Q2 as the big data and application lifecycle management provider adjusted to the changes made to its sales organisation. Although revenue was up 7% to $2.7m yoy, sales bookings were down from $3.4m to $2.4m.
The two parts of the business continue to show different performance profiles and the company seems to be finding it hard get the right balance in terms of focussing resources. The ALM part of the business generated bookings of £1.4m (vs. $3.3m), with revenue of $2.2m (vs. $2.5m), with most of the sales bookings coming from renewals. According to management “sales to new customers are taking time to regain momentum after the steps taken to sharpen our focus on the ALM market and increase the productivity of our sales operations.”
The big data part of the business had a better quarter. Although sales bookings were modest at $1m that was a significant improvement on the $0.1m of the year ago period, while revenue was $0.5m compared to $0.1m, which is an indication that previous sales bookings are starting to generate notable revenue. More significantly, WANdisco secured 8 new customers for its big data products during the quarter. Its slow big data business build is continuing, aided by its Oracle partnership and relationships with Hortonworks and Cloudera customers. And the new WANdisco Fusion product that was designed to expand its addressable market appears to be doing its job.
Posted by Angela Eager at '09:55'
BT’s figures for the quarter to June showed Group revenue down 2% to £4.3bn and EBITDA ahead 1% at £1.45bn. Consumer again got most of the attention (and funding) with revenue up 3% and positive noises about mobile adds, broadband share and viewing figures. This will remain centre stage as BT pushes its Champions League exclusive (costing £300m per season), launches Ultra HDTV and trials even faster broadband (G.fast). The EE deal is expected to complete by March 2016.
BT Global Services showed another revenue decline, of 6% (-4% excluding transit), with the UK down 12%, largely with Public Sector declines. This period of double-digit declines is nearing its end as most of the larger health contracts have been delivered. Government spending plans however provide little grounds for optimism and BT’s traditional portfolio areas will remain under severe pressure. BT has also retreated from Local Government BPO business. Underlying costs were down a further 10% and additional savings have been identified in contract delivery and contact centres. 1Q underlying EBITDA was down 4%. Further reorganisation and consolidation is now anticipated in GS UK. A new head of GS UK was appointed earlier this month, see here.
GS has been more active in terms of new portfolio with the launch of Cloud of Clouds, see here. This marks a step up in terms of IT Infrastructure Services and plays to BT’s strengths. A big push in Cyber Security should also generate growth and margin. Orders had a good quarter, with Zurich Insurance (a new logo) signing a global network contract. Management held out the prospect for medium term growth for GS, and it is good to see that more attention is being paid to this important, and potentially more valuable, area.
Posted by Peter Roe at '09:55'
Capgemini’s global revenues were dragged down by the UK business. This was the first half-period (H115) impacted by the novation of Fujitsu’s subcontractor revenues on the HMRC Aspire contract. The impact was a 15.4%, or €187m, like-for-like fall in UK&I revenues to €1,026m. As expected, though, the HMRC Aspire impact was also to push up operating margins in the UK – they were up from 9.9% to 12.7%, making the UK&I now Capgemini’s most profitable region (on a margin basis) behind North America. Stripping out the impact of Aspire, UK&I revenues were described as “stable”.
At the headline, Group revenue was up 9% year-on-year to €5,608m (note, acquisition of iGate didn’t close until 30th June so doesn’t impact these results – see Capgemini/iGate: Vive la France!). However, organic growth was a lower 1.4%. Indeed, the quarterly revenue growth trend shows organic growth at its lowest for six quarters. Again, this is the impact of HMRC Aspire – we estimate that if you strip out the decline in Aspire, the organic growth rate in H1 would have been around 4.7%. Across the service lines, consulting revenues (4% of Group) increased 4% like-for-like thanks to ‘digital transformation’ work; local professional services (Sogeti) was up 0.5% with the UK highlighted as an area of strong growth; application services increased 5%; and other managed services contracted 7% like-for-like (impacted by HMRC). The global operating margin was up from 7.9% to 8.7%, representing a 21% increase in operating income.
Overall, this was a confident statement from Capgemini. Guidance for the full year has been increased due to the iGate acquisition, as well as success in digital transformation. It is now forecasting organic revenue growth of 12% and an operating margin of 10.3%. Capgemini claims that revenue from SMAC offerings was up 25% y-o-y in this half, now representing 20% of revenues. And while we’re aware that much of this could be down to ‘definition’ and ‘reclassification’, the top-line numbers suggest that the Group investment is paying off. Capgemini has paid particularly close attention to ensuring its portfolio of offerings evolves; for example by merging its Digital Customer Experience (DCX) and mobile solutions businesses at the beginning of the year (a theme that emerges in our recent report: ‘Mobile apps adoption in UK public sector’), and by launching a Cybersecurity Global Service Line. The result appears to be strong traction in certain verticals, notably financial services; consumer product, retail, distribution & transport; and energy & utilities.
Posted by Georgina O'Toole at '09:38'
The rollout of Windows 10 started as planned on July 29. Microsoft is taking a cautious approach and phasing the rollout. This should mean it can prevent outages from high volumes of downloads and fix any problems before they proliferate too far and tarnish the new OS. After Windows 8, which pushed users too far, too fast, Microsoft is focussed on brand and reputation management. Due to the extensive beta programme the new capabilities of Windows 10 are well known and it has been well received so far – now the adoption test begins.
There is a lot resting on Windows 10: from Microsoft’s credibility in the mobile market, to changes in how it's monetising its offerings, and how it is positioning to build new revenue from the Internet of Things (IoT).
Subscribers can read our thoughts in our UKHotViewsExtra comment Windows 10 Unleashed. Those readers who are not yet TechMarketView subscribers can find out how to subscribe by emailing Deborah Seth.
Posted by Angela Eager at '09:12'
Eschewing the maxim ‘when you’re in hole, stop digging’, management at AIM-listed network security appliance supplier Corero Network Security have decided instead to try to fill the hole (again) with more dosh.
Hence another dash for cash (see Corero investors dig deeper), this time for £5m gross, to support the development and marketing of its SmartWall TDS product. COO Andrew Miller (before you ask, nope) noted longer sales cycles in the very market the product is pitching into, and warned on FY results (again).
Miller also raised the prospect of delisting Corero from AIM, though expects to stay on the junior market ‘at the present time’.
So that’s all right then.
Posted by Anthony Miller at '08:46'
Recent acquisitions are helping to slow the revenue declines at IT and business process services (BPS) supplier Xchanging (see Xchanging’s Agencyport deal finally sets sail, and work back).
In H115, net revenue was down 3% to £199.4m, compared to falls of 24% and 23% in H114 and FY14 respectively (see here and here). The adjusted operating margin also rose to 10.2% vs. 9.8% last time. Excluding the £15m boost from acquisitions, revenue would actually have fallen 10% - nonetheless, still an improvement on where things were.
Xchanging also announced the retirement of CEO Ken Lever at the end of 2015, following four years at the helm (see Lever gets the top job at Xchanging). Lever has run the business during a very difficult time, and has done a creditable job taking some tough decisions, like refocusing the business away from legacy joint venture BPO deals to more technology and IP-led business process services. In fact, Xchanging now sees the legacy BPS legacy contract revenue reduction almost complete.
The insurance product suite Xuber is central to Xchanging’s turnaround. Although progress has been slow, there have been a number of smaller contract wins in H1 with Ariel Re and Everest Re, but encouragingly some ‘material contracts’ are moving towards closure in H2.
Procurement appears to be in a real mess. Xchanging took a £47m impairment charge here following declines and widening losses, and plans to reorganise during H2. Procurement is the smallest part of Xchanging’s business, but the shift from legacy outsourcing is firmly at play as contracts are exited and renegotiated. The newer procurement SaaS/BPaaS offerings (MM4 and Spikes Cavell acquisitions) are growing, albeit from a low base.
Lever now has six more months to finish the job of restructuring. It will then be up to the new CEO to give Xchanging a fresh start and re-invigorate the business.
Posted by John O'Brien at '08:44'
Following in the footsteps of peer Michael Page (see UK steams ahead at Michael Page), UK-headquartered international recruitment firm Robert Walters’ domestic business showed the rest of the group a clean pair of heels in first half, with revenue growth of 31%, to £184m, and gross profit growth of 20%, to £39m. This contrasts with group revenue growth of 22%, to £378m, and 12% GP growth, to £114m.
It’s worth noting, though, that gross margins were compressed yet again yoy (see Robert Walters growth belies gross margin squeeze) both at group level (30.2% vs 32.9%) and in the UK (21.0% vs 23.0%). However, heroics at the SG&A level boosted group pre-tax profits by 74% to £8.7m, a 2.3% margin. UK PBT more than doubled to £2.8m, a 1.5% margin.
Its eponymous CEO noted increased candidate and client confidence in the UK, and called out London-based financial services and commerce finance recruitment as the high spots. So far, all looks on track for the rest of the year.
Posted by Anthony Miller at '08:20'
Revenues via its parent company channel are now 20% below the prior year’s period at Mphasis, the Bangalore-based offshore services firm majority owned by HP. In contrast, direct sales to international markets are 11% higher and now account for almost two-thirds of the total.
This is the eternal conundrum facing HP management (see Mphasis moves ever further from HP clients and work back) and there seems to be little they wish to do about it. That might be all finel and dandy (-ish) if Mphasis was increasing its contribution to the HP P&L, but in fact it is declining. Net profit at Mphasis for the quarter to 30th June was down 12% yoy at Rs1.56b, some 14% lower in USD terms at $25m. For the record, headline revenues were just under flat yoy at Rs14.9b, but this represented a 6% decline in USD terms, to around $235m. EBITDA margins were 250bps lower yoy at 14.1%, though steady compared to the prior quarter.
Mphasis management is also selling off (giving away?) most of its Indian BPO business (see Mphasis de-emphasises BPO), one assumes to rid itself of margin-detracting operations.
At some point HP management will have to take a decision about what to do with its renegade captive. Clearly that point has not yet been reached.
Posted by Anthony Miller at '07:46'
Last year, the UK BPS supplier landscape was all about disruption impacting the status quo among the top 20 - exposing the decline of some really big name suppliers and the rise of some new names and star performers (see UK Business Process Services Supplier Landscape 2014).
This year that disruption is accelerating, with the real boost being to those players focused on hotter digital technology areas - notably Analytics, Business Process Automation (BPA) Business Process Platforms (BPPs), Business Process-as-a-Service (BPaaS) and Customer Experience (CX).
Accenture and Capita in particular are making headway into this new realm via aggressive acquisition strategies. Meanwhile in the public sector, a newer breed of competitor - notably arvato and Sopra Steria - are taking market share thanks to their responsiveness and pragmatic approach to service delivery.
Providers wedded to the old delivery models of lift and shift and legacy outsourced operations, focused predominantly on cost reduction, are the ones being disrupted. Providers like Xchanging and HP are investing in new technology and platform IP to turn things around, but it will take time, and there are no guarantees of success.
What makes this so significant is that the digital technologies like digital BPPs, BPA and BPaaS are not huge in revenue terms, but they impact a UK BPS market worth billions. And it is these newer tools which are directing the new BPS spend, and enabling new engagement with customers around digital transformation. Those suppliers that don’t have the relevant capability or partnerships in place, are seeing new business opportunities disappearing, and the consequent loss of market share when contracts are let.
This year, the UK BPS market is all about 'Digital Disruption'...
Subscribers to TechMarketView's BusinessProcessViews research stream can read the detailed analysis and implications for BPS suppliers in the new report: UK Business Process Services Supplier Landscape 2015.
Posted by John O'Brien at '07:27'
Facebook’s Q2 results at the top line were pretty impressive with revenues up 38% to $4.04b. Although they reported user growth of 13% yoy to 1.49b, qoq growth fell to just 3.47%. Although mobile users have risen 23% to 1.31b.
So far, so good. The ‘problem’ was that costs rocketed 82% to $2.77b: obviously outstripping revenue growth. The workforce now tops 10,000 – up 52% yoy. R&D was the largest riser though – up 175% yoy to $1.2b in the quarter. To be fair, Facebook had warned that this would happen. Initially investors marked Facebook down over 4% in after-hours trading . But this was all recovered when the conference call started and the outlook was clearer.
Indeed there was even evidence of ‘grown-up syndrome’ with a promise to curb expenditure in the future. As we have oft said this year, the markets now favour companies that can grow profits faster than revenues. We rather like it that way too!
But let’s be fair to Facebook. They have a superb business model which is obviously capable of generating profits. Users are really engaged with the platform – indeed the ‘stickiness’ of Facebook is pretty impressive with very little churn. Seems once you are hooked you stay hooked. Not only that but Facebook has many other platforms that hook you too. Instagram, Messenger and WhatsApp could all become major $billion+ businesses in their own right.
Facebook really has become the one that all the others have to beat. And they seem pretty unbeatable right now.
Posted by Richard Holway at '23:12'
With public sector bodies at varying stages in their digital transformation ‘journeys’, this latest PublicSectorViews report examines the extent to which mobile applications (apps) are part of the thinking. Public sector workers are spending increasing amounts of time working remotely, while citizens are often looking to engage with public sector bodies via mobile devices. Public sector bodies are faced with a variety of choices in how to support employees and citizens in an increasingly mobile age. Public sector organisations also face contradictory advice on the recommended use of mobile apps.
This PublicSectorViews report – Mobile apps adoption in UK public sector - identifies the areas in which mobile apps have been developed, implemented and used, and the suppliers involved. Subscribes to TechMarketViews’ PublicSectorViews research stream can download the report now. If you are not yet a subscriber, please contact Deb Seth, to find out how to sign up and gain access.
Posted by HotViews Editor at '21:12'
CGI’s Q3 results may have been disappointing in the UK (see CGI to fix the roof when the sun shines). But the team will be getting ready to celebrate next Monday. The City of Edinburgh Council is set to approve CGI as its preferred bidder for a new transformational ICT contract worth £186m over seven years. According to the Council, an additional £46m of services will be delivered “at no extra cost”. The Council expects to save a minimum of £45m over the contract term. This will contribute to its targeted £107m reduction in costs over the next five years. The contract forms part of the next phase of the Council’s ICT & Digital (ICT&D) Transformation Programme, which is focused on channel shift or in the words of the council “digital by desire”. There is potential for the contract to be used by over 50 other public sector organisations.
BT has been Edinburgh’s main IT services partner, under a £150m Smart City Partnership, since 2001. Having been extended, the deal is due to expire at the end of March 2016. Early in the competition for the replacement contract, BT was one of eight companies shortlisted. The others were CGI, Agilisys, Atos, Capita, HP, Lockheed Martin, and Serco. The contract will have been hard fought; there are very few substantial contracts up for grabs in local government currently. We understand that Agilisys withdrew from the competition early on and subsequently decided to partner CGI. CGI, with Agilisys, was up against Capita at the final hurdle. Partners will be important on the deal; CGI has committed to 25% of the contract value going to SMEs, supporting the local economy. Moreover, it will create 221 new jobs and 60 modern apprenticeships in the city. The contract will be a big boost to CGI’s business in local government; it currently has a tiny revenue footprint. From that perspective, the partnership with Agilisys made perfect sense, allowing CGI to combine Agilisys’ significant local government and channel shift experience with its major ICT transformation programme experience. We’re sure we will hear more detail after Monday.
Posted by Georgina O'Toole at '20:50'
Q315 was not the best quarter for CGI UK. And the finger was squarely pointed at the impact of the May 2015 General Election on the public sector business. At the headline, revenues decreased by 1.8%, or by CAN$6.2m, to CAN$331.8m. But at constant currency, the decrease was a steeper 4.3%. Also as a result of the decline in revenues, the EBIT margin suffered: standing at 8.6% compared to 13.1% in Q314. However, over the first 9 months of the year, the EBIT margin has been steady - 10.4% compared to 10.8% in the same period in 2014.
In Q3, Group revenues declined 4% to $2.6b. The constant currency decline was 3.5%. Sequentially revenues remained stable. It wasn’t just in the UK that revenues declined (ccy): US was down 7.6%; NSESA was down 2.2%; Canada was down 4.7%, and CEE was down 7.0%. The only positive growth rates came from France and Asia Pac. However, the good news was that the Group EBIT margin continues to improve and profitability is returning to the heights seen prior to the Logica acquisition. Adjusted EBIT for the quarter stood at 14.5% (up from 12.8%). Prior to the acquisition, in Q212, the adjusted EBIT margin had touched 14.7%. The quality and mix of North American revenue (with a higher proportion of IP services and solutions) fuelled Q3 profitability.
Sounding a bit like UK Government Chancellor George Osborne when he said, “the time to fix the roof is when the sun is shining”, CGI President & CEO, Michael E. Roach, has stated, “the time to restructure a business is when you are financially strong”. CGI will now take up a $60m pre-tax charge over the next six months. The investment will accelerate utilisation offshore, improve productivity and utilisation, align headcount to exit of low margin business and non-core geographies, and reduce SG&A expenses. In particular, Roach highlights the investment in IP (driving the rest of the geographies closer to the US mix), cyber security and the “digitisation of client critical processes”. The plan is that results should come quickly; the intended result is increased EPS performance in 2016 driven by lower expenses and organic revenue growth. We have been keen to see CGI accelerate investment in its IP and its 360˚ approach (wrapping services around the core products) to align them better with different geographical requirements. One of the biggest challenges following the Logica acquisition appears to have been getting this right. It’s good to see the issue getting some management focus. Getting that right combined with industrialising its service offerings will help CGI compete more effectively for smaller, incremental, digital projects.
Posted by Georgina O'Toole at '19:39'
Digital transformation is the great growth hope for the Enterprise Software & Application Services (ESAS) market but the reality of digital adoption is less fulsome than the market chatter suggests.
ESASViews subscribers can explore current and future trends and see where the most promising near term digital opportunities lie in Enterprise Software & Application Services Market Trends and Forecast 2015, the latest report from the ESAS research stream. This core report also contains our market size and growth data.
The combination of market insight and market data make it essential reading for all ESAS suppliers operating in the UK market. Download the report here. If you do not have an ESASViews subscription, contact Deb Seth for details.
The digital playbook is all about smart operations. In our view, smart suppliers will play the long game and operate at the intersection between legacy and digital environments, prepared to sacrifice ’jam today’ for ’jam tomorrow’. But they also have to cope with the challenges of digital fragmentation and complex technology environments of multi-part joins and co-dependencies, all overlaid by cross department politics and budgets. All of which can conspire to push the digital transformation timeline to the right. Understanding and navigating these complexities is key to supplier success – and making revenue from the digital transformation opportunity.
Posted by Angela Eager at '10:01'
New Atos UK CEO Adrian Gregory has only been in role for a couple of weeks – see ‘Promotions at Atos’. Even so, we’re sure he’s delighted Atos’ UK business has again outperformed all other Atos’ geographies in H115, posting organic (constant scope and currency) revenue growth of 11.5% (£511m). Interestingly though, in calculating organic growth, as well as taking out the impact of acquisitions, Atos has excluded the impact of the early termination of the DWP Work Capability Assessment BPO contract, which ended on 1st March 2015 (see Atos seeks early exit from DWP contract). Nonetheless, the strong performance in the UK was put down to the Managed Services business, and most notably growth in public sector BPO. The UK was also instrumental in improving Group operating margin: “improvement came from the UK beyond revenue performance and on the back of slippages on projects booked in the first half of 2014”.
Overall, performance was “solid”. Revenues increased by 18% to €4,941m and by 0.3% organically - the third consecutive quarter of positive organic revenue growth. Operating profit was €345.6m, up 26%, representing a 7.0% operating margin (up from 6.6%). But outside the UK, performance was mixed. In particular, the situation is described as “challenging” in Germany, particularly for systems integration, and in Benelux & Nordics, mostly for Managed Services. Q2 is expected to be better in both regions, however, H1 results was a 2.4% decline in Consulting & SI (to €1,612m) for the Group, and a marginal increase of 0.8% in Managed Services (to €2,488m) (despite the UK boost). The Worldline revenue contribution to Atos increased by 3.9% to €571m. The strongest area of growth was ‘Big Data & Cyber Security”, which increased revenue by 4.2%, but still represents a tiny proportion of the business at €270m. As our latest research highlights – see Atos: investing in big data & analytics – after significant investment, the big sales push here will come in FY16.
Atos predicts acceleration in organic growth in H215 (it will also be impacted by the Xerox ITO acquisition – completed on 30th June). Notably, in H1 3.5% of the organic growth came from Atos’ largest clients (representing 60% of revenue). Moreover, while two years ago, 49% of order entries came from renewals, today that figure has fallen to just 28%, with the remainder coming from “fertilisation” (26%) and “new business” (46%). This would indicate Atos’ focus on leveraging its digital expertise, cross-selling its capabilities (including those acquired) and using its alliances as a sales channel are starting to pay off. We will be talking to Adrian Gregory later today to understand the UK picture in more detail.
Posted by Georgina O'Toole at '09:53'
After advancing revenues by 37% in the year to March 2015, to £57.3m, and generating EBITDA of £11.8m, the management of GB Group, the identity data intelligence specialist, is forecasting double digit organic growth in today’s AGM statement. With the share’s consistent appreciation (advancing by 40% over the past year) together with the confident outlook, the Group’s shareholders are probably feeling rather satisfied with progress.
GB Group has acquired eight businesses over the past four years to expand its portfolio of identity-based services and to drive its SaaS and software licensing revenue. The latest move, to acquire Loqate completed in April, see here. This deal was part of a big push to expand GB Group’s operations internationally, and we would expect to see a lot of focus on developing business internationally and with companies that act on a global stage. See “GB Group sets sights on international expansion”.
Acquisitions will continue to be a central plank to GB Group’s growth strategy. Identity Data intelligence and associated activities in fraud management and regulatory compliance rely increasingly on the access to and interpretation of data held on many disparate databases. GB Group’s expanding range of services, its broader geographical coverage, along with its growing track record should consequently make it more attractive to its growing list of public and private sector clients.
Posted by Peter Roe at '09:41'
In May the management of UK data centre operator Telecity agreed to a takeover approach from the US data centre giant Equinix. (See here for more background). This deal is working its way through, though it won’t be completed until early 2016. As a consequence of this approach, Telecity withdrew its own offer for InterXion and management is now focused on driving growth and getting into good shape for the forthcoming marriage.
First half figures show revenue advancing by 6.6% on an organic currency neutral (OCN) basis (down 0.4% in reported figures). The UK operation, contributing 42% of group revenue, advanced 5.4% on an underlying basis (whereas the larger Rest of Europe operation achieved underlying growth of 12.4%). In addition, the company reported a reduction of churn across its operations, good order intake and higher utilisation and so management guidance of an 8-10% OCN growth rate and stable underlying EBITDA margin for the full year remains unchanged. First half EBITDA margin had been stable at 47%.
Net debt was slightly down on last year end with positive cash flow after (reduced) capex and dividend payments (although this benefit was wiped out by the £16m cost of the aborted InterXion approach and the on-going Equinix discussions).
The Group is pushing its Strategic Accounts Programme, particularly in the UK, to ensure that Telecity is aligned with customers’ plans for the increasing use of cloud services and Telecity is also seeing good growth in Continental Europe. Underlying demand for capacity remains strong and we anticipate a growing propensity to use third-party data centres. Although the protracted process of the take-over may deflect management attention and threaten momentum, the underlying business looks set fair for the walk down the aisle.
Posted by Peter Roe at '09:37'
Quartix Holdings, the AIM-listed vehicle telematics systems and services player, is experiencing accelerating growth since its maiden AIM results in March (see here).
Revenue for the six months to 30 June were up 24% to £9.2m (vs. 16.5% growth in FY14), although operating profits were up 8% to £2.7m – which slightly dented the operating margin – albeit still a very healthy 29% vs. 34% last time.
Growth is being achieved across both lines of business - the larger established fleet services operation (up 17% to £6.2m) and the newer insurance services space (up 43% to £3m).
Particularly encouraging is the growth in installations across both lines of business. Fleet rose 44% to almost 11,000 and insurance rose 64% to over 25,000. This bodes well for future recurring revenues from services subscriptions.
Quartix’s offering is an integrated tracking and telematics data analysis solution for commercial vehicle fleets, and ‘pay as you drive’ motor insurance providers. The lower cost and better reliability of telematics technology is now making it increasingly valuable as a means to capture driver behaviour and use it to mitigate risks and reduce costs.
Insurance is a market changing rapidly as a result of new competition, and the need to replace legacy systems to embrace new digital technologies (see Innovation Group aiming at tier one insurers). With the demise of larger telematics rival Quindell (see Quindell trading suspended; FCA investigation begins), Quartix is in an even stronger position to benefit.
Posted by John O'Brien at '09:29'
Recent big acquisitions in Europe (avocis) and the UK (AMT Sybex) have played a larger part in Capita’s top line growth for H115 (see Capita makes assault on DACH!).
Headline revenue for the six months to 30 June was up 10% to £2.28bn - 7% of which came from acquisitions, and 3% was organic. FY14 by contrast saw 9% organic growth and 5% from acquisitions (see here). Operating margins meanwhile remained more or less flat at 12.7%.
This shift to inorganic growth is unlikely to continue however. More organic growth should filter through in H2 from recent major public sector wins (see Capita wins £400m NHS primary care deal and Capita forms Government JV with DEFRA). These and other deals helped H1 wins to jump 23% to £1.6bn. The bid pipeline meanwhile, is up 6% since February to £5.4bn. Closing these deals will help Capita achieve its target to drive an increase in organic growth in H2, and then accelerate it in 2016.
Capita also created three new divisions: Capita Europe (avocis); Digital & Software Solutions (software, digital, IT assurance and document services), and Local Government, Health & Property.
For the first time, we now get a view on Capita’s revenues outside the UK - £82m in the half from Capita Europe - and mostly from customer management player avocis.
Also for the first time, we now see Capita’s revenue from software and digital solutions - £247.5m revenue in H1, vs. £210.9m last time - making Digital & Software Solutions a £500m business annually. Although not all will likely be 'pure software', or what we might consider 'digital', it gives Capita a significantly higher profile in the IP-led space we believe is critical for business process services (BPS) suppliers to achieve differentiation in the digital economy (see Business Process Platform Opportunities in Digital Transformation). We look forward to learning more over the coming months.
Posted by John O'Brien at '09:08'
I guess investors are not in the least bit phased about investing in a MOWMAT (meals on wheels masquerading as tech) startup whose mascot is a guy ill-advisedly dressed as Skippy (see here) – but every business has to have a gimmick.
No gimmick, though, the $70m raised by London-based Deliveroo in a Series C funding round led by Greenoaks Capital and Index Ventures. Existing investors Accel Partners and Hoxton Ventures also participated. Deliveroo raised its first funding in June last year (see Investors toss £2.7m at ‘MOWMAT’ Deliveroo) and followed it with a further $25m in January (see IndustryViews Venture Capital Q1 2015).
It’s interesting to compare business models between Deliveroo and archrival food delivery service Just Eat. The latter is ‘employee light’ and relies on the restaurants themselves delivering the food. Deliveroo runs its own fleet of drivers (Roomen and Roowomen, would you believe) and as such arguably has access to somewhat more upmarket restaurants that don’t deliver themselves.
Deliveroo charges £2.50 per delivery, and I assume also gets a cut from the restaurant. With Just Eat, the customer pays whatever the restaurant charges for delivery and takes 12% commission from the restaurant. Just Eat also charges restaurants a £699 sign-up fee and optionally offers POS hardware and software on which I assume they hope to make a small margin.
I can see a market for both businesses, but I can’t see any reason why one couldn’t also encroach on the other. Just Eat has already proven that its business model is profitable and cash generative (see Just Eat delivers). I suspect that Deliveroo will have a somewhat steeper hill to climb.
Posted by Anthony Miller at '08:42'
Unlike traditional UK IT recruitment firms, London-based and internationally spread veteran FDM Group follows the US model of employing the vast majority (c. 85%) of its contractors. As such you’d think it carries significant ‘bench risk’, but with founding CEO Rod Flavell’s guiding hand on the tiller, FDM turns in near-98% utilisation rates (surely that only leaves time for a sarnie and comfort break?).
Anyway, the truth is in the numbers and the numbers look good. Half-time revenues (to 30th June) rose by 32% to £74.6m, while a 28% rise in gross profit to £28.8m saw gross margins ease a point to a still enviable 38.6%. Also enviable are FDM’s 17.7% operating margins, though not as good as the prior year’s 21.0% (excluding IPO costs – see Re-list slugs profits of veteran ITSA FDM).
If you going to run a body shop, then I suggest you get hold of a copy of Flavell’s play book!
Posted by Anthony Miller at '07:48'
Twitter’s actual financial results for Q2 were better than expected. But the outlook really spooked investors. Twitter managed a 61% increase in revenues yoy to $502.4m and losses were 5% lower at $136.7m. But after all these many years, it is salutary to report that Twitter is still making pretty massive losses every quarter.
The problem is that growth in user numbers has effectively disappeared – just 2% qoq in Q2 to 304m. Facebook has over 4x as many users and is still growing significantly. On top of that, interim CEO Jack Dorsey warned that these slowing growth rates would hit advertising sales in the periods to come. Twitter would have to spend to reverse that trend. So it looks like losses will continue – even increase. Investors wrote Twitter down over 10% in after-hours trading. Twitter at $32.90 compares wih an IPO price of $45.
Dorsey also asked the age old question – ‘Why Twitter?’ – without really supplying an answer.
Here at TechMarketView we use Twitter extensively to get our views out. But we don’t spend with Twitter. On top of that we don’t really use Twitter all that much in our research for stories On a purely personal basis, I find Twitter a bit of a jungle. Even CFO Anthony Noto admitted last night that ‘Twitter remains too difficult to use’. I followed a large number of people at the start, but really find their utterings of little value. Indeed they often irritate! Conversely, I still like Facebook and look forward to checking up on what family and friends are doing.
So I am the archetypal Twitter user for which Dorsey needs to answer the ‘Why Twitter?’ question. Otherwise, I can see it going the way of MySpace and Bebo. Difficult to name any internet brands , let alone social media brands, that have managed a turnaround. So maybe the question is ‘Whither Twitter?’ rather than ‘Why Twitter?’.
Posted by Richard Holway at '06:14'
Capgemini is moving quickly to integrate its recent acquisition of iGate. iGate’s CEO Ashok Vemuri now joins the Capgemini group management board, with other moves to bring senior iGate managers into play as the organisations align.
The US$4bn deal now means that almost half of Capgemini’s workforce is in India and the addition of iGate will play an important role in Capgemini’s push for better margins and faster growth. The geographical split of sales will improve as 30% will now be derived in the US, with iGate bringing some flagship industrial customers. Additional resources, particularly aligned to sectors such as healthcare and FS, will help the push to cloud and to the faster introduction of innovation. These initiatives should counter the revenue impact of continued offshoring of activity and price reductions on contract renewals.
Capgemini will also be looking to learn from iGate in terms of employee productivity, better resource allocation and higher profitability, particularly as management has recently lifted its targets for both organic growth and operating margin (see Compagnie à grande vitesse, Capgemini?).
With the approval process moving more quickly than earlier foreshadowed, Capgemini will be pushing through its new organisational structure by January 2016, particularly as regards its sales operation and India-based resources. It will be looking to reap iGate benefits as early as possible as it aims to sustain a high single digits growth rate and improving profitability.
Posted by Peter Roe at '08:52'
After preparing the ground for a sale of its B2C music streaming business earlier this month (see InternetQ separates music streaming business), InternetQ updated the market on H115, with growth of 10% to c€72m, which it said was mainly driven by its B2B mobile marketing business Minimob.
Apparently revenues for Minimob are being driven by replacing the legacy Mobi-Dialogue business which has much lower margins. This and maturity within the B2C business, helped drive 18% growth in EBITDA margin for the half. InternetQ said it is on track for even better growth in the historically stronger second half, because of greater momentum in the mobile marketing business, and adding new geographies in digital music.
It’s clear that InternetQ is a business of two halves – focused on the very different B2B and B2C sectors. The B2C streaming business appears to be more capital and time intensive as it relies on investing in new geographies and markets for growth. Mobile marketing also requires constant investment, in new products and services, but the upside opportunities for growth and margin appear to be expanding at a more rapid rate.
An eventual sale the music streaming business seems a sensible move to make. It would then allow InternetQ’s management to focus solely on the higher growth and profit potential of B2B mobile marketing for global brands, and mobile operators.
Posted by John O'Brien at '08:18'
It must have been a bit of a disappointment for management at Mumbai-based Indian pure-play (IPP) Tech Mahindra to miss its first $1b quarter by just a whisker – but it could have been worse.
A few weeks ago management warned of a potential shortfall in revenues and profits (see here). As it turned out, Q1 revenues (to 30th June) rose by the merest tad to £989m, £5m higher than the prior quarter but nearly 16% higher yoy. On the other hand, operating profit did indeed shrink, by $2m to $147m, pitching margins over 3 points lower yoy at 14.9%.
As usual, we'll have much more to say about the IPPs – including their UK performance – in the next edition of OffshoreViews.
Posted by Anthony Miller at '18:34'
I got a very real sense of how competitive is the SME IT managed services market recently, joining some 150 MSPs (managed service providers) at a conference held by service management software firm Autotask. You may remember that Autotask acquired TechMarketView Little British Battler CentraStage nearly a year ago (see Autotask becomes LBB CentraStage’s endpoint!).
Two MSPs stood out – literally – from the crowd: Cardiff-based Circle IT and Mirus IT Solutions, headquartered in Milton Keynes. Their respective CEOs – Roger Harry and Paul Tomlinson – are both engaging personalities, and although the businesses they founded are in many ways different, they share a common cause. And that is to nurture their respective company cultures.
Circle IT and Mirus are fast-growing and have realistic ambitions to double their revenues over the next few years, to around £30m and £20m respectively. Both are pleasingly profitable. And both CEOs realise that the key to growth is to recruit, train and retain competent technical staff in a market awash with similar players all looking for the same types of skills.
In the early days, of course, Harry and Tomlinson were very much hands-on owner managers, spending most of their time securing the next piece of business and helping make it happen. Now they have mature companies with management teams in place to run day-to-day operations. This allows them to concentrate on more strategic matters, none of which is more important than keeping their people happy and motivated.
It would probably be fair to say that Harry is the more advanced in terms of formalising the culture-building process, witness the incredibly high employee approval ratings – and lower attrition – Circle IT now enjoys. But Tomlinson is well along the way; for example Mirus has instituted an employee share ownership scheme that rewards key long standing employees with a customer satisfaction-based long term incentive.
Harry and Tomlinson have developed compelling messages for their clients and prospects that treating their own staff well is an important factor contributing to the high quality of service they deliver. This, as much as employee technical and project management capabilities, will be key to achieving their growth ambitions.
Posted by Anthony Miller at '11:47'
CSC CEO Mike Lawrie has never been shy to partner with Indian pure-plays (IPPs) in his various incarnations and has just done it again with Chenna-based HCL (see Lawrie invites HCL to the CSC party). This time it’s to create banking software and services joint venture company, the precise structure and function of which has yet to be revealed. But given that CSC has proprietary banking software (e.g. Hogan) and HCL doesn’t – unlike IPP peers TCS (BaNCS) and Infosys (Finacle) – you can take a fair stab at guessing who’ll lead the dance.
CSC’s own Indian offshore services operations were boosted by its $1.3b acquisition of 8,400-employee strong US-headquartered but India-centric Covansys back in 2007, bringing its Indian headcount to some 14,000 FTEs. I think the number is closer to 19,000 today whereas HCL had over 100k FTE’s as at the end of March.
The news of the JV has got the Indian media into one of its usual froths, surmising this is a prelude to HCL acquiring CSC’s commercial business post the split with its North American public sector operations announced in May (see CSC does the splits).
This is the wrong answer.
The right answer of course is TCS – or at a pinch, Infosys (see OffshoreViews – Be careful what you wish for!).
Anyway, there may be more on the JV after HCL announces its FY results next Monday.
Posted by Anthony Miller at '09:16'
US company Palantir Technologies (named after the mystical stones in Tolkein’s Lord of the Rings) has completed another round of financing, raising US$450m to value the company at c.US$20bn.
Palantir has been working hard to show that Big Data is no fairy story, with its website showing a wide range of applications from fraud detection, through pharma R&D to disaster response. Finextra reports that they are also working with the SEC, TR, Bloomberg and several hedge funds.
The company was founded in 2004 by some ex-PayPal people and Stanford computer scientists. It uses its two data platforms, (called Gotham and Metropolis) to co-ordinate structured and unstructured data sources and enable large-scale quantitative investigation). It has now raised over US$1bn (according to CrunchBase).
The valuation of Palantir and the breadth of application for its technology underlines the importance and potential of this area. Key to success however, is the ability of companies to understand how it can best be applied in the context of the customer's specific problem. We would look to companies that not only have raw Big Data expertise, but that are also building or acquiring domain expertise to make the solutions relevant. Notable examples discussed recently in HotViews have been the recent investments by Atos in this area and the progress made by First Derivatives. This topic has also been covered in several of our research reports such as “Does the market need Big-data driven applications?”.
Posted by Peter Roe at '09:04'
According to Bloomberg reports at the tail end of last week, Square, one of the major mobile payments newcomers, is looking to fast-track its way to a US stock-market listing.
Square provides its free-to-download Square Register software to enable point-of-sale functionality, including dashboarding and analytics on mobile phones or tablets, generating income through taking a cut of the customer’s business. The company is also broadening its proposition with payroll applications (in the US) and customer engagement tools. Card payments are only available in the US, Canada and Japan. Square has also launched peer-to-peer payment services for its customers.
Over the past six years, Square has invested heavily in marketing (and hype) and has established a global operation. This has not been without some pain. Losses were rumoured to be of the order of US$100m in 2013, against revenues of US$550m.
Investors are still keen to put their money into the payments business given the massive changes made possible by new technology. However, building scale and profitability is very difficult, particularly at the consumer end of the business with so many competing devices and software offerings. Although Square has built a global operation and a large customer base, it does not yet appear to have found the right formula to drive sustained profits and cash flow. Investors brave enough to participate in the potential IPO will probably have to be prepared to fund the company for some time yet.
FinancialServicesViews subscribers can access our recent Payments Bulletin, here.
Posted by Peter Roe at '08:59'
Build and buy hosting minnow Daily Internet has won another significant deal for its size, on the back of its recent takeover of Netplan (see Daily Internet benefiting from recent M&A).
This time Netplan has won contracts over three-years worth c£400k with builder merchants J T Atkinson & Sons Ltd (JTA) to provide a fully managed hybrid cloud service, with business continuity and disaster recovery via Amazon Web Services (AWS) (see Amazon soars as it reports profit). The deal will see Netplan provide professional services/consultancy, and host JTA’s core ERP application off-premise.
Apparently, Daily Internet’s other acquisition of Q4Ex Ltd in December, helped secured this deal with its focus on the merchant space, which represents a new market opportunity.
The deal structure looks very much like private cloud for the core ERP and public cloud for back up and recovery. This is an increasingly common approach for mid-market enterprises looking at cloud-enabling their applications.
Daily Internet is clearly carving out a nice little niche for itself among the UK mid-market in areas like payments and now merchants. Although relatively small in size, there should be plenty more deals like this out there for the taking.
Posted by John O'Brien at '08:28'
Great to hear that savvy tech investor Imperial Innovations (IVO), the AIM-listed incubator arm of London’s Imperial College, has ‘connected’ to the Internet of Things (IoT), with a £3m investment in London-based TechMarketView Little British Battler, Concirrus. The funding gives IVO a near 29% stake in the business, implicitly valuing Concirrus at £10m.
Concirrus was part of the ‘Second Coming’ tranche of Little British Battlers back in early 2013 (see here) and had been looking for a financial growth partner pretty much since then (see Concirrus seeks connections to accelerate growth). Management was looking to reach revenues of £2m in 2014.
Concirrus plays to the instrumentation side of IoT, constructing and managing turnkey machine-to-machine application systems on its proprietary hosted platform.
Onwards and upwards we very much hope!
Posted by Anthony Miller at '08:28'
After a welcome return to black ink in the first half of its FY (see Nakama resurfaces), profit growth at AIM-listed, self-styled digital media and IT recruitment firm Nakama Group slowed materially in H2.
Headline revenues for the year to 31st March 2015 jumped by 24% to £21.7m with growth in net fee income (gross profit) slightly slower, at 24%, trimming gross margins by 40bps to 24.5%. But this was enough to turn the prior year’s £121k pre-tax loss into a £297k pre-tax profit, albeit just £75k more than in H1.
Nakama executive chairman Ken Ford alluded to an ‘in line’ Q1 (to 30th June) “though not without the normal recruitment challenges … given the current candidate-driven market”. Given its colourful history (see the UKHotViews archive) one wonders whether Nakama’s recovery, like the English summer, might be somewhat illusory.
Posted by Anthony Miller at '08:00'
Another quarter, another set of disappointing results from infrastructure services provider Unisys (see Unisys Q1: dips into losses, staff cuts ahead). Q2 revenue fell 5.1% to $764.8m (although up 4% in constant currency). At an operating level, Unisys tumbled into heavily losses of $49.5m vs. a profit of $15.8m last time. QoQ this was considerably worse than the $30m loss in Q1.
The bottom line was even worse, thanks to a $53m charge to cover the first part of a $300m major restructuring programme over the coming quarters, that will see an 8% reduction in total headcount. Net losses were $58.2m vs. $12.1m last time.
Unisys’ services business is the worst performer declining 6% yoy (although up 3% in ccy thanks to growth in application services). The technology business was flat in the quarter, and up 10% ccy, thanks to strong double-digit growth in the US and Canada. Rest of the world, which includes the UK, fell in double-digits, and down 10% ccy.
In the UK Unisys has been quiet for some time, although there are some signs of things improving in the public sector at least (see Unisys has early success with next-gen HOLMES). Meanwhile, a new global partnership with fast-growing SaaS specialist ServiceNow for cloud service management, may help move Unisys shrug off its legacy provider image, and move faster into newer as-a-service delivery models (see here).
Posted by John O'Brien at '08:41'
Subscribers to the TechMarketView Foundation Service can download the latest edition of IndustryViews Quoted Sector to see our latest analysis of how the stock performance of UK software and IT services companies listed on the London Stock Exchange compares with their international peers.
Posted by HotViews Editor at '08:34'
And another one bites the dust.
Much troubled IT managed services buy-and-build adventure, Enables IT (see Enables IT struggles with disabling losses), delisted from AIM today subsequent to its recent acquisition by similarly troubled, AIM-listed, geospatial software-led firm 1Spatial (see 1Spatial Enables IT – or the other way round?).
Obviously someone thought this was a good idea.
Posted by Anthony Miller at '08:13'
The good news is that Bangalore-based offshore services major, Wipro, reversed the prior quarter’s sequential revenue decline (see Wipro shares Indian growth malaise) – but only just. However, yoy growth continued to edge downwards.
Headline revenues for Q1 (to 30th June) hit $1.79b, 3.3% higher yoy and 1.1% higher qoq. Operating margins trimmed a point or so to 21.0%. These results leave Wipro trailing Bangalore Blues Brother Infosys (see Infosys inches closer towards $10b year), though both grow further distant from peer leader TCS (see TCS hits first $4b quarter as growth slows again).
Wipro is aiming to build its ‘digital’ credentials, recently acquiring 200-man Danish digital design agency Designit (see Wipro’s Design on Digital). While this should add some useful front-end capability to Wipro’s kit bag, it is unlikely to move the growth needle or indeed get CEO TK Kurien any nearer to his aspiration to slash headcount by 30% and maintain growth over the next three years (see Wipro and the irreducible core). In this respect Kurien shares aspirational dreams with his opposite number across the road at Infosys, where CEO Dr Vishal Sikka aims to double the company’s revenues by 2020 (see Vishal Sikka’s 20-30-20 Vision for Infosys).
Maybe it’s something in the Bangalore air.
Posted by Anthony Miller at '07:56'
Very sad to report the death of John Woodget who, together with his wife Judith, was killed in a car crash on the A303 last Sunday.
John, aged 64, had worked for Intel since 1989 until his retirement in March. I came across him in my analyst role when he was MD for Intel UK between 2001-2007. During that time he also served on the board of Intellect (now techUK) and as its President.
Posted by Richard Holway at '07:22'
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