June is always a fallow month in the reporting calendar. And the few dozen major high-tech companies that do turn in their quarterly or half-yearly numbers provide an eclectic mix.
No more so than IT infrastructure company dimension data (DiData). It is headquartered in South Africa, has its primary listing on the London stock exchange, yet reports in US dollars. However, this formula seems to be paying off, as the company reported revenues for the first half of 2005 up 15% to $1,354.3 million. The driver behind that surge was the 44% growth of its integrated IT services unit which brought in 28% of overall revenue. But its networking integration business is also a key part of its arsenal of services, generating 10% of revenues.
Fuelling some of that growth were high-profile customer wins at Mercator Bank, Swift and Coca Cola Germany. Acquisitions also added to revenues: over the six months it swallowed Belgium-based Euricom, a software development company specialising in Microsoft's .NET environment, and Bellerephon Group, an Australian IT consultancy that deals in Microsoft IT infrastructure.
Growing at twice the speed of DiData is another giant of IT services that is breaking into the UK market with some success. For its second quarter, Montreal-based cgi group reported revenues up an impressive 30% to C$929.7 million ($753.1m). With approximately 61% of its business in Canada and 31% in the United States, CGI is still a minnow in Europe, but is pushing its presence in the UK where it already counts Abbey, Vodafone, Prudential and Royal Mail among its 50 clients.
In the US, its acquisition of American Management Systems (AMS) back in May 2004 is now paying off, resulting in government contracts in the last quarter with the State of Utah, San Bernardino County in California and the City of Austin in Texas. CGI estimates the AMS part of the business has grown by 33.7% since last year, while the company's organic revenue growth was unchanged.
CGI's chief operating officer, Michael Roach, recently predicted his company would double in size in the next three to five years. Its strategy to do so will involve a combination of acquisitions and organic growth, and is likely to place a strong spotlight on US and UK services companies.
Ship and go
The kind of momentum it is hoping to pick up in the UK was evident in the performance at kewill systems. There are two sides to Kewill: one sells supply chain automation and goods shipping software to companies globally, such as FedEx and DHL in the US, and the other, more UK-centric side, sells electronic trading systems based on EDI (electronic data interchange). Buying some Internet-based EDI technology in 2002 for a fraction of the price it cost to develop enabled Kewill to rejuvenate the latter side of its business and attract customers who were previously worried their software was becoming outmoded.
The UK-headquatered company is now also reaping the rewards of its two big acquisitions in the first half of 2004 – TradePoint (in January 2004) and ShipNow (in April 2004) – which both contributed to a surge in revenue in the company second half of its fiscal 2005. Revenue in the second half of 2005 grew by 16% to £13.2 million ($25.6m), as global customers such as The Body Shop, Littlewoods and GE Healthcare signed up. By focusing on two niche software areas, each with healthy customer bases, Kewill is looking like tempting acquisition target.
But it needs to marry these two businesses more closely together, say analysts. "Interestingly, we understand that two customers have [recently] bought across the divisions, suggesting that its strategic aim, to create ‘one Kewill', is gaining some traction," says Shore Capital analyst George O'Connor, adding that Kewill stills needs to use acquisition and possibly disposal to counter the structural shift as the segment consolidates.
There is a contrasting picture at one of Kewill's rivals, US-based supply chain specialist descartes. Revenues of $11.3 million in the first quarter of 2006 were 15% down on the same period a year ago. That will concern some of its roll call of high-profile customers – John Lewis, Ocado, Kodak, Foster's, Ericsson and British American Tobacco – who will be anxious about the future of their supply chain software investments.
However, one area of hope is a rebound in profitability during the quarter to $0.5 million, a significant improvement on the loss of $28.9 million in the year-earlier quarter, although this result is mainly down to the sale of 22% of Descartes' investment in online grocer customer Ocado, the Waitrose supermarket partner.
Also offering supply chain management software, ssa global showed Descartes and others it is possible to recover from a near-death experience. Having been rescued from bankruptcy by a group of private investors in 2000, the Chicago-based enterprise resource planning software vendor re-listed on Wall Street in April. And the company's third quarter results highlight its rehabilitation (see Company Analysis).
Total revenue for the quarter rose to $180.4 million, a 10% increase from $164.5 million in the same quarter last year. Software licenses hit a record $52.5 million, up 27% from the third quarter last year, and represented 29% of total revenue for the quarter.
Net income hit $9.2 million, compared to $2 million for the same quarter in 2004. That solid cash generation will augment the $100 million it generated at its initial public offering.