Prestige networking event for growth company Directors

If you need to raise £2 million or more to support your growth plans, you're probably asking many questions right now. Is funding available from private equity, bank or other sources? How likely is it that your business will secure the money, and what will financiers expect in return? And what are your options if you can't get the funding that your business needs?

Chris Dines, ex-CEO of Ovum (and good friend of ours) is building an exciting new business called Knowledge Peers, an advice network for directors of growth companies (typically 10 to 500 employees). Aside from their growing online presence, Knowledge Peers hold regular, top quality, networking events. The next is an evening event at the Royal Institution on Monday 2nd November, and we have negotiated a number of complimentary tickets for qualifying UKHotViews readers.

The more formal part of the evening looks at some of the challenges that mid-tier companies will face in order to fund expansion. There’s a very interesting set of speakers and panellists, including tech entrepreneur, John O'Connell (who many of you will know well) and Andrew Garside, of private equity firm Isis Partners. There will be informal networking over drinks and canapés, and private access to the RI’s museum.

If you are a Director of a growth company and would like to find out more, or to register for the event, click here. When registering, please be sure to add "UKHotViews " to the name of your company in the "Company" field of the form else a booking fee will apply!

Be quick – the offer applies only to the first 25 qualifying Directors!

For Autonomy, growth seems easy, profitability a bit less so

(By Philip Carnelley, 20 Oct 09, 09:00) As expected – see Autonomy continues to see strong trading – Autonomy has unveiled another strong set of results for its Q3. Boosted of course by last spring’s acquisition of Interwoven, revenues were up 51% to $192m for the quarter; organic growth was an impressive 15%, due in part to a long string of new client wins. Its new IDOL SPE – the application of Autonomy technology to relational data – is said to have got off to a good start with a ‘stronger than expected’ response – though no mention of orders.

Profitability growth has proven more elusive, as the company works to integrate Interwoven and launch IDOL SPE. Adjusted operating profit margins fell from 42% to 34%. The company claims that without the product launch, margins would have been 43%. But, hey, isn’t launching new products what all companies have to do? Including a fairly hefty write-down for acquisition amortisation, ‘true’ operating profit margins fell from 37% to ‘just’ 26%. Let’s be clear: these are figures many companies would kill for, but not great by Autonomy’s standards. Margins, as well as growth, support its stellar market valuation – it’s the most valuable UK software company despite being considerably smaller in revenue terms than either Sage or Misys (for more detail, watch out for our analysis of the UK software industry coming very soon!). In early trading, Autonomy’s shares have fallen 7.5%.

IT contractors move homes to ‘box-world’?

(By Anthony Miller – Tuesday 20th October 2009 8:30am). An interesting piece in today’s The Register on the potential impact on IT contractors of the FSA decision to scrap mortgage self-certification, particularly for those who have recently been cast out from permanent positions. Beneath the witty reportage is actually quite a chilling message which of course extends to all temporary workers, not just IT contractors. Given the UK’s dependence on freelancers, one wonders whether the FSA has really thought this thing through.

Adecco goes shopping again

(By Anthony Miller – Tuesday 20th October 2009 8;15am). Barely has the ink dried on its acquisition of leading UK ITSA (IT staff agency) Spring Group (see Spring is sprung!), than Zurich-based staffing giant Adecco is at it again. This time it’s US-based professional staffing group MPS Group (nee Modis Professional Services). Adecco will pay $1.3b cash which, at $13.80 per share, is a 24% premium on last night’s close.

Last year MPS recorded revenues of $2.2b at 29% gross margin and 6.6% operating margin, though this excluded a $379m impairment charge which sent net earnings negative. In its most recent quarter (to 30th June), MPS recorded $418m in revenues at 27% gross margin but only 1.6% operating margin. So, based on last year’s ‘adjusted’ numbers, Adecco is paying 0.6x sales and 9x EBIT for MPS. In comparison, Adecco paid 0.2x sales and 15x EBIT for Spring, though that deal ‘only’ cost them £100m.

MPS’ ITSA business trades as Modis International in the UK and Continental Europe. Its revenues last year were $329m, at 18% gross margin and 3.9% operating margin. I believe most of this is UK-based. MPS also runs the Badenoch & Clark professional staffing brand.

So, the relentless consolidation of the staffing industry continues. Will Adecco take another tilt at Michael Page I wonder?

Golden Apple

(By Richard Holway Tuesday 20th Oct 09) I bought Apple shares in 2002 at $10 and saw my investment soar. As HotViews readers can easily verify from the archives, I sold half my holding in Dec 2007 when they hit $203. I then congratulated myself at how clever I was as they plunged to $80.

Problem was I didn’t then buy again.

So here I am today on the one hand glorying in the fact that Apple, last night in after hours trading, hit an all time high of $204 but kicking myself for only having half the Apple holding I had two years back!

It is difficult to find the right words to describe Apple’s wonderous Q4 (to 30th Sept 09) results last night as they blew expectations out of the water. Profits up 47% at $1.67b is one thing but a 25% rise in revenues to $9.87b in one of the worst consumer recessions on record, is quite another. It was almost ‘across the board’ with iPhone sales up 7% at 7.4m units (‘demand is outstripping supply in most countries’), though total iPod sales were down 8% at 10.2m units (is there anyone left who doesn’t have one?) but iPod Touch sales doubled. This has what many call the ‘halo effect’ as Apple Mac sales jumped 7% to 3.05m. Again this against a falling market in top-spec PCs.

"The future (as we should now say) looks Apple" too. The iPhone is gaining acceptance in the corporate world with over 50% of Fortune 500 companies now using the device in some way – really bad news for RIM. The iPhone launches in China this quarter. The launch of Windows 7 this week might just tip even more down the Apple Mac route – well, if you have to reload all your programs to install Windows 7 on an old XP PC, why not buy a Mac and save yourself the hassle? I can see the advert already! Steve Jobs promised “some really good new products for 2010” when the world and Holway expects the game-changing iTablet.

Apple is one amazing story. In 1983, whilst Group Marketing Director at Hoskyns (now Capgemini), I was given a pre-release Lisa for the weekend. It literally changed my life. There is no other technology brand that has given me so much joy in the last 25 years as Apple. The fact that Apple shares have made me a tidy return too just helps the warm feeling!

Last week I wrote the post Recovery? I warned readers yet again that downturns accelerate change with some companies doing very well and others failing. Add Apple to the Google and Intel list of those doing very well in bad times. But don’t read from Apple an end to tech recession and/or recovery.

There are precious few ‘Apples’ - just ‘Enjoy’.

Atos UK update

(By Anthony Miller – Monday 19th October 2009 9:30am). I’ve just been speaking to Atos UK CEO, Keith Wilman, about the Q3 results (see Atos UK star shining even brighter). Despite the cracking growth, Wilman remains cautious on demand both in public sector – where large deals are still being delayed – and in the private sector, where bids are continuing but at lower contract value. Wilman sees particular risk that public sector deals pushed beyond the end of the year may end up being postponed until after the election, which bodes for a rather quiet H1 for all vendors with skin in that game.

On the Consulting front, Atos is seeing some renewed activity, mainly around supply chain cost reduction A few customers are also starting to take a closer look at ‘nextgen’ technologies such as Web 2.0 and Cloud. But with the scarcity of consulting projects, competition is fierce, with some vendors bidding “eye-watering” pricing to win the deal.

The fastest growing part of Wilman’s business looks to be on the BPO side, where ‘output-based’ processing – such as Atos Worldline and Medical BPO – now comprises 22% of Atos UK revenues. Today’s announcement of Atos’ new supermarket fuel card looks set to push this percentage much higher. This will be good news on margins – once volumes have ramped. Indeed, Wilman hinted that Q3 margins were pretty much in line with H109 (8.2%), so perhaps this could be pushed even higher.

Q3 acquisitions down despite strong September

(By Anthony Miller – Monday 19th October 2009 8:00am). A bumper month for European tech M&A in September (see Regent reports strong month for M and A) was not enough to salvage the quarter, according to data just released by Regent Partners.

The total number of European tech M&A transactions in Q309 fell 12% yoy to 574, mainly due to a very slow August. But the September recovery pushed aggregate transaction value for the quarter to nearly $22b, more than double Q209. Valuations also recovered sharply, with Q3 median P/E up to 13.2x and median PSR up to 1.07x. Regent CEO, Peter Rowell, expects valuations to edge up further as buyers become active now that the recession appears to be easing.

We will be analysing the UK software and IT services M&A deals in much more detail as usual in the next issue of IndustryViews M&A.