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Last Friday (3rd May) was the deadline for Atos Group’s existing stakeholders and third-party investors to submit their refinancing proposals to Atos. Yesterday, Atos revealed its suitors. Three of them came as little surprise: EPEI (Daniel Kretinsky’s Czech Republic headquartered investment vehicle) in partnership with London-based asset manager, Attestor Limited; French consulting firm Onepoint (controlled by David Layani,) in a consortium with partner investment company, Butler Industries; and a group of bondholders and banks of Atos’ banking group. Both EPEI and Onepoint (Atos’ biggest shareholder) have been sniffing around for some time (see the UKHotViews archive on EPEI and Onepoint for the history).
The new name - which was only revealed as throwing its hat into the ring on Thursday last week - was Bain Capital. However, Atos has already rejected its offer as it does not meet the stated objectives to “consider the full perimeter”, i.e., it was only interested in certain assets. With EPEI/Attestor and Onepoint/Butler Industries now facing off against each other, the contrast of the two bids is notable.
The Onepoint/Butler consortium is fully committed to keeping Atos under French control, with a promise to protect jobs and maintain all Atos’ assets. It is also pitching a ‘One Atos’ approach, which would, by 2027, lead to Atos being a “leading orchestrator of large-scale cloud and digital transformation for major groups and institutions”. In terms of the financial deal, Atos would benefit from €350m in new money and would see its debt erased to the tune of €3.2b through a mix of non-repayments, extension and conversion into equity. The consortium would have at least a 35% stake in Atos.
Meanwhile, the EPEI/Attestor partnership provides an entirely different proposition. As a non-French suitor, its proposal assumes that that the disposals of both Worldgrid and the “Sensitive Activities” of Atos (see Atos & French Government nervousness | TechMarketView) would go ahead during 2025, with the proceeds available to repay the existing creditor of Atos and fund the Group’s operational needs. EPEI/Attestor also has a different strategic outlook for the Group, wanting it to become, “the foremost European industrial leader in designing, optimising, operating, and marketing Data Centers as a Service”. Perhaps unsurprisingly, considering EPEI’s past interest in the Tech Foundations business, it sees that ‘perimeter’ of Atos – along with Cybersecurity Services - as crucial to that pursuit. Whereas the future of the Digital business of Eviden would be less secure; EPEI/Attestor would review a number of strategic alternatives for that perimeter, with one option being disposals. For Atos, this option also represents a more severe debt restructuring, with an injection of €600m in new money and debt reduced by €4b. The aim would be to achieve “stability” as quickly as possible. EPEI/Attestor would own 99% of Atos.
The option presented by Atos’ bondholders bank Creditors involves €1.2b in new money through bonds and guarantees, and the conversion of debt worth €1.8b into equity.
Now we wait again. Atos’ target for reaching agreement on a financial restructuring solution acceptable to its financial creditors is 31st May. A final agreement is set to be reached by 31st July. Until the summer, all stakeholders – including employees and clients – will continue to face uncertainty. With all bidders still to undertake their due diligence exercises, nothing is yet guaranteed. Moreover, with any bid set to involve significant organisational upheaval, the road ahead is bound to have some bumps regardless of the outcome of this latest rescue operation.
Posted by: Georgina O'Toole at 10:09
Tags: corporateactivity debt refinancing
San Francisco HQ’ed AI data infrastructure company Scale has announced it is creating a new European HQ in London, as the company seeks to expand its global footprint.
Scale aims to be a one stop shop for training and building AI models. The company was founded in 2016, and has already raised over $600m in funding, as well as building a close relationship with the U.S. government, working with a number of U.S. Defense and Federal departments. Alexandr Wang, founder and CEO of Scale AI, was also one of the attendees at the UK AI Safety Summit last year, and has begun to build a close connection with the UK government, with this morning’s announcement directly commented on by the Prime Minister and Deputy PM.
Prime Minister Rishi Sunak said:
“I’m delighted that Scale AI has chosen London for its European base. It’s another vote of confidence in the UK’s economy and status as a science superpower and we are determined to ensure AI helps deliver a brighter future for the next generation”.
Scale’s ‘Data Engine’ platform collects, curates and annotates data, which is then used to train AI models, evaluate them and allow organisations to easily find, categorise and fix model failures. Scale works with a number of GenAI and foundation model suppliers including Open AI, Meta, Cohere and Microsoft, as well as technology suppliers such as Nvidia and Accenture.
Customers range from a number of U.S agencies including the White House, U.S. Air force, U.S. Army and Chief Digital and Artificial Intelligence Office (CDAO), to private organisations such as Toyota, GM, Fox and Koch. With the U.S federal government its Data Engine was used across a number of use cases such as satellite imagery analysis used to monitor oils spills or ocean waste, to edge deployments for autonomous marine vehicles and drones, and to summarise legal documents and streamline operations via an agency chatbot across the Judicial branch.
Whilst we often focus on the outputs of GenAI, we must remember that it takes a significant amount of investment, time and skill to build effective AI models. Underneath the silky user UX we see from the likes of ChatGPT is a complex array of data labelling, parameter weighting and bespoke coding. High quality annotations and labelling of different types of data are crucial to the effective delivery of AI models, and platforms like Scale will be big beneficiaries as more organisations seek to build and customise AI models. They will however face competition from the Hyperscalers, all of which have built their own platforms, such as Vertex by Google Cloud and Bedrock by Amazon.
Posted by: Simon Baxter at 09:40
Tags: AI
AdvancedAdvT has acquired Celaton, provider of the intelligent document processing automation platform inSTREAM, for a cash consideration of £5m, net of cash acquired of £1.5m.
The deal is not unexpected given Advt’s acquisitive strategy and the fact that Advt shareholders Executive Chairperson Vin Murria and BGF Investment Management, already owned about 45% of Celaton each, following Vin’s decision to buy into the business in a personal capacity in 2021.
Nonetheless, the acquisition appears to be a good fit, with Celaton likely to benefit from being part of a larger business and Advt’s Integrated Business Software & Solutions (IBSS) clients, which operate within accounts payable and sales order processing, prospects for Celaton’s intelligent automation platform.
Celaton, which was part of our famed Little British Battler programme in 2013, recorded revenue of £3.3m in the year to 30 June 2023, 80% of which was recurring, and EBITDA before development costs of £1.5m during the period. The SME has invested some £2.3m in product development in the last two years, targeted at AI capabilities, web user interface and multi-language support. Customers include some big names with high volume e-invoicing and document processing needs such as Talk Talk, Currys and Capgemini.
As a group, AdvT expects to report good progress at its financial year-end, an eight-month period to 29 February 2024, with revenues and adjusted EBITDA still ‘performing well’ and net cash and investments totalling £102.9m. In the months ahead, we can expect more of this cash to be used to fund acquisitions, with a view to expanding its presence across adjacent markets, geographical boundaries, and digital sectors.
Posted by: Tola Sargeant at 09:13
Tags: trading acquisition
Conduent continues its strategic push to rationalise its portfolio and shift resources onto growth areas, announcing a $240m cash deal to sell Casualty Claims Solutions Business to MedRisk.
Having completed the sale of its Curbside Management and Public Safety Solutions business to Modaxo for $230m just last week, Conduent continues to look to improve growth and cash flow generation (see Conduent flat for the first quarter). Conduent’s Casualty Claims business is a US-focused operation geared towards the physical rehabilitation of workers’ compensation patients that includes the processing of medical bills and clinical services, and a portfolio of Strataware bill review software products. In 2023, the business had approximately 100 clients across multiple markets, processing circa 29m medical bills.
Acquirer MedRisk is a large Pennsylvania-based provider of managed care dedicated to the physical rehabilitation of workers’ compensation patients. Current Conduent employees in the Casualty Claims Solutions business will join MedRisk, whilst Conduent will continue to provide mailroom services for current casualty claims clients including MedRisk. The transaction is expected to close in the third quarter of 2024, subject to the usual regulatory approvals.
Posted by: Marc Hardwick at 08:59
Tags: divestment
Controversial US defence contractor, Palantir, has issued lower than expected guidance for its full year, despite healthy revenue growth during the first three months of its new fiscal. Palantir, which provides data and AI solutions to the public and private sector globally, saw first its quarter revenue increase by 21% to $634m and reported quarterly net income of $105.5m.
For the three months ended 31 March 2024, Palantir reported $335m in revenue from government sources (up 16% year on year) and $299m in commercial revenue (up 27%). Palantir’s outlook is however being inhibited, in part, by its poor performance outside of the US and in particular in Europe, which accounts for around 16% of the company’s total revenue.
Looking ahead, Palantir now expects Q2 revenue to be between $649m and $653m whilst for FY24 the company now indicates that revenue will be between $2.68bn and $2.69bn (compared to previous consensus estimates of $2.71bn). At one point, shares in Palantir were down 11% off the back of Monday’s results.
Palantir has been the focus of a great deal of public anger recently, in part due to the outspoken pro-Israel stance of its CEO, Alex Karp. In the UK, Palantir’s London HQ has been targeted by demonstrators since the firm’s recent NHS contract award (see: NHS contract winners announced). Critics accuse Palantir of being "complicit" in war crimes for providing software and services to the Israeli military, including support for active missions in Palestine. Karp has admitted that Palantir has lost staff as a result of his controversial views and that he expects further attrition.
Posted by: Jon C Davies at 08:00
Digital SI, Endava is hoping to revitalise its flagging fortunes (see here) through the launch of an AI accelerator. Badged as Morpheus and aimed at organisations operating in highly regulated fields such as healthcare, insurance, financial services and private equity, the new offering is essentially a reference architecture. Described by its creator as “the first of its kind”, the accelerator and its AI-powered industry tools seek to combine data products and multi-agent autonomous teams to tackle complex problems.
The challenges that Morpheus aspires to help overcome are certainly constraints to the adoption of Gen AI. To date, large language models (LLMs) and AI have existed predominantly in a 'black box' with little insight into how the systems arrive at the answers they provide. Endava is aiming to change this by operationalising LLMs around data. The company is confident that this approach will both overcome common barriers caused by hallucinations and ensure that all activity is transparent, knowable, and most importantly to those with strict regulatory requirements, auditable.
The design of Morpheus, which is LLM and cloud agnostic, focuses on allowing for more dynamic, flexible and comprehensive problem-solving capabilities. It uses lead AI agents to distribute workload amongst a team of specialist human and automated agents, collate their results and orchestrate the next workflow steps. Data is continuously captured for traceability and governance.
In our conversation with Endava regarding the accelerator launch, the company reported that client reaction to the new offering has been extremely positive. The firm believes that it is on the cusp of closing its first Morpheus-led engagement which will be focused on the new product innovation processes of a global corporation.
How quickly market interest can be converted into a material revenue stream, however, remains to be seen. As Endava itself advises “Just as we must crawl before we can walk and walk before we can run, the same principles apply in bringing complex AI-supported automation to our workflows”. For now, it is likely that Morpheus will alter the shape of corporate dreams more than it changes operational realities.
Posted by: Duncan Aitchison at 16:59
So we now have all the latest quarterly results (mainly) to 31st Mar 24 from the Magnificent Seven. Although, if you look at the chart, maybe it should now be the ‘Magnificent Five’? As both Tesla and Apple have lost value YTD.
With the exception of Tesla, they all exceeded expectations to some degree. Which gave fuel to a continued rise in the NASDAQ – up 3% since end Apr and up 7.6% YTD.
Tesla. See Times a-changin for Tesla. The news in the last month has been nothing short of an ‘unmitigated disaster’. Deliveries down. Prices down. 10% (or more?) or the workforce cut. Estimates for EVs sales worldwide drastically reduced. Competition from Chinese manufacturers intensifies. Musk is now trying to make out that Tesla is a Robotaxi company. I just don’t buy it.
Tesla shares are down 27% YTD.
Meta – See Meta shares dive on accelerated AI Spend. The quarterly results were pretty good with a 27% rise in revenues. But it was the prediction of significantly increased spend on AI that spooked the market. Zuckerberg still has a fixation with the Metaverse which managed to lose a massive $3.8b on revenues of just $440m in Q1. Go figure…
Meta shares are up 31% YTD.
Alphabet/Google - See Alphabet shares leap 14% on Q1s Not only did they exceed expectations but they also announced a dividend. WOW. Once upon a time no tech stocks paid a dividend. Now they are all rushing to do so. A sign of maturity methinks.
Alphabet shares are up 21% YTD.
Microsoft also exceeded expectations as AI drives Q3 Cloud growth In my view Microsoft have ‘played a blinder’ with their early backing of ChatGPT and various AI-inspired investments of late. Remember, Microsoft was market leader back in the1980s with their operating system for PCs. Then they adapted to the internet in the 2000s when most of the then current tech leaders did not. Then they rode the Cloud wave and now they seem to be the leader in AI. To ride FOUR waves is incredible…
Microsoft shares are up 8.1% YTD
Amazon, unlike Microsoft, was a ‘Child of the Internet’. But they too have ridden the subsequent waves extremely well. Amazon has become a clear leader in Cloud. See AWS growth picks up and cost efficiency drive delivers. What really inspires me is the breadth of their operations from physical and online stores, through hardware, media to cloud. They have a fantastic opportunity to benefit from AI across almost all of their activities. No wonder they have been about the best performing share this YTD.
Amazon shares are up 22.6% YTD
Nvidia – Unlike all the others, Nvidia is a ‘Child of AI’. Sure, I know they have been around for some time but it is their massively expensive chips for AI that really propelled them to their current glory. Their latest quarterly results (to 28th Jan 24) were announced in Feb but also exceeded expectations. See NVIDIA smashes Q4 expectations
Nvidia shares are up 84% YTD
Apple – Apple was the last of the Magnificent Seven to announce last Thursday night. Although they exceeded expectations, that was because those expectations were so low! Revenues were down 4% with sales in China down 8%. The brightest spot of all was Apple Services - up 14% at $23.9b. Revenues from iPads and Mac were also rans and they didn’t disclose what revenues (or losses) they were making from their ‘mixed reality headset – Vision Pro’. I really do NOT think this is the NBT for Apple (or the market..)
My ‘problem’ with Apple is that they could have been leaders in several markets. Why, oh why, has Amazon’s Alexa beaten them hands down? Where is the Apple music system? Where is Apple in AI?
I am sure Simon Baxter will have more to say after the forthcoming Apple AI Event.
Apple shares are down 4.8% YTD
Advertising
‘Olde HotViews Readers’ will know of my interest in Amazon’s growing revenues from advertising since I first reported on them in 2017. Revenues were c$1b in Q4 2017 and an ‘also ran’ to the main leaders.
Latest results show Amazon’s Advertising revenues up 24% to $11.82 in Q4 (to 31st Mar 24) Alphabet/Google is still the market leader but their growth was a lower 13% in their Q1 to $61.6b. Meta/Facebook was second – up 27% at $36.4b.
Just shows what a broad base there is to Amazon’s activities.
Declaration – Note that Richard Holway is a current (and long-standing) shareholder in Apple, Amazon and Microsoft and has also held shares in Meta, Alphabet and Tesla in the past
Posted by: Richard Holway at 16:30
Digital delivery consultants, Equal Experts, has secured a major contract with the Department for Environment, Food & Rural Affairs (Defra).
The deal will see Equal Experts supply the Department with application development services to support Defra’s responsibilities across borders and trade, environment, rural, marine, farming, and science capability, as well as its work to modernise legacy applications and corporate services.
The call-off contract, which was awarded via the Digital Specialists and Programmes framework, is worth up to £74m over its initial two-year term. There is also an option to extend the contract for a further 12-months.
The company has performed well via Crown Commercial Service frameworks, particularly Digital Outcomes and Specialists (DOS). In 2023, Equal Experts secured income of just under £93m via the DOS framework; however, almost all of that was via its key customer HMRC. It extended this relationship through a range of new contracts with HMRC last year (see Equal Experts wins big at HMRC).
Adding a major deal with Defra is a positive step that will help reduce Equal Expert’s reliance on its HMRC partnership.
Posted by: Dale Peters at 10:05
Tags: contract public+sector application+services central+government
Denmark-headquartered IT consultancy Netcompany has announced its results for the first quarter of FY24 (ended 31st March 2024).
Revenue was up 3.6% year-over-year in constant currency to DKK 1,598.1m, though this time last year the company reported 13.7% ccy growth in Q1 2023. Netcompany acknowledges that this was “a tough comparable” to beat, however – since the international part of the group (in particular) posted a strong showing in 2023. Compounding matters this time around, an earlier Easter holiday period resulted in fewer working days in Denmark, Norway and the Netherlands too (which not even the leap year February could make up for).
Adjusted EBITDA grew 3.4% ccy to DKK 250.4m, with Adjusted EBITDA margin holding at 15.7% ccy. News to which the market responded positively this morning, with shares up 7.8% first thing on last night’s close and (at time of writing) trading higher thus far today.
Noting the comparison with the “strong performance” internationally last year, Netcompany’s UK business dropped -4.1% to DKK 157.9m in Q1 2024 (representing 9.9% of the group’s total revenue for the quarter). Adjusted EBITDA margin for the UK was 9.6% (Q1 2023: 19.7%), “negatively impacted by increased time spent on business development”. We reported in March that the company has been devoting significant resources to relationship-building and business development – see Re-use and re-imagination—Netcompany’s Public Sector growth.
UK public sector revenues declined -8.4% in Q1 (bucking the recent trend of higher performance compared with the group overall of late), compared with a stronger showing this time in the private sector – up 7.4%. However, the company is reporting that it won “a significant [up to 5-year] contact” in its public sector business in Q1 2024, with revenue expected to start materialising in the second half of the year.
Posted by: Craig Wentworth at 09:56
Significantly outpacing its larger rivals, mid-tier offshore service provider Coforge grew organically by a very robust 13.3% yoy at constant currency in FY24. A final quarter top line improvement of 9% yoy helped to lift firm-wide revenue for the twelve months ended 31st March to a record $1.12bn.
The double-digit increase in company sales came at some cost to profitability with the Adjusted EBITDA margin for the period dipping by 70 bps against the prior year to 17.6%. Order intake for the full fiscal, however, surged by 56% yoy to $1.9bn to give Coforge a 12-month executable order book of over $1bn (FY23: $870m).
Growth was achieved in all the vertical industry and geographic dimensions of the firm’s business portfolio last year. There was particularly strong progress made by Coforge in both the Financial Services sector and the European market. Sales in these segments were up yoy by c.19% and c.15% respectively in FY24.
The publication of the company’s results was accompanied by the announcement that the firm has launched an open offer to buy an additional 26% stake in Cigniti Technologies. Once completed, the share purchase will increase Coforge’s interest in the Hyderabad-based digital assurance and engineering services to 54%.
Founded over a decade ago, Cigniti today employs some 4,200 personnel worldwide. With operations in USA, UK, Australia, Canada, Czech Republic, South Africa, and Singapore as well as India, the company turned over c.$100m last year. Coforge believes that the acquisition will not only help it achieve its ambition of becoming a $2bn revenue business by FY27, but also support the improvement of operating margins by 150 to 250 bps over the next three years.
Describing the latest set of results as representing an “exemplary year”, CEO Sudhir Singh proudly commented that Coforge was “one of the very few firms across the industry that was able to deliver on the annual growth guidance given at the beginning of FY24” – a feat made all the more impressive given the level of growth achieved in a market where demand has softened significantly over the last twelve months. As we have noted before, it appears that the tougher trading conditions have favoured the smaller offshore players at the expense of their Tier 1 competitors. Two days ago, Mastek posted financials which saw sales up by 13% yoy in FY24 (see here).
Posted by: Duncan Aitchison at 09:40
Tags: results offshore acquisition IT+services
Blackstone has completed its acquisition of Civica from Partners Group. Financial terms of the deal have not been disclosed. The alternative asset management firm announced it had entered into a definitive agreement to acquire the London-headquartered business in November 2023 (see Blackstone to acquire Civica).
Partners Group acquired Civica for just over £1bn in 2017 and over the time of its ownership Civica has made 26 acquisitions, including its two most recent additions of the facilities management solution booka from Canberra-based Rollercoaster Digital and Victoria-based contractor management specialist LinkSafe. Civica has grown strongly over the period of ownership, increasing revenue by c.60%, taking it past the £500m mark.
Under Blackstone’s ownership we do not expect to see any dramatic change in strategy or approach. Civica will continue to focus on software to support customers across four key areas of the public sector: local government, healthcare, education and central government. We also expect it to remain an acquisitive business, however, the scale of those deals may increase after Blackstone’s investment.
We will be taking a closer look at what this new era for Civica may look like in next week’s UKHotViews.
Posted by: Dale Peters at 09:04
Tags: acquisition software public+sector govtech
Business process services (BPS) specialist EXL saw its share price tick up more than 3% yesterday on another solid set of quarterlies that saw it grow revenue 8.8% in the first quarter to $436.5m. Operating margin for Q1 2024 was a respectable 14.1%, down on the 14.8% for the same quarter a year ago but up significantly on the 13.1% for Q4 of 2023.
EXL’s offer remains focused and more resilient than most, growing revenue by over 15% last year despite some pretty strong headwinds (EXL grew 15.5% last year as it ramps up the AI ecosystem). The firm has always had an analytics focus but is increasingly working to take a lead in the AI enabled BPS space. EXL now has tie ups with both Microsoft and AWS in the bag and took the decision to press the button on a major skills ‘realignment’ last month, that will see 800 roles disappear, half to be made redundant and half to be repositioned elsewhere (EXL job cuts signal AI skills realignment). The New York-headquartered firm employes some 50,000 people globally, and like most SITS players had hired aggressively since the start of Covid. Staff targeted for cuts/repositioning are mostly junior roles in data analytics and digital operations based in the US and India, with the firm at the same time looking to hire workers with advanced data and generative-AI skills.
Much of the AI opportunity for the likes of EXL lay with helping clients get their data ‘AI ready’, a time consuming and often labour-intensive process. Whilst automation and AI-led BPS services will increasingly replace labour arbitrage, BPS players of the likes of EXL, with its data and process expertise, do have a window of opportunity to make hay whilst the Gen AI sun shines, but only if they have the right skills mix in place.
Looking forward to the rest of FY2024, CFO Maurizio Nicolelli outlined expected revenue to be in the range of $1.79bn to $1.82bn, up slightly on previous guidance and representing YoY growth of between 10% to 12% - down on last year’s 15.5% but still very respectable given where the rest of the market is at.
Posted by: Marc Hardwick at 08:26
Tags: results
Posted by: HotViews Editor at 00:00
DXC Technology has appointed Cameron Art (pictured) as General Manager of its UKI and Americas regions, effective 1st May 2024. In his new role, Art will report directly to CEO, Raul Fernandez, and will be responsible for developing the growth strategy for the UKI and Americas, building client relationships, go-to-market, and sales. Art will also lead DXC Technology's global strategic deals team, focusing on complex, multi-year deals. Derek Allison will continue to lead the UKI as General Manager, reporting to Art.
Prior to joining DXC Technology, Art held a number of senior roles withing IBM, including General Manager of the Americas region. During his long career with IBM, Art was also previously General Manager of Industry Markets, Managing Director and Managing Partner, Enterprise Cloud Applications and served on the Board of Directors for IBM Japan. Art holds a bachelor’s degree in business from Colorado State University.
Art is the third senior appointment to DXC Technology's leadership team in recent weeks and follows hot on the heels of the news yesterday that Patrick Thompson has joined the company in the role of Senior Vice President, Enterprise Transformation (see: DXC calls in transformation expert Thompson).
Art looks to be an experienced global leader, with a broad background that encompasses sales, corporate, technical and transformation roles. As DXC Technology strengthens its top table under the stewardship of its new CEO, the latest recruits appear to be equipped with impressive resumés. Fernandez and DXC Technology’s shareholders will of course be hoping that they also possess the ability to lead the company into profitable growth.
Posted by: Jon C Davies at 20:09
Tags: leadership appoinments
Yesterday I attended a TechUK event on Quantum readiness in Transportation, which explored how Quantum computing is already being trialled across the transportation industry and some of the many challenges the industry faces in deploying emerging technologies. Speakers at the event included the Department for Transport (DfT), Network Rail, Quantum middleware provider Q-CTRL and Quantum supplier D-Wave Systems. I thought I would share some takeaways from the event and my conversations with several attendees, who spanned government departments, technology providers and end users.
The UK's transport infrastructure is under continued pressure to address challenges such as reaching net zero, combatting rising costs and integrating new mobility solutions. Quantum computing is one of a number of emerging technologies that could help modernise and drive efficiencies across transportation. From quantum-enhanced navigation systems to alleviate traffic delays with enhanced precision, to quantum sensors and imaging technologies to ensure safer and more efficient travel, quantum computing is a technology with huge potential, but one that is still a decade or more away from seeing any real impact.
However, there are a lot of misconceptions and a lack of awareness surrounding quantum comptuing, coupled with a fear of how complicated the topic can be which can quickly shut down engagements, and hold organisations back from getting quantum investments off the ground...
TechMarketView subscribers can read the rest of this article in UKHotViewsExtra – click here
In addition TechSectorViews subscribers can read more about the practical applications for quantum technologies across a number of industries, challenges surrounding skills, and the current supplier landscape in our report Quantum acceleration is on the horizon.
The report is also available for individual purchase if you do not have a subscription. Please contact Deb Seth for further information on subscriptions or report access.
Posted by: Simon Baxter at 10:16
Tags: quantum transportation
CGI’s Q2 performance reflects a similar slowdown to that we have seen from many other major IT services providers over the past few weeks. Revenue for the quarter (to end December 2023) was up 0.7% year-on-year to CAN$3.74b, and “stable” year-over-year in constant currency. The topline will have been marginally boosted, to the tune of about USD$8m (we estimate), by the October 2023 acquisition of US-headquartered Momentum Consulting.
Notably, quarterly growth has been on the decline since Q4 2022, when year-on-year quarterly growth stood at 13.9% at constant currency. Despite that topline growth trend, CGI has maintained its Adjusted EBIT margin at above 16% over that 1.5-year period.
Across all geographic segments (aside from US Commercial and State Government), performance was weaker in Q2 than in Q1. However, the UK & Australia segment shone as the best performer with 9.2% revenue growth in Q2 to CAN$402.2m, and constant currency growth of 5.1%. Indeed, this was not too far off the performance for the full six months (5.1% growth, or 5.6% growth at constant currency), suggesting a robust business. The adjusted EBIT margin for the quarter improved to 16.0% from 15.0% a year previously, predominantly due to profitable organic growth in the Government and Communications and Utilities verticals.
We understand that growth in the UK & Australia was driven by strong performance across most vertical markets, and as in previous quarters, the UK Central Government and Space, Defence and Intelligence (SDI) units continued to shine, with double digit percentage revenue growth again this quarter. We have recently written about some significant Central Government wins, including the most recent with the Cabinet Office (see CGI wins £100m Cabinet Office Strategic Delivery Partner deal | TechMarketView).
Interestingly, it is the changing nature of deals in Whitehall, moving away from large managed services deals to framework-based arrangements (like that at the Cabinet Office), where CGI logs the order only when individual statements of work are agreed, that has had some impact on the region's 12-month trailing Book-to-Bill ratio. More broadly in the UK & Australia business, the cyclical nature of order logging across the business has also contributed. This is evidenced by the ratio for the region currently being lowest of CGI’s segments, standing at 94.1% (against the global ratio of 112.8%). Confidence is evident however that the region will return to >100% Book to Bill for the trailing 12 months in Q3.
Posted by: Georgina O'Toole at 09:54
RM plc has secured a significant expansion to its longstanding partnership with The International Baccalaureate (IB). The new arrangement will see the Abingdon-headquartered EdTech business support IB’s drive towards digital assessment.
RM has been working with the non-profit education foundation for 15 years, supporting its transition to e-marking. IB is now looking to push its digital transformation further by transitioning its Diploma Programme (DP) and Career-related Programme (CP) to digital assessment.
Talking to TechMarketView, Dr Matthew Glanville, Head of Assessment Principles and Practice at IB, said IB were looking to better reflect the way students interact with the world and that digital assessment presents a huge opportunity to do this whilst also improving access and enhancing inclusion for those with special educational needs.
Although the terms of the arrangement have not been revealed, the length and scale of engagement suggests this is one of the largest assessment contracts RM has won to date.
RM CEO, Mark Cook, said the partnership is perfectly aligned to where he wants the business to go, particularly its aims to develop a Global Accreditation Platform (see RM draws a line under turbulent times and sets sights on growth). It should also provide the good opportunity for RM to demonstrate its capability on an international stage, with 51% of IB schools in the Americas, 28% in EMEA and 21% in Asia-Pacific. The curriculum offered by IB is also growing rapidly in popularity, as demonstrated by 37% growth in the number of IB programmes being delivered over the last five-years.
As we reported in March, there is a new confidence and positivity within RM. It has been a challenging few years, but it looks like the worst is behind it. The IB partnership should act as a launchpad for growth in the digital assessment market. Other awarding bodies and education departments will be following IB’s progress with interest, which should lead to further opportunities for RM. We can also expect RM to increase the range of services it offers to help organisations break down some of the barriers to digital transformation of assessment e.g. access to appropriate infrastructure. The future is looking brighter for one of the original EdTech pioneers.
TechMarketView subscribers, including UKHotViews Premium subscribers, can read more about RM's partnership with IB in our expanded UKHotViewsExtra article here.
If you aren't a subscriber – or aren't sure if your organisation has a corporate subscription – please contact Deb Seth to find out more.
Posted by: Dale Peters at 09:45
Tags: contract education schools assessment edtech partnership digital+transformation
Insight has made another acquisition in the services space as part of its strategy to become ‘a leading solutions integrator’. The addition of Infocenter, which brings a full complement of ServiceNow consulting and implementation services, will strengthen Insight’s automation solutions portfolio.
Established in 2017, Infocenter is a well-respected ServiceNow partner. The North Carolina-headquartered business has some 575 ServiceNow experts, many of whom are based in India with a small presence in the UK and Mexico.
For Insight, which saw top line revenue decline 12% last year, enhancing its ServiceNow services capability is a solid move given ServiceNow’s rapid growth as a digital workflow platform. The expertise will also complement Insight’s multicloud capabilities around Microsoft Azure, Google Cloud Platform, AWS, and private cloud infrastructure.
The addition of Infocenter follows the acquisitions SADA and Bristol-based Amdaris, which were also designed to enhance Insight’s expertise and services in the areas that are most meaningful to its clients. In other words, the six high growth areas of the IT market that Insight is focused on as it continues its journey from product business to solutions integrator - modern platforms/infrastructure, cybersecurity, data and AI, modern workplace, modern apps and intelligent edge.
Posted by: Tola Sargeant at 09:31
Tags: acquisition
UK-based insurtech, Urban Jungle, has raised $14m in its latest funding round. The cash injection was provided by a variety of backers including the Sony Innovation Fund and angel investor Rob Devery, former Prudential UK CEO.
Founded in 2016, Urban Jungle, was the brainchild of Cambridge University alumni, Jimmy Williams and Greg Smyth. CTO, Smyth, studied Computer Sciences and Philosophy and was previously VP of Research and Data Technology at Winton Capital. Meanwhile, CEO, and first-time founder Williams, graduated with a first in Economics and Management Studies in 2007. The difficulty of securing home insurance, whilst flat sharing in London, was the founders' inspiration for Urban Jungle.
Urban Jungle’s main target market is the UK's growing army of renters. The insurtech provides simplified buildings and contents insurance, tailored to this segment, which is designed to be accessible, affordable and easy to manage. Urban Jungle’s online platform aims to make household insurance more inclusive and easier to manage with a simpler claims process. Because of the typical life stage of renters, Urban Jungle's products are also designed to appeal to the younger generation.
To date, Urban Jungle has raised more than $55m in funding. The insurtech employs 70 UK staff whilst its total customer base (including current and previous policyholders) totals around 200k in number. The insurtech plans to use the latest investment to add further scale to its operations and to expand its team.
Studies show that UK renters are woefully under insured, despite the increased risks associated with the sector. The accessibility and affordability of traditional policy types has previously been a barrier to entry, for younger people in particular. As the rental market grows in size and employment patterns continue to change, I suspect that the appeal of products such as those offered by Urban Jungle is likely to increase.
Posted by: Jon C Davies at 09:23
Tags: funding
Continuing customer concerns regarding their own trading conditions and the resulting ongoing clampdown on discretionary IT expenditure impacted Cognizant UK in Q124. Company revenue in the region for the three months ended 31st March fell by 7.7% yoy at constant currency to $456m. The apparent steepness of the decline was accentuated by the strength of first quarter performance in the prior year, which saw a 14% yoy jump in the company’s UK turnover (see here).
Our recent conversations with Cognizant’s UK management suggest that the underlying business picture is considerably more positive. The company has secured all of its contract renewals in this country so far this year. The region’s new business win rate is said to be remaining healthy and good progress continues to be made in the UK Public Sector vertical. Now accounting for an estimated 12% of country revenue from almost zero a few years ago, notable Q1 successes in this market segment included the agile development deal with the Department of Education. The UK geography also reports beginning to reap the benefits from Cognizant's global $1bn Generative AI investment programme. This is driving burgeoning volumes of both pilot projects and foundational apps modernisation work in the territory..
Firm-wide, Cognizant’s Q124 global sales dipped by 1.2% yoy to $4.8bn. The result exceeded to top end of the guidance issued in February (see here). Weaking demand from the company’s Financial Services and Health sector clients in the first quarter was largely offset by revenue growth from the firm’s Products & Resources and Communications, Media & Technology verticals. Adjusted operating margin for the period improved by 50 bps against Q123 to 15.1% and, on a trailing-twelve-month basis, bookings were up 1% yoy a $25.9 billion to generate a book-to-bill ratio of c.1.3.
Looking ahead, the company continues to take a cautious view of its prospects for the coming months. Second quarter global revenue is expected to decline by between 2.5% and1.0% yoy in constant currency. Full year top line guidance has been left unchanged with firm-wide turnover projected to land somewhere 2% down and 2% up against FY23. In common with many of its competitors, whether Cognizant ends up in top line growth territory for the current fiscal will be determined largely by how soon and how wide buyers reopen the taps on discretionary expenditure.
Posted by: Duncan Aitchison at 09:15
Tags: results offshore IT+services
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