Sunday, 31 May 2009

Share indices in May 09

(By Richard Holway and Anthony Miller 8.00am 31st May 09) Tech stocks do seem to be ‘defying gravity’ right now. For the 5th month in a row this year, UK SCS stocks have outperformed the FTSE100. The cumulative YTD effect of this is quite startling. The FTSE UK SCS Index is up an amazing 37% whereas the FTSE100 is down 0.4%. I repeat, the only other time in the 20 years that I have studied this, that there has been such a diversity of performance was in Q1 2000 – just before the crash.

In May, the FTSE UK SCS Index rose by another 9.5% with Computacenter, up 26% (See Services drive Computacenter growth) , leading the way with strong performances in the IT Services subsector from Anite (+16%) and TeleCity (+15.5%). The Innovation Group (TIG), though not in the FTSE SCS Index, rose 20% after a respectable set of interims results (see TIG – first half ups and downs) and fund-raising (see TIG in dash for £5m cash). But it was the ‘software’ bit that really starred. Non-index Bond (up 69%) and Intec (up 63%) lead the way with strong performances from Aveva (+30%) (see Aviva shines - but storm clouds loom), Micro Focus (+24%) after its buying spree (see Busy day for Micro Focus!), Misys (+20%) and RM (+19%) - all the latter compnaies are in the FTSE SCS Index. We were not that impressed with RM’s results – see RM – worthy cause deserves worthy profit - and even less so with their decision to buy a furniture company – see RM – Oh No, not the comfy chair! Non-index healthcare software star, System C Healthcare rose 32% alter a useful acquisition and also perhaps in anticipation that AIM-listed healthcare IT acquisition vehicle, ACS, may have it in its sights (see UK healthcare IT consolidation continues apace).

As you can see in the chart Support Services still pretty much hugs the FTSE100. I am still surprised that Capita hasn’t done better this year (up 4% in the month but down 3% YTD) considering the fact that BPO really is the flavour of the recession. Serco (see Public sector pays off for Serco) did at least manage a 10% rise in May - based on excellent results and a lot of press publicity surrounding their deal to help young unemployed people back to work – but is still down 11% YTD. The ITSAs (including both recruiters and resourcers) were a mixed bunch. SThree fell 14%. But OPD (which includes Odgers) managed a 32% rise (see Hearn rescues OPD).

Outside the UK, it was a stunning month for the Indians with a major recovery on their own stock exchange, helped by the recent election results. This benefited the IT offshorers almost across the board – headed by Mastek (up 76%), Mphasis (an HP/EDS company – sort of) up 50%, and Tech Mahindra (+44%). Even Satyam put on 14%! We’ll have more on this in OffshoreViews.

Notable amongst the US players was a 15% rise at CSC (see Steady progress at CSC) on solid results, and a surprise 14% rise for Unisys. On the software side, Intuit rose 18% knocking Sage into a cocked hat (+2%) as the latter saw its first organic revenue decline for years (see Sage suffers organic revenue decline). SaaS poster child was among the worst performers, down 11%.

Telecomms players continue to be out of favour. BT (see BT FY09 results and many other postings this month about BT Global Services - we were greatly appreciative of your kind comments on our BT coverage) retreated another 7% on its dismal results. They were not alone – Deutsche Telecomm fell 11% in May.

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