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techMARK Report
Notwithstanding the crisis of confidence running through the mobile phone sector, recent events should encourage investors looking for a recovery in sentiment about technology. A number of statements have come out flagging up increases in corporate demand for IT services, while the new issues market has finally woken up from a long period of torpor.
Two new faces are waiting in the wings, the first for techMARK since iRevolution came to the market nearly a year ago. One of these – orthopaedic devices firm Corin - is in the relatively 'defensive' biotechnology business. The other hopeful – IT services firm Detica – principally supplies the customer relationship management and national security markets. Crucially for its £13 million fundraising, Detica is profitable, making £4.7 million pre-tax in 2001 on £26.6 million sales, so a prospective market value of around £100 million does not look particularly demanding. UBS Warburg is handling the issue.
Kewill leads the way forward
In the past few weeks Kewill Systems has provided welcome relief to its shareholders. It has recovered from the doldrums of 15.5p to surge to 24p. This happened after the company reported a surprise upturn in fourth quarter orders and the anticipation of breaking even at the operating profit level in the second half of its year to March. The shares were hit hard by a previous profit warning in February, and are now only slightly up on the end of last month.
Semiconductor technology firm Imagination Technologies gave a fillip to industry bulls by saying the sales cycle is 'showing signs of improvement' and 'we have seen real progress in partners committing to a range of our technologies'. But its shares remained static at 43p.
Also making positive noises was Eyretel – which makes various systems for customer contact centres. The company, which has shown impressive resilience over the past few years, says pre-tax profits for the year to March will be ahead of expectations. However, its shares failed to respond, remaining unchanged at 67p.
Training software company Azlan and specialist instrumentation firm Oxford Instruments both issued positive statements and saw their shares gain 4 per cent to 152.5p and 2 per cent to 225.5p respectively.
Data capture specialist Dicom also made some good noises about its trading. But at the same time it said it is going to make £5.2 million of exceptional provisions due to defaulted payments from a customer and the fear that more will follow.
Well off the Pace
Investors in set-top box maker Pace Micro Technology might be forgiven for throwing in the towel after the company released a fourth profit warning in the space of seven months. Many already have, which helped the shares down to an all-time low of 64.75p. This values the company at £146.3 million – about a tenth of what it was a year ago.
Pace is now expecting a second-half loss, after previously saying that it would probably report a profit. Pessimism was also expressed about next year, due to ITV Digital's collapse and NTL's travails.
Network management software firm Riversoft was another sporting a warning. It is suffering from more customers deferring orders, which is having a severe impact on revenues. In response, the shares fell 35 per cent to 8.25p. Net cash balances are £48 million, against a market capitalisation of £20 million. Expect vultures to circle.
Manoeuvres and contract wins
The spat between present and former management groups at Patsystems, a software company with a lot of cash in the bank, seems to have reached a resolution of sorts, with the present incumbents winning the day. But, despite a spate of director buying, the shares have declined from 10.15p to 9.5p of late.
Sirius Financial Solutions is doing rather better, on the back of what it says 'is believed to rank among the most important decisions to purchase underwriting software made in the market in the past year'. The deal in question is with New Zealand-based insurance firm NRMA Insurance; Sirius beat off 94 competitors to land the deal. The company's final results showed a fall in operating profits, but a massive uplift in orders. Its shares surged 41 per cent to 130p.
There were other big contract winners in the technology arena, not least of which was Alan Sugar's Learning Technology (the holding company for Viglen) and Retail Decisions. While the former announced a £26 million order to provide systems to Northern Irish schools, the latter revealed a contract with Shell UK to provide fraud screening solutions to its national network of petrol stations.
Coming up
Winning contracts has come easy to wireless communications technology group TTP Communications. Its latest licence win was for the provision of GPRS mobile phone technology to Korean firm LG Electronics.
This deal, and a more recent alliance agreement with US firm Trimble, followed March's news that Toshiba and IBM had signed up for various applications. Despite this, the shares have continued their history of decline, falling 17 per cent to a near all-time low of 93p. Results for the year to March are due on 30 April.
The market currently expects upwards of £6 million pre-tax profit and earnings of 1.9p per share.
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