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At the end of last week, Mastek reported its financial results for the quarter ending 30th June 2024 (its Q1 FY25). The quarter was defined by solid revenue growth combined with a squeeze on profits.
Revenue growth for the quarter was 12.1% to Rs812.9 Crore, with quarter-on-quarter growth of 4.3%. This represented an improvement on Q4 performance (see Mastek Q4: UK performance improvement | TechMarketView). Mastek points to four key growth drivers: Healthcare in the US, Central Government in the UK, Account Mining, and Data/AI Solutions globally.
Meanwhile, the EBITDA operating margin shrank to 15.2%, down from 16.0% in the previous quarter, and 17.0% in FY24.
TechMarketView Chief Analyst met up with Mastek Group CEO, Hiral Chandrana, Mastek President UKI & Europe, Abhishek Singh, and Executive Vice President UK Secure Government Services, Ashish Julka, to delve into the story behind the numbers.
TechMarketView subscribers, including UKHotViews Premium subscribers, can read the analysis now: Mastek Q1: Solid revenue growth and squeezed profits | TechMarketView. If you are not yet a subscriber – or are unsure if your organisation has a corporate subscription – please contact Deb Seth to find out the easiest way to access this analysis and a lot more besides.
Posted by: Georgina O'Toole at 16:13
Tags: results offshore defence retail IPP healthcare financial+services central+government genAI public sector
First quarter results for Fujitsu show the firm increased both revenue and profits in the three months to end June.
Revenue was up 3.8% to 830 billion yen, helping to lift the adjusted operating margin by 2.5 percentage points to 7.0%. A “healthy demand” for digital and modernisation services in Japan helped boost the region, which grew a little stronger than the overall top line at 4.0%.
The core Service Solutions segment grew faster than the overall business at 7.8% to 501.6 billion yen. The firm has been buttressing its existing engineering and solutions capability in AI with further organic and inorganic investments. For example, the recent investment in, and partnership with, Cohere. As ever, there is no UK-specific break out, but Europe (as with full-year FY23) was said to be impacted by last year’s “pullback” in large-scale deals, primarily in the Nordic area. Europe region orders fell 14% compared to last year.
The UK has been consolidating its GenAI resource and capabilities, bringing highly specialist industry expertise into a central practice. In time, this will enable clients to tap into learnings and solutions across sectors. The UK can also draw on the extensive data and analytics capability residing in global delivery centres, alongside the deep AI/GenAI and computing engineering expertise at the global level. There is huge potential here (as well as a commitment to invest), but the challenge is very much around channelling all of this through the UK business.
The performance of the UK for the full year was low single-digit revenue growth and it maintained its mid-table position in the TechMarketView ranking of leading Software and IT Services players. The company has been navigating its way through unprecedented times in light of the Post Office Horizon IT Inquiry, with much focus being put on working with customers, partners, and employees to rebuild going forward.
Revenue forecasts issued with the Q1 results indicate the firm expects the top line to be roughly flat for the full year.
Posted by: Kate Hanaghan at 10:00
A trading update from Computacenter this morning shows the firm is expecting adjusted profit before tax for the first six months of the year to be lower than the comparable period in 2023. However, this is not unexpected given the strength of the H1 2023 performance.
There is no specific update on Services revenue, but Technology Sourcing (product resale) volumes eased over the comparable period last year (a particularly strong period). Germany and North America turned in a “solid” performance, but the UK saw demand for hardware that was “weaker than expected”.
Adjusted profit before tax is expected to be in the region of £87m, down from £121.8m. That includes c.£2m of negative currency translation. Also contributing to this lower figure is the movement of certain large North American orders into H2 and an increase in strategic investments.
Computacenter also announced a share buyback programme today. Based on the company’s net funds position and anticipated capital needs, it plans to return up to £200m to shareholders via the scheme.
Tags: tradingupdate
UK-based Software Circle has acquired children's social care social enterprise business Link Maker Systems for £4.5m. Formerly known as Grafenia, Software Circle specialises in the acquisition of vertical market software businesses across graphics, e-commerce, finance, property, and care management. An initial consideration of £3m was paid at completion, with £1.5m contingent on future financial performance targets.
Link Maker provides an online platform that helps match children with prospective adoptive and foster families, aiming to join-up services by improving communication and data sharing within the sector (across England, Scotland and Wales). Over 95% of Link Maker’s £1.6m revenues in FY24 came from annual recurring fees.
Software Circle posted revenue of £16.2m for FY24 (ended 31 March 2024) – up 29.6% on the previous year – and raised up to £27.9m of capital in September 2023 to fund M&A activity. The Link Maker acquisition is Software Circle’s third this year (following EdTech company Arc Technology for £2m in February, and BeTheBrand for £3.5m in May) with more promised in due course as it builds out its portfolio.
Posted by: Craig Wentworth at 09:59
Tags: acquisition marketplace foster care
A less optimistic assessment of the anticipated demand uptick in the second half of the year has led Capgemini to reduce its top end revenue projection for FY24. The Group now expects turnover for the current fiscal will at best shrink by 0.5% yoy at constant currency, down from the flat guidance issued three months ago (see here). The company still estimates that it will exit this year on a single-digit growth trajectory.
The firm’s performance in Q224 (the three months ended 30th June) did, nonetheless, show an improvement in demand across the vast majority of Capgemini’s vertical sector, service offering and regional portfolio. Sales for the period dipped by 1.9% yoy but were up c.1.4% qoq. Overall, company-wide revenue in H1 decreased by 2.6% yoy to €11.14bn with the operating margin of 12.4% holding against the prior mid-year position. A shift in the firm’s business mix towards higher value-added strategy & transformation consulting engagements, revenue from which improved by 2.7% in the first half, offset the bottom line impacts of broader slowdown.
Capgemini UK’s H1 results largely followed the global pattern. Regional turnover for the first six months of the year deceased by 2.8% yoy to €696m with the pace of decline slowing from 3.2% in Q1 to 2.5% in the second quarter. Healthy demand improvement in the Energy & Utilities and Services sectors could not compensate for weaker sales in the Financial Services and Consumer Goods & Retail verticals. The geography did, however, further consolidate its position as Capgemini’s most profitable territory with its H1 operating margin increasing by an impressive 210 bps yoy to exceed 20% for the first time.
TechMarketView’s latest Market Trends and Forecasts report highlights that caution and concern would be two of the more significant limiters on Software and IT Services growth in 2024. In our commentary on Capgemini’s Q1 results we posited that the firm’s prospects for the year rested largely on how fast and how materially customers would loosen their purse strings on discretionary expenditure in the months ahead. Speaking on the analyst conference call this morning, CEO Aiman Ezzat noted that, although improving, buyer confidence has yet to return fully. It is to be hoped that the company can report stronger signs of increasing market momentum come the autumn.
Posted by: Duncan Aitchison at 09:33
Tags: results IT+services
The UK's National Cyber Security Centre (NCSC) and international partners have issued a warning about a global cyber espionage campaign orchestrated by North Korean state-sponsored attackers. The advisory, released yesterday, sheds light on the activities of a cyber threat group known as Andariel, believed to be a part of North Korea's Reconnaissance General Bureau.
Andariel has been systematically targeting organisations worldwide, with a particular focus on entities in the defence, aerospace, nuclear, and engineering sectors. To a lesser extent, they have also set their sights on medical and energy industries. The group has been seeking information in a wide range of areas - from uranium processing to tanks, submarines and torpedoes - and has targeted the UK, US, South Korea, Japan, India and elsewhere. The primary objective of these cyber incursions is to steal sensitive technical information, classified data, and intellectual property, all in service of advancing North Korea's military and nuclear aspirations.
In a particularly concerning development, the advisory notes instances where the group has launched both espionage and ransomware attacks against the same victim on the same day. In addition, Andariel has expanded its activities to include targeting US healthcare organisations with ransomware attacks. These attacks serve a dual purpose: not only do they extort payments from victims, but they also generate funds to bankroll further espionage activities.
Paul Chichester, NCSC Director of Operations, emphasised the gravity of the situation, stating, "The global cyber espionage operation that we have exposed today shows the lengths that DPRK state-sponsored actors are willing to go to pursue their military and nuclear programmes."
In December, the JCNSS warned that large swathes of UK critical national infrastructure (CNI) remain vulnerable to ransomware, particularly in sectors still relying on legacy IT systems, and cash-strapped sectors such as health and local government. Supply chains are also particularly vulnerable and have been described by the National crime agency (NCA) as the ‘soft underbelly’ of CNI. (See - The UK is unprepared for a large-scale ransomware attack)
Posted by: Simon Baxter at 09:24
Following a weak end to lacklustre FY24, Tech Mahindra has seen its top line trajectory take a small turn for the better during the first quarter of the new fiscal year. Company revenue for the three months ended 30th June increased qoq by 0.7% at constant currency to $1.56bn, albeit this was still 1.2% down on the Q124 number. The improvement in the offshore major’s profitability in the recently completed quarter was, however, more marked. EBITDA rose by 15.3% yoy to $188m lifting the associated margin by190 bps.
There were a number of brighter spots visible across Tech Mahindra’s target industry markets. Q1 sales were up yoy in the Manufacturing sector (the firm’s only vertical to grow during the previous financial year) as well as in the Retail, Transport & Logistics and Health & Life Sciences segments. Demand from the company’s Communications customers, however, remained subdued. Accounting for a third of global revenue, turnover in this vertical was down almost 10% against the first quarter of FY24.
From a geographic perspective, it was the Tech Mahindra’s Americas territory which continued proved the most resilient. The first quarter top line yoy decline in this region, which generates about a half of global revenues, was a modest 0.6%. In Europe, Tech Mahindra saw its sales drop by over 7.3% against Q124 to c.$365m.
The company describes FY25 as a turnaround year to which it believes it has made a positive start. Time will tell if this optimism is well founded.
Posted by: Duncan Aitchison at 09:22
Tags: results offshore IT+services
Science Secretary Peter Kyle has announced funding boosts to two key areas of technology research, cementing the Department for Science, Innovation and Technology (DSIT)’s pivotal role in digital, data, and technology transformation (see Digital centre of government starts to take shape).
In the first (announced yesterday), the Government will provide a matched investment of £8m to Amazon Web Services’ provision of $10m (around £8m) worth of cloud computing credits to support the UK Biobank biomedical database (to be spent on cloud storage and access to AI services, etc.).
UK Biobank is “the world’s most advanced source of data for health research”, helping the life sciences sector transform healthcare (for diseases like dementia, Parkinson’s, diabetes, and cancer) across the UK and worldwide.
A public-philanthropic consortium was set up last October to provide funding for UK Biobank’s long-term future (with an initial £16m funding coming from former Google CEO Eric Schmidt and Citadel CEL Ken Griffin, matched by government). This week’s announcement means that almost £50m has now been raised – marking the end of the government’s match-funding pledge. This money builds on UK Research and Innovation (UKRI)’s 2023 £127.6m investment in UK Biobank’s new headquarters at Bruntwood SciTech’s Manchester Science Park (due to open in 2026).
Secondly, today Kyle announced over £100m of government funding for five new quantum computing research hubs (based in Birmingham, Edinburgh, Glasgow, London, and Oxford), designed to deliver breakthroughs in healthcare, cybersecurity, climate tech, and transport. The hubs will bring researchers and businesses together to combine scientific expertise and commercial acumen to not only develop new quantum-based tech, but also “bridge the gap between brilliant ideas and practical solutions” with the intention of kickstarting economic growth in the field.
The hubs will be delivered by the UKRI Engineering and Physical Sciences Research Council (EPSRC), with a £106m investment from EPSRC, the UKRI Biotechnology and Biological Research Council, UKRI Medical Research Council, and the National Institute for Health and Care Research.
Posted by: Craig Wentworth at 09:16
Tags: funding hubs life sciences
Kainos and Workday have established an enhanced strategic partnership which will see the enterprise cloud applications provider’s sales teams across North America, Europe and Asia Pacific incentivised to introduce and co-sell Kainos products. As a result of the new collaboration agreement, the Belfast HQ’d software and services business has increased the Annual Recurring Revenue (ARR) target for its Workday Products business from £100m by 2026 to £200m by 2030.
Kainos is already Workday’s top European partner and its seventh largest globally. Between March 2022 and March 2024, the firm almost doubled the ARR from its Workday products to over £60m (see here). The new arrangement covers the existing Kainos software suite, which comprises Smart Audit, Smart Test and Kainos Employee Document Management, as well as future products that Kainos will develop on Built on Workday. The latter enables partners to both create purpose-built apps and accelerate their distribution to Workday's 10,500+ enterprise customers through the Workday Marketplace
The multi-year agreement involves payments from Kainos to Workday of approximately £7.8m per year. In addition, and with the objective of maximising the returns from the strategic relationship, Kainos will increase its investments in both the support of the wider Workday sales organisation and the on-going development its Workday products. In total, these costs are expected to be c.£7m during the current financial year (the twelve months ending 31st March 2025) and will reduce the Adjusted PBT for the period by the same amount. Revenue acceleration is expected to build from FY26.
Securing Workday as a channel for its products has significant potential upside for Kainos. The firm will now have more than 2,000 additional salespeople with a direct financial incentive to take its software offerings to market. Unsurprisingly, investor reaction has been positive. At the time of writing, Kainos’s share price had risen by 3% post the announcement of the enhanced partnership.
Posted by: Duncan Aitchison at 09:12
Tags: software alliance
This summer marks a year since TechMarketView Founders Richard Holway and Anthony Miller hung up their boots and passed the baton on to the MBO leadership team. The move, 16 years after TechMarketView was founded, marked a major milestone for the company.
For the last year, TechMarketView’s Partner team, consisting of Tola Sargeant, Georgina O’Toole, Deb Seth, and Kate Hanaghan, have focused on continuing to deliver exceptional research and analysis on the UK tech market to our clients, while consistently pursuing excellence.
As we move forwards, you will see some changes. Firstly, Tola has taken the decision to leave TechMarketView to seek a fresh challenge, after 16 years with the company (seven of those as Managing Director/CEO). During that time, Tola has shown immense loyalty and dedication to the company. Her deep understanding of the business has been a hugely valuable asset. Bringing such experience and knowledge, Tola has helped in shaping our company's path. Everyone at TechMarketView would like to take the opportunity to thank Tola for her contribution over many years.
Looking ahead, Deb, Georgina, and Kate will accelerate progress with a newly refreshed growth strategy. Deb will take on the role of Managing Partner, concentrating on driving business growth, enhancing key operational functions, expanding partner networks, and implementing strategic talent acquisition. Georgina will remain as Chief Analyst, continuing to develop thought leadership and client excellence within the organisation, while also orchestrating the execution of TechMarketView’s growth strategy. And Kate will remain Chief Research Officer, responsible for advancing TechMarketView’s research agenda, ensuring our analysis supports our clients to make smart decisions, and running our expert analyst team. Between them, Deb, Georgina, and Kate bring a wealth of experience in the UK tech industry (90 years in fact!) and have sat on TechMarketView’s management board since 2017.
Senior Research Directors, Marc Hardwick and Dale Peters, having been promoted to the Senior Leadership Team (SLT) (see Techmarketview announces senior leadership team), will continue to develop and lead a range of programmes and projects supporting richer analysis and enhanced customer experience.
Tania Wilson will become Finance Director (FD) and join Deb, Georgina and Kate on the Management Team. Tania joined TechMarketView in 2019. She brings a wealth of experience in financial analysis and valuation, having spent many years as a Director at PwC. Tania is also an investment principal and CFO for a venture capital firm. Her input will be invaluable as we make important investment decisions aimed at supporting our soon-to-be-revealed new strategy.
We are excited to officially ‘relaunch’ TechMarketView at our annual event on 26th September (please come and join us: TICKETS). The event will serve as the platform for introducing our new strategy through insightful presentations and a fireside chat with an end user organisation in pharmaceuticals. We will also reveal a brand-new strategic partnership, allowing us to showcase a fresh proposition for our clients, as well as reveal results from our new Tech Confidence Index.
We’ve got some fun ideas bubbling about how we can celebrate this new TechMarketView era with our guests, so don’t miss out!
Posted by: HotViews Editor at 08:40
US headquartered, SS&C Technologies, the global provider of services and software to the financial services and healthcare industries (and the owner of RPA specialist Blue Prism) continues to make the steady progress covered in previous quarters (see A solid start to FY24 for SS&C). SS&C saw revenue for the three months ended 30th June 2024 increase 6.5% (6.4% organic) to $1,451.5m (Q2 2023 $1,362.6m). Operating profit also ticked up nicely at 13.7% to $327.6m for the quarter (Q2 2023 $288.2m) as corresponding margin improved to 22.6% (Q2 2023 21.2%).
Operationally in the UK, the big announcement of the last three months was the deal for SS&C to provide fund accounting, middle-office and transfer agency services to UK-based investment group, Marlborough (see Marlborough selects SS&C for IFS fund administration). SS&C signed a long-term agreement with Investment Fund Services Limited (IFS), Marlborough's authorised corporate director (ACD) and authorised fund manager (AFM) business. Under the terms of the deal SS&C will provide services for those funds for which IFS acts as ACD or AFM.
The Marlborough deal signals SS&C’s intent to enhance its capabilities within the UK fund administration space and should allow the US vendor to expand its middle-office and fund accounting services. In line with its "land and expand" strategy previously executed within other market segments, SS&C is likely to now focus its efforts on growing its market share within the UK mutual fund administration sector.
In February, the company issued guidance for the current fiscal equivalent to 6.6% revenue growth at the top end. Q2’s growth performance leaves SS&C on track.
Posted by: Marc Hardwick at 08:37
Tags: results software financialservices automation
IBM has announced its results for Q2 2024 (ended 30 June 2024). Revenue was $15.8bn (up 4% year-over-year in constant currency), exceeding estimates. The company's Software division was the star player (up 8.4% ccy to $6.7bn), Consulting was up 1.8% ccy to $5.2bn (though down 0.9% as reported, reflecting a tightening of belts in the short term), Infrastructure was up 2.7% ccy to $3.6bn (near flat – +0.7% – as reported), and Financing was down 6.6% ccy (but – at $200m revenue – only represents 1.3% of the total).
Unsurprisingly, IBM is lauding AI's contribution to the company's performance. It launched the watsonx AI platform a year ago and now reports having a book of business for GenAI in excess of $2bn.
Although growth at IBM's Software division has improved on the 5.9% posted in Q1 (see IBM shares dip on Q1 results and HashiCorp acquisition), Big Blue still expects overall (constant currency) revenue growth of "mid-single digits" for the year (IBM closed out FY23 at +3% – see IBM closes a solid FY23), citing currency as applying a "one to two-point headwind" to revenue growth figures (at current foreign exchange rates). However, the company is raising its full-year view of free cash flow (now expected to be over $12bn for FY24).
See how IBM has been performing in the UK in our latest UK SITS Supplier Rankings.
Posted by: Craig Wentworth at 09:52
Tags: results
The impact of legacy managed services contact declines, which began to bite in the final quarter of FY24 (see here), dragged BT's Business Division down further during the first quarter of the new fiscal year. The latest trading update from the company states that revenue from the B2B connectivity-centric unit for the three months ended 30th June shrank both qoq and yoy by 3.4% and 5% respectively to £1.933bn. The company did, however, report seeing improved trends within the division as the modernisation of its offering portfolio and streamlining of its operations both progress.
Q125 turnover for BT Group as a whole was down by 2% yoy at just over £5bn. Openreach was the only unit to deliver top line growth for the period with sales increasing by 2% to £1.56bn. There was, however, better news to be found on the profitability front. Adjusted EBITDA in the first quarter ticked up by 1% yoy to £2.06bn. This was largely driven by tight cost control, which included lower staff costs.
The transformation of BT Group remains very much a work in progress. As CEO, Allison Kirkby notes “There is much more to do to simplify BT Group and deliver for our customers.”. The company believes that it remains on track to achieve its near and longer-term financial objectives. These comprise an adjusted revenue increase of 0-1.0% generating EBITDA of around £8.2bn in FY25 and consistent and predictable turnover growth coupled with EBITDA improvements ahead of revenue from FY26 to FY30. Continuing difficult macro-economic conditions and cost of living pressures coupled with a highly competitive market for connectivity services, however, make the road ahead a challenging one for the telco heavyweight.
Posted by: Duncan Aitchison at 09:48
Tags: results telco
Having signed off its FY24 with an ahead of market growth performance (see here), mid-tier offshore provider, Coforge has continued to outpace its larger rivals during the first quarter of the new fiscal year. Company turnover for the three months ended 30th June increased by 7.8% yoy at constant currency to $294.1m. The bottom line improved at an even faster clip with Q125 adjusted EBITDA rising by almost a fifth yoy to lift the associated margin by 210 bps to 17.0%.
There was positive progress made across all the vertical sector and geographic dimensions of the firm’s business portfolio in the recently completed quarter. From an industry segment perspective, it was the double-digit yoy increase in sales to Coforge’s Banking and Financial Services clients which made the largest contribution to the Q1 revenue uptick. In terms of geographies, the firm’s Americas and EMEA regions both advanced more rapidly that the business as whole. Together accounting for almost 90% of world-wide turnover, these two territories delivered yoy top line improvements of 8.2% and 8.1% respectively.
Although no forward guidance was provided, Coforge did report that it entered the second quarter with a very strong executable order book. Company CEO, Sudhir Singh is justifiably upbeat on the outlook commenting that the firm is well set for continued growth ahead.
See how Coforge has been performing in the UK in our latest UK SITS Supplier Rankings.
Posted by: Duncan Aitchison at 09:39
Aptitude Software Group H1 2024 results reveal a mixed financial picture amidst its strategic pivot towards AI Autonomous Finance. Despite single digit declines in revenue, early results are promising for adoption of its Fynapse data platform.
Total revenue for H1 FY24 dipped -6% to £35.3m, with Annual Recurring Revenue growing 2% to £50.8m, driven by strong business performance in Fynapse and Revenue Management products. The company has made significant strides in its strategic realignment, moving from directly selling regulatory and compliance software to becoming a partner-led platform organisation delivering AI Autonomous Finance solutions. Despite the decrease in total revenue, Aptitude maintained its adjusted operating profit at £4.2m. The company's focus on operational efficiency and cost management has led to improved margins.
Fynapse, its intelligent finance data management and accounting platform for finance teams launched in 2022, but the big change came last year when new CEO Alex Curran took the reins, shifting the focus of the business (See - Aptitude doubles down on Autonomous Finance). In H1 Aptitude secured two additional Fynapse clients, including one win in partnership with HSO and Microsoft and one with a major existing Aptitude Accounting Hub client. The company's partnership strategy is also gaining momentum, with 38% of new Software ARR signed through partners in H1 2024. Aptitude aims to increase this to 80% by the end of 2027. A notable development was the launch of a global insurance industry solution with HSO, underpinned by Fynapse and Microsoft Dynamics 365.
Aptitude is still very much a business in transition, including leadership refreshment and a flattened structure. The company remains confident in meeting market expectations for 2024, with a £4m contract win with a major global insurer announced in July (See - Aptitude Software celebrates £4m contract win) and a growing pipeline of opportunities for Fynapse.
Posted by: Simon Baxter at 09:34
ServiceNow has outperformed again in Q2, exceeding guidance across all topline growth and profitability metrics and raising guidance for the outlook thanks to GenAI, which it describes as a ‘generational secular tailwind’.
Total revenues in Q2, to end of June ’24, were up 22% to $2,627m; subscription revenues increased by 23% to $2,542m; and the net new average contract value for Now Assist, ServiceNow’s GenAI offering, doubled quarter over quarter, significantly beating expectations, with 11 new deals greater than £1m in the quarter.
There is no doubt that ServiceNow is a supplier in the right place, at the right time. Chairman and CEO Bill McDermott believes the relevance of its AI platform for business transformation remains stronger than ever as CEOs look for new vectors of growth, simplification and digitisation. And he’s not lacking ambition with the goal to ‘reinvent every workflow, in every company, in every industry with GenAI at the core’.
Partnerships are central to this strategy and Q2 saw ServiceNow expand its strategic AI relationships with a host of big names including Microsoft, IBM, NVIDIA, Genesys, Fujitsu, Equinix and Infosys. Today it also announced a deal with Boomi in customer experience.
There is no let up in innovation either, with ServiceNow launching its RaptorDB Lighthouse programme today to help customers quickly ingest and analyse data at massive scale as they pursue new AI use cases. It also announced the acquisition of German information retrieval tech company Raytion, to enhance its GenAI search and knowledge management capabilities.
Against this backdrop, and given ServiceNow’s robust pipeline and outperformance in the first half, it is no surprise to see CFO Gina Mastantuono raise 2024 subscription revenue guidance and have the confidence to predict revenues of $15bn+ in 2026.
Posted by: Tola Sargeant at 09:25
Tags: results acquisition partnerships genAI
Last Friday, we covered Sopra Steria’s preliminary results for the first half of 2024 with the business adjusting its FY growth outlook whilst maintaining its margin target. Full H1 2024 results were published yesterday evening and confirmed the headline numbers released last week, with Group revenue of €2,949.4m, equating to total growth of 3.8% and organic growth of just 0.3%. Operating profit was up 13.6% to €285.3m with a corresponding margin of 9.7%, up 0.9 points from H1 2023.
Sopra Steria Group CEO Cyril Malargé provided more colour on operating conditions citing a wait-and-see stance of clients. The business has been strategically targeting higher value activity (upscaling in consulting, moving its tech offerings up the value chain and upgrading its operating model) that appears to be feeding through into wider margin improvement. Positioning / differentiation is now about providing a “credible European alternative to global players” and Malargé confirmed that most of the steps in the sale of banking software activities to Axway have been completed with the deal to be finalised in early September.
The UK business accounts for 17% of total Group revenue with €487.3m achieved in H1, equating to organic growth of 3.1%, after declining slightly in Q2, with the election acting as a drag on the Public Sector heavy business, particularly impacting its SSCL Business Process Services operation. The most buoyant parts of the UK business were cited as financial services, government and transport. UK operating margins on business activity were 11.6%, up 0.2 points from the first half of 2023.
Looking forward, full-year Group targets are now for “relatively stable” revenue on an organic basis, with operating margin of at least 9.7% and free cash flow of around €350m.
Posted by: Marc Hardwick at 08:22
You’d be excused for missing it. As it seemed to be merely an addendum to a financial restructuring market update. But Atos has another CEO. In January this year, we published Atos: 6th CEO in 6 years so you can do the maths for yourself.
The new CEO is Jean Pierre Mustier; the former UniCredit boss has been appointed as both CEO and Chairman of Atos, replacing Paul Saleh who has resigned. Mustier has been Chairman since October 2023.
Mustier joins as Atos announces the next positive step in its financial restructuring journey. In relation to the pre-arranged financial restructuring plan, Atos has entered into “accelerated safeguard proceedings”, which have been approved by a French court (see Atos: Significant milestone in financial restructuring journey | TechMarketView). The expectation is that the plan will be approved on 15th October, with implementation between November 2024 and January 2025.
Affecting Atos’ financial debt and share capital, the plan includes €1.7bn in new funding and a debt reduction of at least €3.1bn and will mean that no debt is maturing before the end of 2029. 67% of bondholders have agreed to contribute to the new financing, including up to €837.5m in new bonds and €75m in cash.
The usual reminder is included: that the restructuring will result in a massive dilution for Atos’ existing shareholders, “who would, if they do not participate in the proposed capital increases, hold less than 0.1% of the share capital.”
The news had little impact on Atos’ share price during today’s trading. Every step towards more certainty is positive for stakeholders, including clients and employees. But one of the biggest uncertainties remains. How will the Atos Group move forward in terms of its organisational structure and go-to-market approach? Will it continue to go to market as two businesses: Atos and Eviden? We understand that a ‘One Atos’ approach remains on the cards. How that is implemented remains up in the air and must be a question that employees will want answered as soon as possible. They have been on one hell of a journey already.
Posted by: Georgina O'Toole at 18:23
Tags: leadership corporateactivity equity debt financing restructuring
Managed security services supplier Shearwater Group has had a challenging FY24 (year ended March 31, 2024), with revenue declining double digits as customers continued to ‘defer budget allocations’ for larger contracts to future periods.
FY24 total revenue was down -15% to £22.6m. Services accounts for 89% of revenue, with revenues of £20m down -15% yoy, with contract wins and renewals notably in the banking, telecommunications and government sectors contributing to performance. Advisory revenues included particularly strong demand for penetration testing consulting services during the year. Noteworthy wins included a managed cyber security service, utilising AI-driven endpoint protection for a leading finance investment house. A £1.3m government agency contract won in October 2023 was also an important milestone for the business, its first major government contract.
The software business saw similar struggles, posting revenues of £2.4m, down -17% yoy. Both the US and the Middle East remain target markets for growth going forwards. The groups SecurEnvoy solution will seek to further leverage AI to reduce training needs, enhance security response and proactive threat prevention. The integration of GeoLang (a sensitive data discovery solution it acquired in October) has generated efficiencies that allowed for increased investment in product development.
FY25 has started well according to management, with increasing momentum building in Q1, with notable contracts including a £1.4m contract renewal and a $4.8m new deal with a British media and telecommunications company, as well as one of the delayed projects from a leading international bank. There are signs that customer budget allocations are starting to be released at a modest pace. While current market conditions have necessitated a focus on strengthening organic growth, M&A remains a strategic pillar for the business, as is focusing on expanding into government departments.
Posted by: Simon Baxter at 09:48
Shares in AIM-listed Learning Technologies Group (LTG) took a hit this morning – they are down 17% as I write to c67p - after the learning and talent solution provider revealed a disappointing first half performance and the temporary suspension of its subsidiary GP Strategies’ eligibility to work on new classified contracts by the US Government.
A weaker US dollar and subdued market mean LTG is expecting a 7.5% decline in first half revenue (to end of June ’24) to c£248m, despite SaaS and long-term services contracts, which make up three-quarters of revenues, remaining resilient. Margins continue to improve though and adjusted EBIT for the first half is forecast to be c£43m, up from £41.4m on a like-for-like basis in H1 ‘23.
The picture for the second half is expected to be similar – revenues under pressure but margins improving – with the full year now predicted to deliver revenues of £480-£500m (adjusting for the sale of VectorVMS on 1 July) and EBIT of £88m-£93m.
On the plus side, it’s also worth noting that the disposal of VectorVMS has strengthened LTG’s balance sheet enabling a debt repayment of $25m. Net debt is now just £6m, compared to c£79m in FY23.
However, news from GP Strategies in the US is less reassuring for shareholders. As a US company that performs work for the US Government, it requires certain approvals designed to protect classified information and these have been suspended. Although GP Strategies, which LTG acquired in 2021, can continue to work on existing classified contracts – and the Board claims the value of related contracts is not material in the context of total group revenue and profit - it can’t take on new classified work until certain requirements are met.
It’s a situation that LTG is taking very seriously and GP Strategies, which has to operate at arm’s length under US foreign parent company rules, is ‘working tirelessly’ to resolve all relevant issues to the satisfaction of the US Government. We expect a further update in due course.
Posted by: Tola Sargeant at 09:35
Tags: results trading education
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