As presented in the August trading update, Earthport, the cross-border payments network provider, returned an 18% revenue increase in the year to the end of June, to £22.8m, in line with forecasts but well down on the previous year’s growth rate. Operating losses doubled to £10m as Administrative Expenses lifted c.30% and as gross margins declined to 70% with more functionality added to the network. The value of transactions carried however rose by 64%, to over US$11bn and Earthport continued to build its customer network, expanding into several European-based global banks, building out its Far Eastern relationship network and taking a large eCommerce provider live in three markets.
Earthport has set its stall out to become a volume supplier of cross-border payment services to several of the big banks and the move to volume has taken longer than many expected. Now the company celebrates the completion of an 18-month integration of a Top 10 bank’s core payment processing platform into its network. This should support volume growth and we can expect further such moves over the next couple of years. Established banks are increasingly looking to Earthport, and other next-generation providers, as a route to a more modern, cost-effective and increasingly mainstream payments services.
With Q1 already in the bag with a 34% revenue increase, the management are confident of reaching its FY17 targets of c.30% revenue growth, a gross margin of c.70% and a move to cash breakeven in the fourth quarter.
Earthport is courting the eCommerce and remittances sector to generate additional revenue and this strategy is paying off. However, we consider that real success lies in a much higher share of the banks’ “wallet”. Earthport appears to have established its value proposition for the banks and we should see continued progress.
Posted by Peter Roe at '10:00'
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Unisys’ cost cutting programme is producing results. It saw a 340 basis point improvement in the non-GAAP operating margin, up to 7% in the year to date. In its Q3, reported overnight, the company detailed the results of the programme, which largely relates to headcount reductions. In the quarter, it axed more jobs, which it anticipates will result in $30m of incremental annualised cost savings. In the year to date, that figure is $185m, against a plan of $200m by the end of 2016.
On a less positive front, Unisys saw revenue decline 5.6% on a constant currency basis to $683m. And in the Services business (88% of revenue), the top line slumped 6.7% to $601m. Gross margin is down on last year, due to some favourable contracts in 2015 and ongoing investments in solutions capabilities this year. However, operating margin was up on Q2 and was the strongest quarter in 2016.
The company’s long-standing contract with The Prudential got a mention in the formal results document as it has now been expanded to include an automated disaster recovery solution. However, that doesn’t sound like a ‘big bucks’ deal to us.
Unisys is still very much on a journey, however it remains on track for its full year revenue guidance. We’ve also seen cash flow improvements and Total Contract Value signings increase 22% year to date. Let's see how the latter impacts the top line in the coming months.
Posted by Kate Hanaghan at '09:24'
I have to say it’s not entirely clear whether the access control part of the business is included in the management buy-out as the announcement only refers to Mitrefinch, the brand name of the long-established York-based developer of HR software and access control systems. The access control operation appears to reside in sister company Advance Systems International (ASI), part of holding company Laratech, also owned by Mitrefinch founders Andrew and Sally-Anne Simpson.
Anyway, this is all prelude to the deal itself, which sees Lloyds Development Capital (LDC) back Mitrefinch CEO Debby Guppy in her buyout from the Simpsons. LDC is investing £20m in the deal and become a ‘significant’ shareholder in the business.
Mitrefinch is the proverbial ‘nice little earner’. Last year it made £2.66m pre-tax profit on revenues of £10.4m (up 8% yoy). The founders awarded themselves a dividend of £2.78m. Holding company Laratech had pre-tax profits of £2.88m on revenues of £15.9m.
Over 80% of Mitrefinch’s revenues derive from the UK, with operations in Europe, Canada, US and Australia. The new funding (it’s unclear how much of the £20m will be left after paying out the founders) will be used to expand Mitrefinch’s international operations. Excellent news for UK tech!
Posted by Anthony Miller at '09:19'
Bless, it’s another dashboard, but cloaked in the usual technomarketing-speak to try to make it stand out from the crowd. Co-founded a year ago by ex-Shazam Chief Technical Architect Rahul Powar, Red Sift appears to be cloud-based middleware that links together ‘micro-services’ (or Sifts, as Powar calls them) to aggregate, analyse and present data from multiple sources.
Fine. And they’ve just raised $2m in a funding round led by White Star Capital and Oxford Capital with participation from Entrée Capital. The product is currently in ‘public beta’.
Posted by Anthony Miller at '08:30'
There were no particular surprises in Paris-based Capgemini’s Q3 trading update, with the UK unit exhibiting its expected diversity of performance between public sector and private sector growth. The continued rundown of the HMRC Aspire contract dragged UK revenues down to €463m (-1.5% yoy at constant currencies, -16% yoy as published) despite a 10% uplift in private sector, which now accounts for more than half of Capgemini UK’s revenues. Group CEO Paul Hermelin said they hadn’t noticed ‘any material impact’ from Brexit.
Capgemini group revenues totalled €3.02b in Q3 (to 30th Sept.), down 0.6% yoy as published but 2.2% higher yoy at constant currencies. All regions grew bar UK. Hermelin is holding to prior FY guidance of 7.5%-9.5% constant currency revenue growth, though the weaker pound is expected to knock 3 points off that. Adjusted operating margins are still expected to be in the 11.3%-11.5% range.
Posted by Anthony Miller at '08:00'
...but can it get its MoJo back?
Apple reporting its first decline in annual revenues for a decade was much trailed. And, as expected, it came to pass. Revenues for FY16 were down 8% at $215.6b with a 9% decline in Q4 (yoy).
Apple sold 45.5m iPhones in Q4 - down 5% yoy. Profits were down 19% at $9b. But this was pretty much - or slightly better - than most analyst forecasts.
Revenues rose in Europe (up 12% yoy) and Japan (up 23% yoy) but fell 30% yoy in China.
Attention was on the outlook where Apple provided guidance for a 1% revenue rise in Q1 - the all important Xmas quarter.
The star performer was Services (App Store, Music, Apple Pay etc) - up 24% yoy at $6.3b and now Apple’s 2nd largest revenue earner. It needed to be as iPad (unit sales down 6.8% yoy) and Mac (unit sales down 15.7% yoy) also fell - joined now by the iPhone in the ‘we are in decline basket’.
Apple shares have done well of late - up around 20% in the last 3 months putting them roughly back to where they were a year back. Gut reaction to the results sent Apple down 2% in after hours trading. Although, as I said, everything they announced was pretty much as expected.
CEO Tim Cook is beginning to sound like a broken record. “We’re thrilled with the customer response to the iPhone7…” “ I couldn’t be more excited…” Goodness knows what words he will use if Apple actually gets another hit on its hands! After all the Apple Watch seems to be a bit of a dud sales-wise.
And that is really the point. Since 2001, when Apple introduced the iPod, we have all enjoyed a string of the most innovative products including the iPhone and the iPad. But with Steve Jobs gone, so it appears has that wondrous seam of inventiveness. Can Apple get its MoJo back? On current form one would doubt that.
Let me say again that what Apple needs is an Elon Musk - the closest thing to Steve Jobs that I know. What better way to get that than to buy Tesla?
Posted by Richard Holway at '22:38'
With over 80% of its revenues deriving from the Americas – the highest concentration among any of the top-tier or mid-tier Indian pure-plays – Mumbai-based Hexaware’s prospects are primarily determined by its success in that region.
Fortunately, a recovery in the US financial services sector favoured Hexaware, leading to topline growth of 8.1% yoy to $135.2m in Q3 (to 30th Sept), over 4% higher than the prior quarter, pretty much in line with growth at very much larger Infosys (see Infosys still shooting for $10b year). Hexaware’s operating margins also improved, expanding to 15.9%, nearly two points higher than in Q2 and a tad higher yoy.
This pretty much guarantees Hexaware will breach the $500m FY revenue barrier by the end of this quarter, a notable milestone that mid-tier rival NIIT Technologies will likely have to wait some time to reach (see here).
It’s so hard for smaller companies especially to find the right sweet spots – but at the moment Hexaware seems to be in the right place at the right time.
Posted by Anthony Miller at '15:11'
Daisy has expanded its long-standing partnership with Atos. A new five-year deal will see Daisy add data centre server, storage and management to the existing arrangement, which was primarily focused on deskside support and maintenance. Daisy will also supply its business continuity services for increased resiliency and provide support for the UK part of Bull, which Atos acquired in 2014. The new contract will create efficiencies for Atos as it consolidates services previously provided by several suppliers.
The deal will see Daisy take on about 80 Atos field engineers, which might seem counterintuitive in an industry that is generally trying to reduce field resource. However, Daisy has been modernising its engineering workforce, removing some of the more expensive resource and recruiting apprentices to undertake more straightforward tasks.
Indeed, there has been a lot of work behind the scenes to ‘shore-up’ what was the Phoenix Partner business (which had a partner-only business model) that Daisy acquired last year. At the time, the Partner business was in decline and suffering from a profitability perspective. Daisy made a number of quick fixes (e.g. cutting the cost base) alongside some longer-term improvements (e.g. renegotiating certain contracts, exiting other loss-making deals).
As well as making operational changes to create a more efficient business, Daisy has also been addressing its relationship with partners, reinvigorating how it is perceived. The Atos win demonstrates it is making progress here. Furthermore, we are also seeing evidence of cross-sale of services from the existing Daisy business (e.g. communication services, network services) into legacy Phoenix partners (who are typically system integrators). The business is now back to growth, suggesting the last year has seen some real progress indeed.
Posted by Kate Hanaghan at '09:48'
To be successful in the fast-moving world of Fintech requires you to play to your strengths and where necessary to co-operate with experts in their specific fields. In this way you can best ensure that your service is both competitive and fit-for-purpose, with an optimal time-to-market. This approach can be seen in the co-operation between UK-based Fintech Modulr and Contego, a specialist provider of SaaS-based automated verification and risk scoring systems to help corporate companies tackle fraud and improve compliance.
TechMarketView first met Contego in April 2015 when it was selected for our sixth Little British Battler programme (Contego and the other members of LBB6 are profiled here) It has since been selected to join Accenture’s Fintech Innovation Lab. Contego will use its automated platform to access a range of data sources to provide complex KYC and KYB (Know Your Customer/Business) checks for Modulr to counter fraud and to speed customer onboarding.
Modulr (modulrfinance.com) aims to make the process of payments simpler and more efficient for their corporate customers. Their API-driven and accounts and payments platform enables faster customer on-boarding, account opening and the automation of payment flows. Their use cases highlight work with alternative lending providers and peer to peer platforms. Modulr is now FCA authorised and is active in a very important area of Fintech. Both companies and regulators are looking to use API-based systems to accelerate the rate of change, stimulate competition and reduce frictional costs across the broader financial services industry.
Modulr’s decision to use Contego to provide a mission-critical service, and one that will be fundamental to the business’s success, is a clear endorsement of the LBB’s value. Both companies look set for an interesting time ahead.
Posted by Peter Roe at '09:31'
It’s not so much that Microsoft is increasing the cost of software and services in the UK in the wake of the post Brexit fall in the value of the pound that draws attention, as the level of increase and the ripple effect.
The basics are that as of January 1 2017, the cost of enterprise software will rise by 13%, with enterprise services jumping by 22%. Consumer services will not be affected and enterprises with existing price agreements will not see any increases during their contract periods.
Other suppliers have raised their prices (e.g. Apple, Dell) but by c10%. The higher level from Microsoft stands out, particularly the 22% services increase, at a time when it is avidly pursuing its cloud services business and Azure is gaining momentum. The services price increase will also play out against a background of downward price pressures across all manner of cloud services so there is a risk to the rate of adoption of Microsoft’s services. Alternatively, given Microsoft’s broad and deeply embedded presence in public and private sector organisations, the move could open the gates for other suppliers to bring through significant increases. It will take time for the effects to filter through however.
Despite its market presence, Microsoft’s move alone will not change the trajectory of the SITS market but the cumulative effect of price increases from suppliers across the sector will. That means less budget within enterprises of all sizes for new developments, which makes it all the more important for suppliers to use technology like cloud services, intelligent automation, AI and machine learning to enable cost effective business innovation.
Posted by Angela Eager at '09:25'
It’s not just about the ‘creatives’. Once the ad is made, somehow you have to deliver it to the media channels. And that, I am given to understand, is not a simple process.
To help streamline the process comes Honeycomb, a TV and video advertising management platform launched last year by the team behind global advertising delivering platform (and now Honeycomb competitor), Adstream. Honeycomb has just raised £3m in a Series A funding round led by Beringea along with a number of angels from the wonderful world of TV and advertising. Honeycomb had previously raised £1m in a ‘family and friends’ round last May (we should all have such rich friends).
From the little I understand of the industry, Honeycomb appears to be a tech-based logistics app for shipping and tracking ads on the journey from ‘creatives’ to broadcasters, which it does for a flat fee starting from £25 per file depending on destination country. As attractive as this may be, Honeycomb’s founders have their eyes set on a bigger prize – programmatic TV.
Much talked about, but yet to be realised, programmatic TV aims to present audience- and content-relevant advertising to TVs and other online channels. I first heard about programmatic TV from Keith Underwood, Director of Strategy and Technology at Channel 4, who was talking about it at an NIIT Technologies analyst event last year (see Who needs a Chief Digital Officer?). It’s all ‘data driven’ stuff and very much the holy grail for online advertising.
However, that’s all down the line for Honeycomb, but it appears that’s really why investors are placing their bets.
Posted by Anthony Miller at '09:25'
App-driven parcel pickup and delivery startup Weengs has raised £2.2m in a seed funding round backed by LocalGlobe, Seedcamp, and Germany’s Cherry Ventures, along with various angels and Greek VC fund VentureFriends. Launched in June last year by entrepreneurs Alex Christodoulou and Greg Zontanos, Weengs raised £100k in March that year from angel investors to start the business. This was followed by a further £75k angel funding round last October.
As an infrequent eBay seller myself, I must say I find the Weengs proposition attractive. Basically, if you have something to ship, you take a photo of it with the Weengs mobile app, enter details about its size and weight, and a Weengs ‘Angel’ (oh dear!) nips round to your home (or office) to pick it up. Weengs does the packing and sends it on with the usual-suspect carriers – all for a flat £5 plus, of course, the carrier fee. Unfortunately, Weengs have not spread to W5 yet – but apparently I shouldn’t get in a flap over it as they intend to cover all London postcodes in due course.
On the face of it the business model looks a little sturdier than some startups I see. The £5 fee is apparently used to pay the ‘Angel’ doing the pickup, and Weengs gets a cut from the carriers. However, Weengs is not ‘asset light’, needing a central warehouse to do the packing and despatching, and of course packing materials, etc. It’s also not clear from their website who carries the can for lost or damaged shipments.
Nonetheless, a neat idea if they can scale successfully.
Posted by Anthony Miller at '08:42'
We first noticed Kings Cross-based ‘going out’ event listing mobile app start-up YPlan three years ago when it undertook an £8m Series A funding round (see YPlan books US expansion with new funding). The following year, Yplan raised a further £15m in a Series B round (see Octopus helps YPlan spread tentacles to more cities) as the startup aimed to ‘pivot’ into more of an event marketplace, laying off most of its staff in New York.
Apparently, things did not go to plan, so to speak, as Yplan has been acquired by recently IPO’d UK-headquartered event listings publisher Time Out, in an all share deal valued at £1.6m. Yplan was launched in 2012 and generated a £6.2m pre-tax loss in 2015.
Yplan is an obvious fit for Time Out, whose net losses, at £20m last year, were not far short of its £29m revenues. However, Time Out has over £60m cash in the bank as a result of its IPO but clearly had a different view about Yplan’s intrinsic value than that of its investors. Such are the swings and roundabouts in the venture capital industry.
Posted by Anthony Miller at '08:00'
Way back in 1958 I passed my 11+ and my parents bought me a Dansette Conquest Auto record player as a reward. The first records I bought were by Buddy Holly and the Crickets. So when Holly was killed in a plane crash in Iowa on 3rd Feb 1959, along with the Big Bopper and Richie Valens, I was devastated. Since then I have bought every track Holly ever recorded (alive or dead!) and still play them regularly.
Holly and his fellow artists were due to play a gig at the Moorhead National Guard Armory that night. The organisers put out a call to local artists to fill the void. A 15 year old called Robert Velline, who had only formed his band two weeks previously, answered the call - singing Holly numbers in the Holly style.
Velline called his band ‘The Shadows’ and recruited a local young unknown lad called Bob Dylan. Dylan suggested Velline changed his name to Bobby Vee. Vee went on to record some of the most iconic pop songs of that time. Rubber ball, Take good care of my baby, The night has a thousand eyes and many more
Bobby Vee died yesterday at the ‘young’ age of 73.
Posted by Richard Holway at '07:39'
Many of you - both those that attended the Prince’s Trust ICT Leaders of the Last 40 Years event on 5th Oct and those that did not - have asked to see the videos of the speeches that night. These have now been uploaded to a new Youtube Channel - TechMarketView TV.
Individually you can view:
Holway’s Introduction and Whizz through the Last 50 years
Philip Swinstead OBE (founder of Systems Designers in 1969, first SITS IPO in 1982 and, as SD-SCICON, tried - unsuccessfully - to fight off hostile bid from EDS in 1991. Went on to form GFI Informatique and Parity)
Sir Peter Rigby (founder of Specialist Computer Centres in 1975 and now the largest independently owned IT group in Europe with revenues >£1.5b)
Geoff Unwin (CEO of Hoskyns, led Hoskyns IPO in 1988 and subsequently first non-Frenchman to be CEO of Capgemini)
Sir Robin Saxby (first CEO of ARM and led their IPO in 1998)
Dr Steve Garnett (hugely successful executive at Oracle and Siebel before leading Salesforce.com in EMEA from 2003)
Stephen Kelly (ex-CEO of Microfocus and currently CEO of Sage)
Roger Graham OBE (Various major roles in IT since the 1960s but now responsible for Archives for IT)
Holway on the Future!
Duane Jackson (founder of Kashflow and beneficiary of assistance from the Prince’s Trust)
Tara Leathers (Head of Fundraising at The Prince’s Trust)
ENJOY. You will never see the likes of this again.
Posted by Richard Holway at '00:00'
He was only the second outsider in more than 140 years to take the chair at revered Indian industrial conglomerate, Tata Sons (see New Tata chairman is – well, not a Tata!), but Cyrus Mistry has been sacked after four years in the job. Ratan Tata returns to the post while a new search is initiated.
Tata’s press release was short and sour, saying only ‘(the) Board has replaced Mr. Cyrus P. Mistry as Chairman of Tata Sons. The decision was taken at a Board meeting held here today.’
Media speculation on his sudden exit revolves around disquiet with Mistry's acqusition and divestment strategy, along with the performance of some of Tata’s over 100 operating companies, among which include the troubled Tata Steel, Jaguar Land Rover (JLR) and its shining star, offshore services market leader Tata Consultancy Services (TCS), the most valuable company in the group, comprising over half the group’s $125b market cap. and 17% of its $103b annual revenues.
Rarely have we seen so many heads roll in Indian companies in such a short period of time (see Ebullient HCL acquires as CEO walks and Coburn flees Cognizant). Is the once star growth economy going supernova?
Posted by Anthony Miller at '15:55'
It can’t have escaped the notice of any readers that I am extremely keen both on supporting the Prince’s Trust and in getting our young people into tech. Indeed I have been a keen supporter of bringing these two objectives together. In March 16 we launched the Prince’s Trust Get into Technology programme and we were humbled to attend the final day when seven of the participants were offered jobs with sponsors Fujitsu and Arvato. See Prince’s Trust ‘Get into Technology’ event a big success.
Since then the programme has gathered pace. Last week saw the final day of the Atos UK&I ‘Get into Administration and Customer Service’ held in Atos’ BPS HQ in Stockton-on-Tees. Of the ten trainees who completed the course, I understand that five have been offered jobs with Atos and a sixth might get an admin role. Adrian Gregory, who heads Atos UK&I, told me that he was “really chuffed. The feedback on them has been really excellent too”.
As Adrian added “It is clear that, with the right training coupled with commitment from participants and businesses to make it work, programmes like this can and do make a difference.”
I too am ‘chuffed’ like Adrian. If you would like more details about how your company could get involved, please drop me an email (firstname.lastname@example.org) and I will connect you with the Prince’s Trust.
Posted by Richard Holway at '13:20'
In June Eckoh, the AIM-listed provider of contact centre and secure payment solutions, reported strong advances in both revenue and EBITDA, (see Eckoh advancing on all fronts). However, the positive mood was severely damaged by the September announcement of problems in the non-core professional services business of PSS, the US company acquired in late 2015, see here. Cost overruns will mean a £700k full-year loss for this division and an accelerated focus on the core contact-centre-related business.
Now the Eckoh management is trying to rebuild the US momentum, announcing three contracts which add US$2.5m to revenue over the next three years.
Larger companies in the US now appear more ready to accept Eckoh, with the deals being signed with a large supplier of nutritional supplements, a Fortune 500 financial services company and a large telco. The two contracts for secure payments solutions are both on a SaaS pricing model, reinforcing the shift away from enterprise-style implementations and traditional licence deals. The financial sector deal is with a long-standing customer of PSS, this cross-sell somewhat balancing out the negative impact of the other PSS problems. The third deal, with the telco, is for a browser-based agent desktop to aggregate the services offered by the call centre, improving agent efficiency.
The US problems and the shift to revenue-postponing SaaS pricing have impacted the shares. However, the management now state that the trading performance at the end of H1 was strong and that the revised expectations for the full year will be met. There are other grounds for optimism, e.g Eckoh performed the world’s first Apple Pay payment via telephone this month, and the secure payments business appears well-positioned.
Posted by Peter Roe at '10:04'
Bangalore-based mid-tier offshore services supplier Mindtree had a very difficult quarter, previously warning that profits would be down for a whole host of reasons (see Mindtree’s Bluefin dives into red). Indeed, operating profit in FYQ2 (to 30th Sept.) declined by 35% yoy to Rs1.16b, 22% lower than the prior quarter, forcing margins down to 8.9%, the first time in single digits. Headline revenues grew by 11% yoy to Rs13b ($193m), though just 2.4% lower than in Q1.
CEO Rostow Ravanan gave some comfort with news of significant wins, including its largest ever testing deal with a major US airline. However, he reported slower ramp-ups and cautious spending in a few large clients. This is a particularly pressing problem for Mindtree, which derives over 40% of total revenues from its top ten customers, twice the concentration of larger peers.
I can only say that management urgently needs to find a way to turn the business around, as ‘maintain current course and speed’ is not likely to get them heading back in the right direction any time soon.
Posted by Anthony Miller at '09:41'
We caught up with Martin Hellawell, CEO of Softcat, following the release of the company’s first set of results since floating on the LSE. Headline revenue increased 12.8% to £672m, led by a near-20% increase in Services revenues to £102m. Those figures look impressive given the general market conditions for infrastructure and infrastructure services.
Softcat provides a range of services offerings. Not surprisingly, given its position as a value added reseller (VAR), the largest portion of services revenue is derived from the sale of vendor support services – including services for higher-end care, which can be highly profitable. Softcat also provides professional services (which include Microsoft-led projects, e.g. moving customers to Office 365, and implementation of data centre technologies) and managed services (which include remote support for vendors such as Cisco). Professional services have been “particularly strong over the past year”, which fits with our view of market demand. Revenue from professional and managed services is roughly equal.
One of the well known characteristics of Softcat is its very youthful culture – something that is evident not just in the number of young people it employs but the layout of its offices and its approach to processes (it has very few) and hierarchy (there is little). This is in contrast with many of the traditional IT services providers, and of course comes with both upsides and downsides.
As its services business has grown, Softcat has found it’s now often not enough to just sell the technology. Increasingly, customers expect it to talk about what other customers are doing, what makes sense for them, how the technology can be applied and so on. The company is also gradually starting to have conversations with technology buyers outside of the IT department (e.g. on Big Data analytics). These are important challenges and an opportunity for Softcat to demonstrate it can continue to grow the top line as it addresses these.
Posted by Kate Hanaghan at '09:39'
In this latest research note, TechMarketView’s PublicSectorViews’ team welcomes Jo Clift as a ‘guest writer’. Jo is a consultant helping organisations to engage with Government (see jocliftconsulting.com), having spent over twenty years working at the heart of Whitehall. In 'Civil service reform: what can we expect?', Jo gives her views on the current state of the Civil Service Reform agenda; her take on the objectives of the current Government; and an outline of the potential barriers to progress (including the Brexit impact!).
Suppliers of software and IT services to the sector will find her insight valuable as they look to assess the likely rate of adoption of solutions designed to support reform. PublicSectorViews’ subscribers will be able to read our interpretation of these views and what we think it means for the UK public sector software and IT services market in our forthcoming UK public sector SITS Market Trends & Forecasts report 2016.
If you are not yet a subscriber, please contact Deb Seth to find out how to access our UK public sector-focused research, including our extensive back catalogue of notes and reports.
Posted by HotViews Editor at '09:39'
Management at Noida-based offshore services major, HCL Technologies, hasn’t been letting the grass grow under its feet. In fact, CEO Anant Gupta found the grass greener outside of HCL and resigned hours before the company was due to announce its Q2 results. Gupta has just launched a tech start-up fund, though he was not expected to leave HCL until the end of the year. HCL COO C Vijayakumar takes over as CEO and President. This is the second surprise departure of a top exec from an Indian pure-play in recent weeks, after Cognizant president Gordon Coburn suddenly and mysteriously left (see Coburn flees Cognizant).
HCL also announced the acquisition of Butler America Aerospace, the engineering and design services subsidiary of US aerospace and defence contractor, Butler America. HCL will pay $85m – essentially last year’s revenues – in the cash deal and will take on 900 employees. Butler Aerospace had an EBIT margin on 12.2%, substantially below that of HCL. Earlier this year HCL acquired US-based engineering services firm Geometric, in a deal valued around $200m. Geometric had over 2,600 employees. Revenues from HCL’s engineering services activities exceed $1b, by far the highest among peers.
All this rather overshadowed HCL’s results, which were perfectly respectable. Headline revenues in FYQ2 (to 30th Sept.) grew by 11.5% to $1.72b, 2% higher than the prior quarter. Operating margins at 20.1% were down 50bps on Q1 but 70bps higher yoy. Management is holding to its forecast to keep margins stable at around 20% for the year, and is predicting headline growth of 11-13%, which could see HCL breach $7b in annual revenues. With Infosys reducing its FY revenue outlook (see Infosys: Pricing pressure intensifies) and even Cognizant shooting for single digit growth (see Cognizant heads for first sub-10% growth year), HCL management are clearly in ebullient mood!
Posted by Anthony Miller at '09:06'
Bangalore-based offshore services major, Wipro, slipped further behind top-tier peers TCS and Infosys in FYQ2 (to 30th September), seeing headline revenues decline by nearly 1% sequentially, to $1.92b, below its prior forecasts. However, it managed to sustain its Q1 17.8% operating margin, though still over two points lower yoy.
On the investor concall, management added some colour and movement to the Appirio acquisition storybook (see Appirio joins TWITCH crew with Wipro), revealing that Appirio’s revenues were $196m last year. However, Wipro CFO Jatin Dalal skirted around the issue of profitability, only saying that ‘margins are very similar for the companies in this space, which are growing rapidly and investing in building the capabilities and investing in SG&A that is needed to continue to build … growth momentum’. Let’s take that as loss-making. Wipro will merge its $40m Salesforce.com and Workday practices into Appirio. I’ll have more to say about this deal another time.
Wipro had a notable UK win confirmed last month, displacing long-time incumbent Fujitsu at Highland Council with a 7-year ICT services deal (see Wipro Highland flings Fujitsu from council). Though we understand the contract value was sub-£10m, it’s a rare win for an Indian-pure-play in UK public sector.
Meanwhile, subscribers to the TechMarketView BusinessProcessViews research stream can read about Wipro’s strategy for enterprise operations transformation (EOT) in our new recent research note Wipro transforming the legacy BPS core.
Posted by Anthony Miller at '08:08'
All you need for a successful auction is two desperate bidders, and that is exactly the joyous position that shareholders in Bond International find themselves in. Not to be outdone by Toronto-based software aggregator Constellation Software’s recommended ‘Final Increased Offer’ of 121p per share (see Bond silences Symphony’s siren serenade), US private equity firm Symphony Technology Group has upped the ante again with an improved offer that promised to return 127-129.5p per share, which Bond management is now recommending.
Unless Constellation can find new meaning in the word ‘Final’, we must assume that it will be Symphony that wins the day.
Posted by Anthony Miller at '07:15'
I remember well when we had purchased a DEC mini in the 1970s with, I think, a 20Mb hard drive. We decided later to upgrade to 40Mb and the engineer came along and flicked a switch. It had been 40mb all along. Of course, we all know that ‘trick’ is still perpetrated until the present day.
Last week, Elon Musk’s Tesla announced that all its cars would from henceforth be fitted with all the hardware to make them self-driving/autonomous. But that wouldn’t be activated until some later date when the software had been robustly tested. And then users would have to pay a hefty fee for the ‘upgrade’.
The ‘problem’ is that if you have already bought a Tesla, chances are it will never get the hardware ‘retro fitted’. Although I love Tesla (many people remember that I bought Tesla shares ‘with my heart not my head’) you have to feel sorry for its many existing users who will now have permanently un-upgradeable models. Although you may say, ‘Well, that is what you get with any ‘normal’ car’ Tesla drivers have got used to constant software updates keeping their models ‘up-to-date’.
As readers know, I believe that autoTech market will be many times bigger than smartphones. It will disrupt the whole auto/lorry/bus sector. But who will win -or indeed survive - is still open to debate. It looks like Apple is having great problems with ‘Project Titan’. I always said Apple should buy Tesla anyway! I’d still offer that advice. But the existing auto manufacturers are all making great strides with autonomous vehicles. The 2017 BMW 5 Series, announced last week (and most likely to be Holway's next car), has many autonomous features including the ability to park itself with nobody in the car.
It is going to be a very interesting race.
Posted by Richard Holway at '18:12'
The Prince’s Trust ICT leaders Forum - Machine Learning and Artificial Intelligence is the Next Big Thing to hit the ICT industry
I would like to extend an invitation to the next Prince’s Trust ICT leaders Forum on Wednesday 2nd November 2016, 18:00 – 22:30, hosted by BT at the top of the prestigious BT Tower.
Machine Learning and Artificial Intelligence is the Next Big Thing to hit the ICT industry. It’s going to help software suppliers become more agile, efficient, and data-driven, and give IT and business process services suppliers the tools to augment their operations with machine intelligence, driving business outcomes and better customer experiences. Data is the new currency. Machine learning and AI are the tools to mine this data for profit.
Simon McCoy from the BBC will be moderating the panel consisting of:
- Simon Segars - CEO ARM
- John O'Brien - Research Director, TechMarketView
- Matthew Ridley - Vice President, Winton Ventures
- Daniel Waterhouse – Partner, Balderton Capital
- Jason Kingdon - Chairman, Blue Prism
A ticket costs £1,600 and, thanks to BT’s sponsorship, 100% of proceeds will be going to The Prince’s Trust, helping to change the lives of some of the UK’s most disadvantaged young people.
This event, which I founded back in 2002 and is now managed by James Bennet of EY, has since raised £1.4m for the Prince’s Trust.
If you would like to attend, please RSVP to Kimberley Wilson email@example.com as soon as possible.
Posted by Richard Holway at '17:05'
Hot on the heels of Microsoft’s strong cloud quarter, SAP has also come through its most recent quarter (Q3, to September 30) showcasing its own cloud momentum.
For SAP, cloud revenue saw a 28% rise to €769m, with the important element of new bookings up 24% to €265m. Although cloud growth is slower than in the year ago quarter (see here), what was noticeable about the Q316 results was that SAP is attracting new customers on the back of its cloud based offerings: S/4 HANA for example gained 400 new customers over the quarter, of which 40% were net new to SAP.
Overall performance was also strong with total revenue up 8% to €5.4bn. Operating profit fell 9% to €1.1bn (reflecting an increase in stock based compensation) but was within expectations and more significantly SAP has raised adjusted operating profit for the year to €6.5bn - €6.7bn vs. the previous range of of €6.4bn - €6.7bn (constant currency), on the back of cloud momentum. It was good to see licence revenue holding its own with a 2% increase to €1bn, while maintenance was up 6% to €2.5bn. All in all, while it is clear than SAP has a long way to go on its cloud journey, it was a reassuring quarter in which it continued to build its cloud credentials.
Posted by Angela Eager at '09:06'
Keshav Murugesh, CEO of offshore BPO pure play WNS, pointed to the UK as one of the most active geographies right now, in the Q2 investor call. The UK today apparently counts for a 'healthy' third of WNS' pipeline, and has remained stable over the past couple of quarters.
Murugesh said that to date there has been no impact to the core business from Brexit. Rather the opposite. WNS is ‘proactively helping clients examine how Brexit may impact their business and how we can quickly and more efficiently adapt to those changes as and when they are finalized’.
This points to consulting and advisory opportunities post-Brexit, something we highlighted as a growth area for business process services (BPS) suppliers in our recent report Brexit implications: UK Business Process Services.
WNS added six new customers during Q2, three of which were in the UK, including two new logos in the area of digital loan servicing in the UK BFS sector. There was also a new win in the UK pharma sector for high-end research and analytics work, which will make use of WNS’ recent Value Edge Research Services acquisition (see here). In July, WNS also renewed a long-term relationship with Virgin Atlantic through 2021, to continue providing operations management, finance and accounting and cargo revenue management.
Overall, WNS’ net revenue (less repair payments) was up 7.8% to $143.7m, and up 2.1% sequentially. However, profitability remains under pressure, with the adjusted net income (ANI) dropping to $22m vs. $24.2m last time - despite the investments in platforms and automation. There’s clearly still demand for new employees to help drive growth, as headcount was up 6% yoy to 31,719 (albeit revenue per employee has improved 6% yoy).
Achieving that illusive ‘non-linearity’ (i.e. de-coupling headcount from revenue growth) is still some way off yet.
Posted by John O'Brien at '08:47'
The c6% overnight share price upswing Microsoft experienced on the release of its Q1 results was due to enthusiasm over its cloud momentum and relief that cloud movement wasn’t damaging growth and profits as much as expected. It followed strong cloud performance in Q4, which also helped.
Although overall revenue was flat yoy at $20.5bn (up 5% cc), the Intelligent Cloud segment rose 8% (10% cc) to $5.8bn and within that Azure soared 116% (121% cc). As is usual with Microsoft, no detailed revenue numbers for the individual products lines were revealed but there is no doubt that the cloud business is developing well, a testament to CEO Satya Nadella’s strategy and execution. Nadella has certainly gained the confidence of investors, with the share price reaching an all time high on the release of the latest results.
According to Nadella, there has been a change over the past year within the customer base where Microsoft is not just building or moving clients' IT but is " building new digital services for hyper scale. And that's what is probably unique in terms of what has changed year over year for us.” And customers are signing up. Office 365 commercial products and cloud products were up 51% (54% cc), Dynamics products and cloud services saw a 11% (13% cc rise). Windows continues to suffer with no growth in OEM Windows sales and flat performance (and 2% cc) for Windows commercial products and cloud services. However, with a 11% (13% cc) rise, server products and cloud services recovered from their previous blip. The net result was net profit of $4.7bn vs. $4.9bn, but performance beat expectations across the board.
With this sort of cloud momentum Microsoft is rapidly gaining credibility as a cloud platform provider and while it is not on terms with AWS as far as cloud platform revenue is concerned, it is gaining in terms of reputation. At the same time, Microsoft is also talking more about hybrid environments, which certainly suits its portfolio and the rate at which customers are moving.
Posted by Angela Eager at '08:26'
There’s still some of us out there who remember the BUNCH. But I must admit today was the first time I heard the term TWITCH – as in TCS, Wipro, Infosys, Tech Mahindra, Cognizant and HCL! It was used by Chris Barbin, co-founder and CEO of Indianapolis-headquartered Salesforce.com and Workday consultancy, Appirio, in his blog explaining why they have just sold the business to Wipro (see Media moots Appirio acquisition by Wipro).
Basically, Appirio was hurting from competition, notably from Accenture and Deloitte, whose Salesforce and Workday practices have accounted for a disproportionate share (Barbin’s words) of the largest ‘cloud’ transformational deals in the market. Appirio needed to expand its business to embrace other major public cloud platforms (Barbin called out Microsoft, Amazon, Adobe and Netsuite) but couldn’t scale fast enough.
The deal was swiftly done. Barbin met up with Wipro management in late summer and the ink will be dry by the end of the year. Wipro will consolidate its existing Salesforce and Workday practices under the Appirio brand and structure, led by Barbin.
There’s an investor concall later today, hopefully with more detail on the financials. We know the transaction value ($500m) and that Appirio has 1,250 employees, i.e. Wipro is paying $400k per employee, roughly four times the notional per-capita value of Wipro’s ~175k-strong workforce relative to its ~$18b market cap.
Appririo becomes Wipro’s second-largest acquisition, behind that of US data centre player Infocrossing, which Wipro ill-advisedly (IMHO) acquired for $600m in 2007, and just ahead of the $460m it paid earlier this year for US healthcare BPaaS player, HealthPlan Services.
Absent financial detail, the rationale for the Appirio acquisition appears sound. Running it as a separate Wipro unit rings warning bells.
Posted by Anthony Miller at '08:19'
A third quarter trading update (July-September) from Computacenter shows a tough market is squeezing the reseller and services firm, both across the business and here in the UK. Group revenue was down 4% (constant currency) to £735m, with Services down 1%.
In the UK, the business saw an improvement over H1 but revenue was still down 3% to £314m. The figures in Services show the segment is having a difficult time versus 2015. A 10% drop in revenue for the quarter was largely due to 2015 being such a good period for project work. For the year to date, the decline wasn’t quite so bad, at 8%. The Supply Chain business (resale) faired better, growing 2% in the quarter. Usually, the UK leads the business in terms of Services performance, but in Q3 Germany grew 10% while France declined just 1%.
The top line performance of the UK Services business is in contrast with the recent past. In 2015, Computacenter had the benefit of a variety of significant wins – including Transport for London, and Post Office and Royal Mail Group. We’ve seen fewer of those big contracts, but understand more recent wins should start to filter through later this year and into 2017.
Posted by Kate Hanaghan at '08:07'
TechMarketView Foundation Service subscription clients can download the latest edition of IndustryViews Corporate Activity, our quarterly summary of significant trade sales and private equity investment in the UK software and IT services market, by clicking here.
Please contact our Client Services team (firstname.lastname@example.org) if you would like further information.
Posted by HotViews Editor at '11:45'
Atos’ decision to raise its full year revenue growth expectations at the time of the half-year results has been vindicated today (see Atos raises full year expectations). Organic revenue growth for Q3 continued in a similar vein to H1, up 1.8% (or up 6.3% at constant exchange rates) to €2,777m. Atos’ believes the performance demonstrates the relevance of its infrastructure and data management business model. The strongest – though still by far the smallest – business line was ‘Big Data & Cyber Security’ which grew by 19.1% to £134m; all other service lines grew in the region of 1-2%. There was particularly strong momentum in defence and security.
And the UK returned to growth. Following the H1 revenue dip (of -4.6%) predicted by UK CEO, Adrian Gregory, Q3 constant scope and currently growth was 4.2% to £426m. The release refers to “a particularly solid performance in the UK post-Brexit” due, in particular, to both higher volumes and new contracts in ‘Managed Services’. The public sector, where it recently renewed its DWP Personal Independence Payments – PIP – contract, and TMU, where it has announced a new collaboration at Anglian Water (see Trio - Atos Capgemini and Cognizant - collaborate at Anglian Water), get a particular mention . The region was only pipped to the highest growth crown by North America (+5.2%) – Atos’ largest geography by revenue.
And following the major signing at Aegon in financial services (see Atos breaks new ground in life & pensions BPS) and a significant ‘consulting & SI’ win with the Ministry of Defence, the book to bill ratio in the UK for Q3 was 128% (Group book to bill was also the highest it has ever been in a Q3 – at 102%). It looks like the UK is heading for a ‘flat’ performance for the full year – which will demonstrate a strong recovery in the second half and indicates that the region is managing to make up for the run off of numerous legacy contracts.
Posted by Georgina O'Toole at '10:05'
Judging by its Q3 results, Citrix’s decision to focus on its core business appears to be paying off as performance for the quarter to September 30 was better than expected and it raised 2016 guidance.
There is a lot going on within the company, with the spin out of the GoTo unit and its merger with LogMeIn high on the To Do list (it is expected to close in early 2017). However, Citrix still managed to deliver net profit of $132m on revenue that was up 3% to $841m.
2016 has been a bit of a new start for Citrix and included the appointment in January of former Microsoft veteran Kirill Tatarinov as CEO, part of the reorganisation activist investor Elliott Management drove through alongside selling off non-core assets. The company is now focusing on the secure delivery of applications and data, executed through four areas: virtualisation, mobility, networking and file sharing. Moreover, where its go to market has been based on point products, it is now concentrating on propositions around how they work together. This is a much needed step up in maturity.
Posted by Angela Eager at '09:58'
Lombard Risk Management is reaping the rewards of the changes made to its executive team and core focus last year (see here and work back). Its first half results reveal an encouraging picture as it benefits from strong growth in the Governance, Risk and Compliance sector.
Revenue in the first half to end September was up by 41% to a record £15.2m; the order book for contracted revenue is up by 35% to £9.2m and annual recurring revenue is 22% higher at £6.1m. Profitability also improved: EBITDA in the first half was £1.5m compared to £0.5m in 2015 and pre-tax losses lessened to just £0.1m (2015: -£1.8m).
It has been a very busy first half for Lombard Risk, which is showing some strong momentum as it invests for growth. During the period it also raised £8m from an equity placing (it now has cash of £6.9m and no debt); launched its cloud-based collateral management system (see here) and signed two new clients for AgileREPORTER as part of its strategic alliance with Oracle.
It’s also worth noting that the AIM-listed provider of integrated collateral management and regulatory reporting solutions has yet to experience any identifiable impact on its business from Brexit. Lombard Risk’s business is spread across North America, EMEA and Asia Pacific and 58% of its revenues are non-sterling providing a natural hedge against the potential impact of Brexit. And whilst European clients “paused to reflect post the referendum result”, Lombard Risk has found they quickly returned to normal project activities. In fact, because of its core focus Lombard Risk is more likely to benefit from Brexit longer term than many other SITS players in the financial services space. Its sales are driven either by non-negotiable regulatory timetables or by banks’ desire to reduce operational costs and risks, pressures which will only be amplified by any impact of Brexit on European economies. Moreover, it would also benefit should Brexit introduce more diversity into the regulatory landscape (although Lombard Risk considers this unlikely at the moment).
All things considered, with the company’s transformation largely complete, Lombard Risk’s new management team is right to face the second half of the year with optimism.
Posted by Tola Sargeant at '09:48'
NCC Group’s confident stride in the security space (see here) experienced some setbacks in the first four months of the year (June 1 to September 30) which are “causing a significant erosion of margin” within the Assurance division, driving management to scratch its collective head as it assesses the full impact for the current year.
The problem stems from unrelated issues within Assurance: the loss of three major contracts and difficulties with contract renewals within the managed security services business unit (formerly Accumuli). Despite these problems the division is delivering top line growth with revenue up 44% to £67m, including 25% organic growth (excluding the FoxIT acquisition). However, FoxIT has its own issues as post acquisition integration is going slowly, which NCC puts down to the lumpy nature of its product revenues and a large contract deferral, allied to complex Government relationships.
Despite the challenges within Assurance management says it is still in the market for further acquisitions of boutique cyber security consultancies over the next few months. In its grab for capability NCC has to take care not to take on more than it can deal with, especially as its focus is on remedial action to address its current problems. Not all its investments pan out, as evidenced by its decision to cut its losses over the secure domain services unit last financial year, which included a £13.7m write-off.
While the full impact of the problems has yet to be determined, the rate of growth in profitability will be biased towards the second half of the year but remains in line with the board’s expectations and is said to be on course to sustain double digit organic revenue growth. At group level revenue increased by 36% (vs. 48% in the year ago period), and 21% organically (vs. 17%).
Posted by Angela Eager at '09:18'
Abingdon-based mobile device management software developer Biz2Mobile has raised £2.5m from new investor YFM Equity Partners which, along with existing investors, led the £3.6m funding round. Founded in 2002 by CEO Julie Purves, Biz2Mobile has attracted top-tier OEMs and MSPs to its product set. Sounds like right time, right place, and another canny investment by UK SME-focused YFM (see Traveltek travels further with £5.3m funding).
Posted by Anthony Miller at '09:02'
We recently caught up with Greg McCulloch, CEO of Aegis Data, a Surrey-based data centre provider. McCulloch is an industry veteran, having previously been UK MD at InterXion for a number of years; he left before the Telecity bid (see Equinix to buy Telecity, InterXion deal terminated).
The Aegis data centre, in Godalming near Guildford, is Tier 3 aligned and has also been designed/built as an HPC (High Performance Computing) facility. The company has built-out the data centre from scratch over the past few years with the help of funding from Rockpool Investments. Back in 2014, Rockpool put in £10m, which has been used to build phase one: a 30,000 square foot facility with immediate built capacity of 6,000 square foot technical space. In addition, there is another 7,000 square foot of technical space requiring fit-out for phase two. We’ve had a look around the site and have also seen the land that is ready (having already gained planning permission) for a phase three, a potential 42,000 square foot development.
Aegis has no intention of competing directly with the likes of data centre ‘big boys’, such as InterXion or Equinix. Indeed, one of the company’s specific targets is the Tier Two banks where it positions itself as a cost-effective back-up solution. Aegis also targets the smaller managed services providers, and majors on the fact that it can provide comparable data centre facilities at a lower cost than London-based providers. We certainly see the attraction of this, but its main challenge could be getting its name known amongst those potential customers.
Aegis is also using some of the Rockpool funding for working capital as it builds out its customer base further. Sales cycles in this type of business are incredibly long – sometimes stretching to 18-24 months. We estimate that the company is currently turning over in the region of £5m, with lots of potential to build on that. We watch with interest!
Posted by Kate Hanaghan at '08:54'
The invariably prescient Economic Times of India (ET) has been particularly astute in unearthing what may be potentially one of Bangalore-based offshore services major Wipro’s largest acquisitions to date, that of US-based cloud-focused consultancy, Appirio. ET mooted a valuation of $400-500m for the company which had revenues last year of some $200m. Appirio is backed by private equity majors General Atlantic, Sequoia Capital, Fidelity, and GGV Capital, as well as by Salesforce.com and certain angel investors, so putting that buyout together – if such it did – must have been like herding cats.
Earlier this year Wipro acquired US healthcare Business Process-as-a-Service (BPaaS) player HealthPlan Services for $460m (see here) paying roughly double its 2015 revenues. However, its attempt to acquire Viteos, a BPaaS player in the alternative investment management sector, unravelled a few months ago (see here). Wipro was to pay $130m for Viteos, whose revenues were just a little over $26m. May be not such a bad thing after all.
Wipro reports its quarterly results tomorrow so perhaps all will be revealed then.
Posted by Anthony Miller at '08:31'
An update from identity data intelligence specialist GB Group points to continued strong growth in the first half, providing a solid foundation for new CEO Chris Clark who takes over the helm next April (see here).
Revenue for the six months to 30 September was up 16% to £37.5m, including the benefit of three months’ revenue from UK-based IDscan Biometrics acquired in June (see GB Group – seeking a new identity?). Adjusted operating profits are expected to be at least £5m vs. £4.5m, up c11% on last year.
Organic growth was however slightly disappointing at 9% (vs.18% last time). It would have been higher, but for the roll out of the Gov.UK Verify project across central government being slower than originally forecast by GDS (Government Digital Service). GDS has been through some significant changes recently, and lost Gov.UK Verify head Janet Hughes, in August (see More changes at Government Digital Service). So it's not really surprising to see GBG's roll out currently off-track.
Posted by John O'Brien at '08:14'
For those readers who have been hanging out for the next exciting instalment in the Bond acquisition epic (previous episode: Constellation ‘best and final’ for Bond), I bring you news that management has recommended the 121p per share cash Final Increased Offer from Toronto-based software aggregator Constellation Software, eschewing the somewhat more complicated bid from US private equity firm Symphony Technology Group (see Consternation at Constellation as Bond flips again). The new recommendation will be put to Bond shareholders next Monday.
Will Symphony play on or have they reached the coda of their serenade?
Tune in next Tuesday to find out.
Posted by Anthony Miller at '07:57'
Traditionally, HPC has focused on serving end users including researchers, engineers, scientists, educational institutes and healthcare professionals, but the growth of IoT and Big Data, combined with the emergence of virtual reality now means it is becoming more readily embraced by the enterprise, demanding greater computing power across the IT estate.
To meet this demand, data centre providers are enhancing their facilities to support HPC capabilities, but as demand for this has increased so has the need to diversify their offering in order to stay ahead of competitors.
Aegis Data has the necessary infrastructure in place to support denser power and cooling requirements with no extra or hidden costs. We recognise that users are no longer accepting a ‘one size fits all’ model – So our strategy involves a bespoke offering which can be delivered fast, account for fluctuations in their data usage and also fit in line with efficiency targets.
Along with our bespoke and flexible strategy, Aegis Data isn’t just offering HPC. Thanks to the design and build of the facility, Aegis can offer users anything from a quarter rack to a full rack of up to 25kW without compromising cooling or footprint costs.
If you would like to find out more about Aegis Data, our facility and the services we offer, visit our website at www.aegisdata.net, follow us on LinkedIn, Twitter or give us a call on 0203 0115 115.
Posted by Aegis Data at '00:00'
EY has reported its results for the year ended 1st July 2016; revenue growth was 7% to £2.15b with all service lines contributing to the growth. However, EY clearly believes growth would have been stronger had it not been for disruption in the run up the EU referendum; the firm talks about the fact it caused “reduced momentum”.
Of the four service lines, ‘Advisory’ was the slowest growing – revenues were up by just 3.8% to £606m. During the year, EY made two new digital acquisitions of Seren and IntegrC. Seren (now EY-Seren) was a 60-man digital consultancy based in London’s tech hub at Silicon roundabout. Looking back at Seren’s annual results, it made revenues of £10.5m in its FY14 and had been growing at a fast rate – 46% in that financial year alone. As such, Seren could well account for most of the growth in the advisory business. Meanwhile IntegrC looks to have been a much smaller, privately owned, provider of governance, risk and compliance services to companies that run SAP, and wouldn’t have had the same impact on revenues.
What’s very clear, though, is that these acquisitions and EY’s continuing investment in disruptive technologies like analytics, artificial intelligence and robotics have been important to all service lines, not just advisory. EY has also established an innovation hub – EYX – in Shoreditch. For example, the company’s data analytics capabilities are now a “cornerstone” of how it delivers and drives its Assurance business. This investment in disruptive tech is a common trend across the Big Four consultancies. They are having to modernise, not just to continue to grow revenues, but also to attract the right people. During the last year, of the 4,000 people recruited, 1,500 were students – all of whom will be attracted by more innovative ways of working.
Posted by Georgina O'Toole at '09:27'
In the half year to August, Logicalis generated 25% of the revenue of its parent Datatec, and 43% of its EBITDA. Both ratios were up on the previous year suggesting a relatively good performance, particularly as 70% of Logicalis’ business is outside the US and given the dollar’s appreciation.
This IT solutions and managed services provider reported revenue of US$757m, up 1% on the year, with services revenue up 9% after better performances in continental Europe and Asia-Pac. This improved mix of revenue enabled gross margins to lift to 23.2%, up from 22.5% last year. UK results were hit by the end of a long-term Broadband and IP Services contract for the Welsh Government and continued restructuring, as reported in our discussion on full-year results in May, see here.
Product resale revenues were down 2%, with a further shift away from Cisco, HP and IBM, towards Oracle, NetApp, VMWare and ServiceNow.
We had already seen Logicalis build up its analytics capabilities as it added Trovus in May 2015 and this initiative has continued with the May 2016 purchase of Spanish group Lantares which specialises in analytics and Big Data, being active in Corporate Performance Management and Information Management solutions.
Logicalis has been restructuring its operations to adjust to a more cloud-based world and to sharpen its focus on analytics and security where it sees higher growth potential. The new UK MD, appointed in April can hopefully bring some stability and consistency to performance.
The Datatec Group showed a decline in overall first half revenue to US$3.04bn, from US$3.29bn. EBITDA fell by almost 15% to US$68.9m, with a margin of 2.2%, continuing the decline seen in the last financial year. Blame was laid at the door of “challenging global conditions and the strong US dollar”.
Posted by Peter Roe at '08:39'
Reviewing its pre-close trading update, it looks like Sanderson is aiming to qualify for the 10% club as both revenue and profit (of the adjusted operating kind) were each up 10% in the year to September 30.
That double digit lift takes revenue to over £21m which is slightly ahead of expectations, while adjusted operating profit is expected to be approximately £3.69m. But growth is down on the previous year which saw 17% and 16% growth in revenue and adjusted operating profit respectively. Management says there has been no Brexit effect but is continuing to monitor the situation.
The Digital Retail division was the star once again but it shone less brightly as revenue grew 8.5% to £6.4m, compared to the year ago growth figure of 31%. It was impacted by a slow H1, although H2 was better and included a contract with a major retailer whose implementation will roll out in 2017. Figures for the generally less buoyant Enterprise division were sparse in the trading update but it appears there was £1m in new business and order intake was up 50% yoy.
We’ll get more insight into Sanderson’s activities when it reports full results at the end of November but we do know it has been investing in sales and marketing and has been staffing up Digital Retail in particular in anticipation of ongoing growth. It also has a number of acquisition opportunities under consideration so the current year should be one of continued progress.
Posted by Angela Eager at '08:24'
It’s onwards and upwards for freshly-floated value added reseller Softcat, which launched on the London Stock Exchange last November at 240p per share (see Softcat gets off to good start on LSE).
Today’s maiden FY results (to 31st July 2016) revealed headline revenue growth of 12.8% to £672m, led by a near-20% rise in Services revenues to £102m. Hardware sales increased by 12% to £251m, with software, Softcat’s largest segment, up 11% to £320m.
Also impressive was profitability, with IFRS operating margins at 6.3%, just 30bps light yoy, even including a £3.7m hit from IPO costs (one of the very few expenses we view as ‘exceptional’). Excluding this cost, operating margins would have been 6.8%. We’re not able to peek under the covers to see the profitability of Softcat’s underlying segments.
CEO Martin Hellawell is sanguine about Softcat’s prospects, reporting ‘satisfactory’ trading since the beginning of the current FY, though he remarked on the ‘highly competitive’ marketplace and ‘uncertainty’ following the EU Referendum. Nonetheless, he sees Softcat growing share.
Softcat’s stock had a very good run after the listing, peaking at 383p just prior to the Brexit vote which knocked £1 off the price. Their shares closed last night at 300p.
Posted by Anthony Miller at '07:48'
The StatPro Revolution is rolling on nicely. After the important launch last month of StatPro Revolution Performance, the replacement for StatPro Seven, its largest seller, the company now reports that Annualised Recurring Revenue of its cloud-based, new generation products has risen by 81% over the past twelve months and now represents 39% of the Group total. This is a significant advance from the 25% level recorded in September 2015.
The Revolution Performance solution has been adopted by National Australia Bank (the poster client at the launch) and is now up and running with 8 of NAB’s clients.
StatPro can now offer a complete service to its Asset Management Clients, offering performance management combined with analytics and risk calculations, at much greater speed due to its access to the AWS cloud. This should allow clients to consolidate multiple systems, reduce cost and provide faster reporting and potential performance improvement.
The company has much to do, in terms of getting the product out into the market and undertaking the task of configuration and implementation into its customers’ systems, but we can reasonably expect a flow of further good news from the StatPro camp.
Posted by Peter Roe at '07:46'
Liberata has achieved its first significant win since its August takeover by Japanese BPO player Outsourcing Inc (see Japanese BPO acquires Liberata for £43m), extending its long-term business process services (BPS) contract with LB Bromley (see Liberata signs extension with Bromley).
Under the two-year extension Liberata will continue to deliver a range of services for Bromley through to March 2020, for a potential £22m. The deal itself will see Liberata continue to deliver 16 different back and front office services for Bromley, including services for 81 out of the 96 schools in the borough, which receive payroll, F&A, HR and specialist consultancy services.
Liberata is also engaged in Bromley’s digital transformation programme, to enable greater self-service via its MyBromley portal launched last year. Channel shift is critical for councils to reduce costs, while also offering a more convenient way for citizens to access council services. Digital is therefore a key area of opportunity for local government BPS providers like Liberata, and rivals Civica and Agilisys (see Agilisys in a digital 'cwtch' with Bridgend Council).
This is Liberata’s second extension with Bromley since beginning work with the council in 2002, reflecting a good long-term relationship between the partners. The new deal means Liberata will earn a potential £11m per year for two years from 2018 - a significant boost to the current annual contract value of c£6m. At the time of that renewal in 2010, Liberata had to take a significant haircut on price to retain the contract.
Fortunately, times have changed for Liberata, since then. Under new ownership, and with a clear vision for the future under CE Charlie Bruin, prospects look much brighter (see our analysis in Liberata aiming for success via BPO, BPaaS and Automation).
Posted by John O'Brien at '07:44'
It’s been some five years since respected tech industry executive Kelvin Harrison stepped down from the chair at (the long-since late) mid-market value added reseller, Maxima (see Maxima minimises!), and he certainly hasn’t let the grass grow under his feet, undertaking several non-exec position mainly in tech.
Most recently, Harrison has stepped into the chair at Glasgow-headquartered travel industry booking system developer, Traveltek, as part of a £5.3m investment from SME-focused private equity firm YFM Equity Partners. David Blythe, ex-Amor Group and Flydocs, has been appointed CFO. Founding CEO Kenny Picken remains in post.
Traveltek was launched in 2002 and turns over £4.3m, employing more than 100 staff. The funding will be used to expand its network beyond Glasgow, Miami and Sydney into Sao Paulo, Shanghai and Dubai. Trvaeltek also runs a development centre in Hyderabad though most development is done in Glasgow.
Great news for ScotTech!
Posted by Anthony Miller at '07:14'
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