Only seemed like last week that I wrote Stocks in record territory as FTSE100 broke through 7000 and NASDAQ flirted with its all-time high of 5048.
Just a week on and NASDAQ has declined 3.2% at 4878 and FTSE100 down 2.4% at 6855. The FTSE UK Hardware Index fell 8.54% as ARM was particularly badly hit by analyst reports that smart phone sales were slowing.
To be honest, I’m unsure if anything really new occurred this week to cause this. We have been concerned for some time at the high number of risks around – from the outcome of the General Election, possible EU Referendum, Eurozone crisis, ISIS, Russia etc. But nothing immediately new.
We expect continued volatile times.
Posted by Richard Holway at '14:38'
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Sad to learn that the ITNEA is to close after some 16 years as EY have decided not to renew their sponsorship.
Set-up by Jane Tozer OBE and David Tebbs some 16 years ago, it was a great networking programme for IT NEDs and Chairmen - 600 members holding 1600 NEDs. Over the years, some 57 dinners have been held attended, on average, by 60 people each time. I had the honour of addressing the ITNEA in Sept 2010.. It also offered a great service recruiting NEDs.
ITNEA will be missed. But, whatever, huge thankyou to Jane and David for everything they did to keep this excellent programme on the road.
Posted by Richard Holway at '14:19'
I didn’t want to release this information in case it was considered price sensitive. Last thing I wanted was to ‘move markets’. But I can now reveal that since Tuesday this week I have an iPhone6 having been a Blackberry user since…well so long ago that I can’t remember.
I can now reveal this news as today Blackberry has released its Q4 results which showed revenues down another 32% yoy at $660m. That was way short of the $786m expected. Smartphone sales were down a staggering 47% at 1.6m despite the launch of the Blackberry Passport and Classic (the model that I was awaiting but, alas, fell short of expectations). I read in The Telegraph that Blackberry still has 700,000 users in the UK but ‘this number is expected to fall to 400,000 by 2017’. This comes as no surprise.
I loved – still love – my Blackberry Bold. It is the best email sender/receiver ever invented. Its physical qwerty keyboard is still better than the puny iPhone6 touchscreen. Its battery lasts for days too. But, it can’t really do anything else.
Posted by Richard Holway at '17:48'
The UK Ministry of Defence (MOD) has awarded CGI a contract to provide ongoing support services for the Fire Control Battlefield Information System Application (FC BISA) and the Fire Control Application (FCA) system.
Competition is rife in the non-embedded systems marketplace (providing mission planning, command & control or battlefield information systems) as the traditional SITS suppliers go head to head with defence contractors (see UK Defence SITS supplier landscape). CGI has been developing and supporting operational systems to this market for 12 years.
FC BISA is a distributed command and control application that helps the British Artillery and Infantry provide accurate and effective indirect fire support to the British Army during operations. CGI will provide software applications support for FC BISA and the FCA. The applications, which were developed by CGI, automate many operational functions to improve tempo, safety and accuracy. In addition CGI will provide hardware support for the FCA’s handheld computer platform. The new FCA system will be fielded to the Army during 2015 with MOD’s Daniel James, Project Manager commenting that “the latest version of the FCA software, improving both safety and accuracy over its predecessor.” There is scope for the contract to be extended to provide enhanced support for operational deployments and capability enhancements.
CGI was ranked 5th in our defence SITS supplier ranking and over a 35 year period has built deep technical expertise (software solutions, systems integration, secure hosting services) and domain knowledge (CGI provides training across the MOD including business, logistics and management information to frontline operations).
Contracts wins such as this plus recent wins at North Wales Police , NHS Shared Business Service, the Ministry of Justice’s (MoJ) and National Security Vetting Solution (NSVS) will further cement the UK as CGI’s star performer.
Posted by Michael Larner at '10:07'
London-based digital marketing and merchandising platform developer Amplience has raised a further $10.5m in a Series B round of funding led by Octopus Investments, along with existing stakeholders and investors including Northstar Ventures and Silicon Valley Bank. Octopus had led earlier funding rounds for Amplience totalling over £5m (see IndustryViews Venture Capital - Q3 2013).
Amplience is also one of some 30 UK SMEs participating in the London Stock Exchange Elite programme. Elite is a two-year programme for high growth private UK companies designed to help founders and CEOs develop their businesses in readiness for investment. It is supported by Imperial College Business School in conjunction with over 40 corporate advisory and investment partners.
Let’s hope it’s ‘onwards and upwards’!
Posted by Anthony Miller at '08:29'
Frankly we’re running out of superlatives to describe Accenture’s results (see Accenture beats again). In the call with investors it was digital, digital, digital that rung out loud and clear as the key driver for Accenture raising its FY15 guidance for the second consecutive quarter, to 8-10% growth in local currency (lcy). Its shares were up almost 7% on the news.
Q2 headline revenues were up 12% (lcy) to $7.5bn (up from 10% last quarter), and up 5% in US dollars. The forex impact was actually higher than expected at 6.5%. But it’s the underlying lcy growth, which tells the real story – this is accelerating in double digits, and enabling Accenture to stretch its lead over the competition. Accenture’s operating margin also hit 13.6%, up 30 bps on the year.
Digital services grew 20% (lcy) during the quarter and now account for c20% of Accenture’s revenue, according to CFO David Rowland. This is a dramatic jump and reflects Accenture’s recent M&A investments (see here and work back), including federal government digital player Agilex last month. But there’s clearly also growing organic demand across the piece. Examples included a digital customer service and analytics strategy for a global telecoms provider, and an early stage opportunity around the Internet of Things (IoT), working with Visa on a mobile payments service for the 'connected car'.
While Accenture has the levers on these new growth lines, its traditional services are benefitting significantly. Consulting revenues were up 11% (lcy) to $3.84bn and outsourcing was up 13% (lcy) to $3.65bn.
Accenture has repositioned itself to offer services to customers at each stage of their digital journey from consulting, advisory, to implementation and operations. In fact, Rowland pointed out that BPO is one of the most significant drivers of growth in digital – something that we would concur with. Underlying processes and operations need transforming too, and while digital is a new capex cost for many, BPO can offer means to mitigate that (see Why is digital customer experience key to future BPS delivery?).
Accenture seems to have got the messaging around digital spot on. CE Pierre Nanterme said ‘Digitization is all about helping…clients tap into new sources of value and new sources of revenue to create competitive advantage… to become the disrupters in the new digital world, not the disruptive [disrupted]’.
This really is the crux of the matter, and why organisations are freeing up spend so readily.
Posted by John O'Brien at '08:22'
I do wonder whether our government did even a basic sanity check on the smart meter rollout programme. The plan is to replace 53m existing gas and electricity meters in 28m premises in the UK by 2020.
Suppose it only took just one hour to replace the meters in a single premise. Switch off the supplies, detach existing meters, install new ones, reconnect, test. Probably have to drill new holes in walls for the new meters. May have to replace old wiring and gas pipes.
So, 28m premises, an hour a premise, 8-hour working days, 220 day working years. I reckon that comes to some 16,000 installer-years’ work to be completed by the end of 2020. That would require around 3,000 installers working full time right now to get the work done. I have yet to see a number for how many installers are currently on the job. I doubt it is 3,000.
So I do take issue with the Government response to the House of Commons Energy & Climate Change committee (see Smart meters: progress or delay? Which do you think?) published yesterday, the gist of which is ‘don’t worry, be happy’!
The Government has already admitted to a 4 month delay to the build and test of the communications infrastructure that will support the roll-out, originally scheduled for December 2015, and now reset to April 2016.
But my real concern is Government’s head-in-the-sand view on the meter installation workload: “We have not seen evidence to date that there is a shortage of meter installers and (a) number of energy suppliers are at an advanced stage in developing their installation workforces…”
The premise behind the programme was fundamentally flawed. The execution more so.
Posted by Anthony Miller at '07:59'
Just to remind you about the WCIT Enterprise Awards 2015 organised by our friend John O’Connell. Whereas our own Little British Battlers is for companies, the WCIT Awards are for the entrepreneurs. So there is no reason why the leaders of our LBBs shouldn’t win a WCIT Award too. Indeed Tony Pepper from LBB Egress won the Developing Entrepreneur Award last year.
2015 award categories are as follows:
'Social Enterprise Award'
'Public Sector Innovator'
'Evergreen Award' – The award sponsored by TechMarketView for entrepreneurs who set up businesses after the age of 50
If you would like to apply for any of the Entrepreneur Awards (I understand I am now a judge - so bribes are in order) you can complete the Entry Form Here. Entries must be in by 30th Apr 15. For more details of the Entrepreneur Awards Click Here.
TechMarketView will be turning out in force at the Awards Ceremony at the magnificent Plasterers Hall on 4th June 15. You are very welcome to join us. Again, if you would like a table or a ticket, Click here.
Posted by Richard Holway at '09:46'
AIM-listed Corero Network Security has concluded what can only be described as a painful year (although CEO, Ashley Stephenson, prefers to describe it as being “pivotal”). The company saw revenue drop from $10.3m to $7.5m (following a warning in February), and operating losses deepen from $8.5m to $10.4m. (It’s always particularly unnerving when losses are greater than revenue.) Shares are down 25% over the past 12 months and 4% this morning.
Corero’s legacy security product line is shrinking and it hasn't been able to counter that with other revenue streams. Indeed, in November last year the company announced it needed to raise a further £4.5m in cash to try to bridge the gaping hole left by lower than expected revenue.
However, management has always remained upbeat about prospects and at the half-year mark there was positive talk of there being “strong” interest from prospective customers, and a “developing pipeline of opportunities” for SmartWall (its new network security product that defends against distributed denial-of-service attacks). As it turned out, revenue from the SmartWall product came in at $1.5m for the year – not enough to counter the declines in the existing business. Corero’s got quite some work to do to build up the new product sales, yet it remains resolutely confident that it is “well positioned for scalable and durable returns from a significant target market”. The H1 numbers will speak for themselves.
Posted by Kate Hanaghan at '09:13'
Over the next few weeks, the TechMarketView PublicSectorViews team will be looking more closely at the progression of the digital agenda across Whitehall and, related to that, the likely impact of the adoption of Government as a Platform as a model. Alongside the potential impact of a new Government after the General Election (see our latest report: General Election 2015 party pledges: supplier impact), it is the topic that most interests our subscribers. In our view, one of the biggest hurdles the Government will face in further progression of its agenda surrounds ‘data sharing’. The ability to share data between Government organisations, and to open up data to third parties to allow greater innovation, will need focused attention. And clearly that is why Mike Bracken, the Government’s Executive Director of Digital, has been appointed the first UK Government Chief Data Officer (CDO).
Announcing the appointment, Francis Maude, Minister for the Cabinet Office, stated that Bracken (alongside his current role) will be “responsible for developing new Government Data Standard, championing open data and encouraging the use of data in the decision making process”. He will also push for greater data analysis skills and capability across Government. On Twitter, Bracken states, “ “Job to do as #CDO Support leaders already in govt, set rules of the road for govt and users, develop standards. Should be fun. Onwards!” There’s certainly a big task ahead but the potential prize, if the value in the large swathes of Government data can be unlocked, is large.
Posted by Georgina O'Toole at '08:57'
Mobile platform SaaS provider IMImobile updated the market on its first full year since going public on AIM last June (see here). Performance is in line with expectations, and the company appears to be doing well in Europe, where it achieved year on year organic gross profit growth of over 25%.
It said top line revenue and profit growth has been achieved through an increase in recurring and professional services revenues and growth from both new and existing customers.
IMImobile provides a next gen mobile platform called DaVinci used by customers to deliver and manage mobile data services, aimed at driving new sales, reducing time to market and reducing capex. This is a hot space, but fiercely competitive, so IMImobile’s challenge will be to keep innovating and investing to stay ahead. It wants to play a part in industry consolidation, so the £7m netted from its recent listing will come in handy.
Posted by John O'Brien at '08:19'
After making some more progress in the first half to December (turnover up 7% to £1.04m) and a return to operating profit, Arcontech management warns of the effects of a major customer asking to terminate his contract 18 months early. A solution is being negotiated, but this will hit profitability and the potential revenue shortfall will be difficult to fill. Despite this the Board anticipates a “positive result” in the second half.
This provider of the CityVision market data solutions to support real-time financial market data processing and trading has been looking for additional growth areas since last financial year, see Where next for Arcontech? It does not look as if the management have achieved much success so far. With all the regulatory and technological change within the financial markets there is certainly lots of scope, but the company needs to make some visible progress in setting a direction. The company still has net cash, of £1m and perhaps the change of adviser, to finnCap, announced today will provide additional help.
Posted by Peter Roe at '08:18'
SCISYS rightly celebrated its contribution to the European Space Agency’s (ESA) mission control system for the touchdown of the Rosetta mission’s lander, Philae, on comet 67P/Churyumov Gerasimenko (see Scisys proud of Rosetta contribution).
However the FY14 results brought SCISYS back down to earth, with delayed contract awards, problematic projects in Enterprise Solutions & Defence (ESD) division, plus a weakening Euro (diluting the contribution from the Media & Broadcast and Space divisions).
In FY14 revenues fell by 5% to £40.4m (2013: £42.6m) but, in spite of the challenges, adjusted operating margin rose for the seventh consecutive year to 8.3% (up from 7.6% in 2013) and operating profit rose to £3.2m (2013: £1.7m).
ESD revenues fell by £1m to £13.5m and were impacted by delayed defence contracts. The restructuring of the ESD division ‘proved more difficult than anticipated’. Two projects suffered from a lack of continuity; resulting in unrecoverable cost overruns. Problems at these clients should be in the past as they have already let new contracts to SCISYS.
The Space Division’s revenues were adversely affected by the falling Euro (the majority of revenues are in Euros but costs are in Sterling) and were down from £19.8m in 2013 to £18.6m. In addition to the work on the Philae comet lander there were recurring revenues from The European Galileo satellite navigation programme and major European earth observations missions.
Media & Broadcast performed slightly ahead of expectations with revenues remaining at £8.1m.
SCISYS sees no reason to revise its goals of double digit margins by the end of 2018 underpinned by top line growth. The project based nature of engagements brings uncertainty, but with more than 40% total revenues coming from recurring revenue, coupled with the disciplined approach on margin; SCISYS remains well grounded.
Posted by Michael Larner at '23:06'
Rapidly growing Little British Battler star Egress Software has announced another contract win, this time with cancer charity, Marie Curie Cancer Care. As a provider of encryption technologies, Egress will provide Marie Curie with secure email and file transfer services (Egress Switch) allowing its staff to communicate quickly and securely with each other, as well as with contacts in the NHS and other approved external parties. In addition, Marie Curie has installed Egress Switch Gateway to implement policy at the network boundary. This means that it can enforce encryption on specific messages known to contain sensitive information based on key words or phrases, such as NHS patient numbers.
Egress has a few charity clients, but this is arguably the most high profile. Readers will know that Egress started life in the local government space. But the viral nature of its business (see LBB Egress Software: virally secure) means that it has rapidly penetrated adjacent sectors, with whom local authorities communicate. The charity sector is a case in point. It’s great to see one of our LBBs continuing to prosper.
Posted by Georgina O'Toole at '09:31'
In line with a trading update issued back in January, field service management software specialist, ServicePower Technologies, saw FY14 (to end December 2014) revenue decrease from £14m to £12.7m. The dip at the top line moved the company into losses (of £877k) at the operating level, from a profit in the previous year of £210k. Shares were down 5% at time of writing.
Behind the scenes, ServicePower has been winding down low margin service contracts, which had the effect of taking £500k off the topline in FY14. Additionally, the company is transitioning to a greater mix of SaaS sales – which hit £2.85m in the year, up from £2.43m in the previous year. ServicePower is very far from being alone in trying to master the transition to the as-a-service model, which can be an ‘uncomfortable’ journey. As we’ve pointed out before, software giants SAP and Oracle anticipate profitability in year four on their SaaS contracts.
Our view is that demand for field management services will remain solid, as products are all about helping customers target inefficiency – and therefore reducing cost. However, suppliers face pressure on margins and must therefore keep on evolving (e.g. in terms of the range of products and how they are delivered) to maintain a competitive edge. For players such as ServicePower, this process of evolution can throw up very significant challenges as a result of fundamental changes to the business model. However, this is ‘compulsory' evolution; stay still and you’re likely become extinct.
The company says trading in 2015 has started “positively” and it remains “confident of a successful outcome to the year”.
Posted by Kate Hanaghan at '09:11'
It appears that education IT and resources provider, RM, had a satisfactory first quarter, meeting the Board’s expectations. Performance was helped by the signing of a new three year contract by the RM Results business. It will provide e-marking services to the education charity AQA.
Meanwhile, with top-line revenue growth not expected until 2016 (See RM re-shapes in a good year), the company has kept investors happy by keeping a close eye on the finances, highlighting “capital discipline” and “an efficient balance sheet” over the medium term as key. In line with this, it has sub-let one of its buildings in Abingdon to South Oxfordshire District Council reducing the lease provision held on its balance sheet. The company also continues to progress with its progressive dividend policy. The Management will be pleased when the business stops being impacted by the end of the Building Schools for the Future programme and the planned move away from hardware sales. In the meantime, they are doing a good job keeping the ship steady.
Posted by Georgina O'Toole at '09:10'
The Azure App Service Microsoft launched this week that provides a unified platform for the development of web, mobile, business and API-based apps, is another marker on the ‘cloud first/mobile’ first road and the ‘open’ journey Microsoft is on.
The new service brings existing Web, Mobile and BizTalk development services together, with additional tools, to enable developers to develop once and deploy many times across multiple platforms and devices. What is particularly appealing is the ability to build applications around APIs and to automate business processes across different data sets and different clouds. If we are to avoid the silo-generated problems of the pre-cloud era, inter-cloud integration is a major requirement. We'll be taking a deeper look into Azure App Services and Microsoft's mobile strategy over the coming months.
Posted by Angela Eager at '08:46'
It was a confident set of full year results from eg Solutions from its “transformational” 2014 as it put itself back into the black, delivering on both top and bottom lines. Part of this was due to the rising tide in the back office workforce optimisation market but even with a rising tide suppliers have to do the right things and it looks like eg Solutions is managing it.
Revenue (to January 31 2015) was up a cool 69% on the restated 2014 figure, reaching £7.5m. The company has been pulling in significant new contracts (10 during the year) but also spreading its vertical wings with developments in Utilities and important first wins in Telco and Local Government (see here) which should position it to expand in these areas. The flow and level of business converted the £1.48m loss before tax of the previous year into a modest but telling PBT of £0.4m, while the gross margin climbed to 70% (from 65%).
Transformational years tend to be the result of problems, as was the case with eg Solutions (see the background here), but these results indicate it has overcome them and is now able to focus on execution without distractions. One of the challenges will be maintaining growth levels while delivering on new business wins and the pre year end placing that raised £3.19m will help with that. So will the realisation in the market that the back office has to be in good shape to deliver on the customer experience and that operational improvement throughout the back office is key to tasks such as delivering services and leveraging global capacity, as discussed in the recent ‘Back Office Optimisation for Customer Experience Delivery’ report.
Posted by Angela Eager at '08:20'
Monitise has moved quickly to end the Strategic Review announced in January, the management deciding to continue as an independent company. Despite receiving several expressions of interest, the Board considered that none of them fully valued the long term potential of Monitise’s unique position and such a move would be disruptive.
The Review appears to have sharpened the focus of the management team and prompted some clear thinking and decision making. Cost cutting, including shifting professional services resources to IBM and the greater use of Istanbul as a R&D hub will continue, with sharper focus on core product development. The management team is also taking a hard look at non-core businesses and geographical expansion plans. Visionary founder Alastair Lukies is stepping down from the Board to work as a Strategic Adviser and letting his ex-VISA and delivery-focused joint-CEO Elizabeth Buse take sole charge.
In April, Monitise launches Bank and Pay capabilities on the new Monitise Central Platform which will be important in terms of scalability and functionality. The peak of development spending is now past (with higher than expected costs in meeting Telefonica’s requirements). Management have re-affirmed their target of EBITDA profitability in FY2016, repeating that they have sufficient cash to see them through to breakeven. The medium term goal of 200m users and £2.50 ARPU is also in view, but as discussed in our Monitise Strategy Update, the timing of this relies on its partners (principally Telefonica and Santander) launching services into new regions and tranches of their customer base.
Markets and management have been distracted by the Strategic Review and its early end is welcome. It will have been a useful exercise if Monitise emerges as a more tightly run operation that has pinpoint focus on achieving its goals and delivering shareholder value.
Posted by Peter Roe at '08:13'
The next generation business process automation (BPA) space is hotting up (see BPS Predictions 2015). Now printer copier giant Lexmark wants in on the action taking over document capture and smart process applications player Kofax. This adds to its earlier takeover of Swedish BPA player Readsoft last November (see Business Process Automation – a brave new world for BPS providers).
Lexmark is paying $11 per share valuing Kofax at $1bn, or 3.4x revenue. As HotViews readers will know, Kofax has been on something of a rollercoaster ride in recent quarters as it transitions its business from legacy capture to newer next gen BPA software and services (see here and work back). Being part of a larger business will give it the stability it needs and away from the glare of investors.
Kofax's c£300m in revenue will almost double the size of Lexmark's enterprise software revenues to c$700m. This is made up of Readsoft (FY13: c$90m) and enterprise content management (ECM) player Perceptive Software (FY09: $84m) acquired in May 2010 for $280m. Kofax is by far the biggest software purchase by Lexmark to date.
Paul Rooke, Lexmark’s chairman and CEO said the rationale for the deal is to offer customers ‘hardware and software solutions that connect their information silos and automate their business processes’. Lexmark is clearly seeking an opportunity to leap-frog competitors in the business process space via next gen BPA technology, side-stepping competitors like Xerox, which paid heavily for its move into BPO (see Atos zeroes in on Xerox ITO).
Lexmark will be particularly after Kofax’s next gen TotalAgility platform that plays into the digital customer experience agenda. This helps join up systems of record such as ERP and ECM, and systems of engagement (mobile, cloud etc) to improve customer engagement (see our recent analysis Why is Digital Customer Experience key to future BPS delivery?). Kofax had inked a global partnership with Xerox to resell, market and deploy TotalAgility - so this is now likely to be null and void.
Gaining exclusive access to differentiating IP is going to be a key driver of M&A within the next gen BPA space.
Posted by John O'Brien at '07:58'
London-based pension auto-enrolment middleware developer Systemsync has raised an initial £850k of funding from a small group of (I assume, well pensioned) angel investors in order to complete product development. Industry veteran Alwyn Welch takes the (non-exec) chair.
Systemsync is in effect a spin-out from CEO Will Lovegrove’s previous software development and support business, Release Consulting. Lovegrove won a £200k government grant in 2013 to fund the development of Systemsync under the covers of Release. He had previously secured an £88k grant in 2011 to fund development of a prior product, Datownia.
Welch, whose career included stints at Aircom, Parity, Unisys and Capgemini, informed me they are ‘weeks sway’ from commercial launch yet Systemsync already has its first paying client. With an aggressive government schedule for the roll-out of pension auto-enrolment the clock is certainly ticking to get the product to market.
Posted by Anthony Miller at '07:40'
We have consistently called upon the management of eServGlobal to put forward a convincing case for the strategy of their core business, now that the flagship HomeSend proposition is only minority-held and after the share prices decline and recent departure of their CEO, see here and work back.
Today’s AGM statement and accompanying presentation goes a long way to fulfilling that request, outlining the enormous opportunity presented to the mobile banking community given the unbanked 2.5bn adults around the world, the growing value of international remittances (US$436bn in 2014) and the rapid growth in mobile money deployments.
eServGlobal’s core business has a growing pipeline of mobile operators and increasingly financial institutions coming on board. It also has a new technology platform and product-led approach to deliver scale and repeatability and address the problems in their delivery capability that dogged 2014 progress and which are now coming to light.
The HomeSend joint venture is now benefiting from the MasterCard brand and marketing muscle and growth should accelerate, requiring additional investment in co-funded marketing and infrastructure from the joint venture partners.
So the fundamentals of the market appear strong, the underlying platform looks more secure and new customers are coming on board across the organisation. However, the management still has a lot to do (including finding a new CEO and full-time CFO) and scale needs to be built in the company’s core business. The operations coming on stream in the mobile money business are relatively small and building profitable revenue from the world’s unbanked will take time. eServGlobal may well be building a string of pearls in terms of valuable long term businesses, but shareholders will have to remain patient.
Posted by Peter Roe at '10:09'
As Gresham Computing, the provider of real time financial transaction control software, publishes its Annual Report, the management take the opportunity of repeating the message of a good start for 2015, with the first 2 months strongly ahead of early 2014. New CTC customers have come on board and Gresham has built a strong portfolio of use cases and reinforced its sales and support capabilities to underpin a higher level of growth (see here and work back).
Ian Manocha, a 15-year veteran of SAS (and prior to that at ICL and Unisys) will join the company as CEO in June as Chris Errington steps aside to take a NED role (see here). Ian will be able to build on the substantial progress made in the company in revitalising the portfolio and re-positioning the company in growing market areas. Gresham fell foul of contract delays and budget issues in several of its customers in mid-2014, resulting in a downgrade of revenue and profit expectations and a drop in the share price. However, given the broader base of CTC customers and the momentum and confidence that is being developed across the business, it is reasonable to expect big things from Gresham, and its new CEO, over the coming years.
Posted by Peter Roe at '10:05'
Following on from the recent purchase of Prelytix, a predictive analytics software company, First Derivatives have moved again to build their arsenal of capabilities in their “Very-Big, Very-Fast Data” strategy. This time the target is ActivateClients, a Dublin-based software company that works with broking, forex and fixed income clients. The company provides quantitative analysis software into wealth managers, a web-based research distribution system and a system for spotting arbitrage opportunities in debt markets. Again, First Derivatives is not spending big, with an initial consideration of €4.75m and a deferred payment of €2m subject to targets being met.
This deal is much nearer the heartland of First Derivatives’ business, having built a strong position in financial markets, but adds to the growing group’s skill set in agile development, SaaS and also in HTML5, which the FD top team consider to be particularly important for their product road map.
Over the past six months, First Derivatives has made big strides in securing its market position and technical foundation and the management has moved quickly to diversify its skill set and target markets (see here and work back). However, it seems unlikely that this ambitious company will be satisfied with what’s been achieved so far, so we will stay on the lookout for yet more M&A activity.
Posted by Peter Roe at '10:03'
Today’s Economic Times of India announces that Balasubramanian Ganesh, the head of Wipro’s banking products and solutions group has resigned as his division was merged with the banking, financial services and insurance (BFSI) business.
This announcement follows hard on the heels of the appointment of a new President and COO and our concern over the future of Wipro’s CEO, see Is Wipro CEO TK Kurien throwing in the towel? and Wipro hires ex-TCS veteran to lead SAP practice. Our recently published Offshore Views Q4 2014 also highlighted Wipro as being stuck in a rut, in both revenue growth at 7% worldwide and profit terms where operating margins are becalmed in the low 20s.
The Financial Services business is certainly a focus area for the top management, given the lower proportion (c.26%) from this area compared to other India-centric players such as TCS and Cognizant (both at c.41%) and Infosys (c. 33%). The India-centric players have been making good progress in this sector (particularly in the UK as discussed in our Financial Services Supplier Landscape, available here). Several of them have been sweeping up contracts as the banks consolidate their supplier lists and as the banks and insurance companies alter their investment strategy to put more emphasis on growth and digital channels. In our meeting with the team at Wipro FS late last year they seemed to be making good progress, with activity in shared services and collaboration and a greater push in consulting, but on our figures Infosys, Cognizant and HCL grew much faster in 2014 and the company cannot be seen to be falling too far behind. More senior changes in this key sector can’t be ruled out.
Posted by Peter Roe at '10:00'
Pinnacle Technology Group, an AIM listed managed services provider, has announced a partnership agreement with O2 to provide O2's mobile, digital and accredited public sector solution services to Pinnacle's client base.
The partnership is a good fit. Pinnacle will be able to expand the range of services it can offer through the Public Services Network (PSN) framework.O2 was the first mobile network provider to become CAS(T) certified (a certification scheme for telecommunications services formerly known as the CESG Standard Security Certification Scheme) and the partnership adds to their IT security credentials.
In Pinnacle Technology facing long, painful turnaround we summarised that FY14 results made for uncomfortable reading with revenues down by 17% and lingering adjusted EBITDA losses.
Nicholas Scallan was appointed CEO last March and his turnaround plan includes focussing Pinnacle more closely on managed IT services and cyber security. We have said previously that it can be very hard for companies such as Pinnacle to stand out from the crowd; augmenting O2’s security credentials is a good starting point. The stock market thinks so too with Pinnacle’s shares up today by over 15% already.
Posted by Michael Larner at '09:52'
When technology merchant bank (and TechMarketView Little British Battlers Sponsor) MXC Capital took Calyx Managed Services (CMS) off Jon Mouton’s hands last month for £9m (see MXC buys Calyx Managed Services from Better Capital), we mooted that this was not likely to be the end of the affair.
And so it has come to pass, with the subsequent disposal of two of Calyx's divisions, Break Fix (to Daisy Group) and Carrier Services (to Chess Limited), for a total cash consideration of £5.55m. This leave CMS a more focused managed IT services business with a turnover of £9.1m and gross profit of £5.1m.
One could posit that even this might not be the end of the affair.
Posted by Anthony Miller at '09:23'
After a very colourful few years as a ‘buy-and-build’ managed security services play (start here and work back), AIM-listed Accumuli is to be acquired by Main Market-listed escrow, verification, security testing, website performance, software testing and domain services (phew!) firm, NCC Group, in a cash and share deal that values Accumuli’s shares at 32.8p per share, a 19% premium to yesterday’s close. The acquisition values Accumuli at some £55m.
Advising Accumuli on the deal was TechMarketView Little British Battlers sponsor, technology merchant bank MXC Capital. MXC had previously been an investor in Accumuli, exiting in October 2013 after selling its 12.4% stake to Oryx International Growth Fund, the LSE-listed investment vehicle managed by London-based private equity firm Harwood Capital (see Accumuli accumulates new investor). At the time, Accumuli’s shares were worth 15p. MXC had taken an option on £2m of Accumuli predecessor company, NetServices’ stock at 8.7p a share.
Accumuli took the trouble of issuing a trading update ahead of FY close (31st March) signalling headline revenues of £27m and ‘in line’ EBITDA.
Clearly NCC (market cap. C. £460m) is keen to boost its credentials in the security market. It already has a security consulting business under the covers of its Assurance (testing & web performance) division which has worked alongside Accumuli at some mutual customers. This rather begs the question whether NCC Group’s ‘business of three halves’ (Assurance, Escrow, Domain Services) will soon become one of four halves, given that its enlarged security activities will dwarf testing and web performance revenues.
Posted by Anthony Miller at '08:54'
SCC has today said it has taken a “substantial share” in London-based Fluidata, a provider of high speed data connectivity solutions across a variety of sectors, including the public sector. SCC has not disclosed the financial terms of the deal or the precise size of the share it has taken.
The move forms part of SCC’s strategy to build its data centre services business with this additional capability meaning the firm can now directly provide connectivity between data centres. Fluidata specialises in Layer-2 and Layer-3 delivery using technologies including DSL, EFM, Fibre, VPLS/MPLS, Wireless and failover/aggregation technology. Being able to buy both the data centre services and the ‘link’ between/to data centres from the same provider gives certain customers peace of mind. Indeed, in SCC’s target market (the mid-market and public sector) this capability is especially attractive.
The Fluidata investment follows SCC's October acquisition of SSE Telecoms’ flagship Hampshire data centre, which became SCC’s second Tier 3+ DC alongside its original facility in the midlands.
It has to be said, SCC’s strategy to expand its service business has been determined. Alongside the investment in Fluidata and the SSE acquisition, the company also acquired managed print services firm, M2 Digital (see here) back in February 2014. SCC has also ploughed millions into its existing faciltiies and created its own cloud platform.
The company is indicating that for the full financial year, its services business will have increased 25% (which we assume includes those acquisitions) to £165m. We’ll have to analyse the numbers more closely of course, but SCC is now edging closer to becoming a Top 20 player in the UK infrastructure services market. We expect to gain sight of the official full year numbers in May.
Posted by Kate Hanaghan at '09:54'
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Posted by HotViews Editor at '09:45'
Optimal Payments (AIM: OPAY) had a good 2014 with revenues up 44% to US$365m and EBITDA up 65% to US$86m, boosted by the World Cup and acquisitions. The company’s business is dominated by the on-line gaming and gambling business and returned 50% growth in its NETELLER Stored Value (prepaid cards and digital wallets) business. The NETBANX Straight Through Processing Business returned revenues of US$247m, up 42%. Underlying growth here was 19% with the July acquisitions in the US diversifying the revenue sources away from one key merchant (which still accounted for 37% of total revenue). The company also broadened its ecommerce activities with a move to Principal Membership with Visa Europe and MasterCard Europe and the launch of a new card issuing services division NETELLERGO!
The management of Optimal Payments has agreed to buy the Skrill Group from a group of Private Equity investors. Skrill is a leading European provider of digital payments services, digital wallets and pre-paid vouchers, having made consistent progress throughout the past year, see here. Optimal Payments are to pay the equivalent of €1.1bn in cash and shares for the Group, giving the PE guys an estimated profit of over 80% on their 18-month investment. The deal will give the enlarged group a broader base in digital media and ecommerce markets, but the combined revenue of c.US$700m will still be heavily weighted towards on-line gambling. Management expects significant cost savings and will be continuing to seek out additional acquisitions. Optimal Payments may well have paid a full price for the business, nevertheless, given the growth in the gambling markets and the benefits of scale, the move looks like it will prove to be a consistent generator of growth and profit.
Posted by Peter Roe at '09:28'
Arria NLG, AIM-listed and heavily loss-making developer of Natural Language Generation technologies has found another partner with whom to develop new opportunities for its specialist technologies. Over the past year we have reported on progress in the oil and gas industry, weather forecasting and with IBM Watson, see here and work back. Today it is the turn of the Financial Services industry, with an Australian company signing a Framework Licensing Agreement to develop automated reporting systems for customers and management.
It’s no good having companies “Joining the Dots” (TechMarketView’s theme for 2015) unless users and customers can understand the implications. Arria NLG’s technology of interpreting developments into simple, understandable natural language narratives should therefore be increasingly important, if it can develop a business model to turn the ideas into ongoing revenue.
Obviously much needs to be done here. Arria NLG was one of the top 10 "Blazing Comets" in our 2014 Review of the Quoted Sector, see here, as its share price fell 74%. Although progress is being made in opening up new market opportunities, shareholders will probably have to remain patient.
Posted by Peter Roe at '09:20'
Crowdfunding is not just all about taking a punt on a product business. London-based startup Property Partner extends the model to investment in ‘buy to let’ property and has raised a further £5.2m in a Series A funding round led by Index Ventures.
Just six months ago Property Partner raised £1.25m in seed funding led by Octopus Investments, along with a host of investment industry glitterati including Betfair co-founder and Funding Circle Board member Ed Wray; Better Capital founder, Jon Moulton; Daniel Quai, Crescendo Real Estate co-founder; and BSkyB CFO and Just Eat Board member Andrew Griffith.
Property Partner is not the first of its ilk in the UK, though claims its ‘USP’ is that punters can exit their investment at any time. Punters pay a 2% fee on the initial investment (starting at £50) and Property Partner also takes 12.5% (+VAT) of the gross rental income to cover its letting management services. The properties are purchased through a ‘special purposes vehicle’ company and punters own shares in the SPV.
I’d say potential punters would be well advised to read the Key Risks section of Property Partner's website. There are many other risks too. For example, I can’t see any mention on how property repair and renovation costs are handled, though I assume, like most letting agencies, these services are procured by the agency and the cost passed back to the freeholder (often with an administration fee). And what about the liabilities of shareholders in the SPV companies? Hmmm - could it cost punters more than their investment?
Personally, I would not want to become a part-share landlord where I have no control on how the property is managed or to whom it is let. Others may.
Posted by Anthony Miller at '08:14'
RightClinic, the laser eye clinic and cosmetic surgery marketplace founded by former medic Ganesh Rao, has raised £250k funding from London VC Forward Partners. RightClinic started life in 2010 as TreatmentSaver and, according to an interview in Tech Crunch, was seeded by Rao’s £50k winnings at a professional poker competition. Rao had tried but failed to get funding on BBC TV’s Dragon’s Den.
Whatever the merits of ‘consumer choice’ one would certainly hope that decisions on, in some cases irreversible, life changing surgery are not made solely on the basis of a star rating on a commercial website that takes a cut on each booking it captures.
Posted by Anthony Miller at '07:20'
Given that it made front page news, you probably are aware that the FTSE100 hit a record closing high of 7022 on Friday and above the important 7000 mark. That’s nearly a 7% rise this year and a doubling since the low of March 2009.
We could almost have written a similar headline for NASDAQ which closed at 5040.7 (up 6.4% YTD); tantalisingly close to its record closing high of 5048 in March 2000 just before the dot.com bubble burst. NASDAQ burst through the 5000 mark three weeks ago.
There are a raft of reasons given for this but the most convincing is the continued ultra low interest rates – and the realisation that these will be with us for some time to come. So one of the only ways to get any return on your investments is to take a riskier route into equities.
My own ‘Holway Portfolio’ (See 2014 update) has performed really well; up nearly 15% YTD. So that’s a 260% rise since Jan 2010. MXC has continued to be the star (up 90% YTD) But double digit growth YTD recorded at Apple, Amazon, ARM, BT, Capita and TeleCity too. Indeed, having ditched a couple of poor performers at the beginning of the year, every one of the 15 tech stocks remaining in the Holway Portfolio is ‘in positive territory’ YTD.
Also worth noting that dividend yield for tech stocks is now a meaningful c2% for the stocks in the FTSE SCS Index. That is much better than the interest you’ll get on your cash – I can’t remember ever being able to say that before. No wonder the world and his dog is piling in. The only concern is that when retail investors catch up, the peak has usually been reached. On top of that there seem to be too many scary potential shocks on the horizon. Building societies still make up a significant part of Holway’s investment strategy!
Posted by Richard Holway at '07:06'
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