The Banking and Securities division of Misys, the UK-based technology group now in the throes of reinventing itself, was the only one of its three business divisions not to increase revenues in the first half of the year. Total revenues were down 9% on the equivalent period last year, initial licence fees were down 8%, professional services down 21% and maintenance static at +1%.
However, net margins in the first half are expected to be slightly ahead of those in the comparable period due to the cost reduction measures that Misys took last year. “Customers remain cautious in the timing and placing of orders and the total number of prospects that we have converted to orders in the first six months was somewhat below the expectation that we had at the time of the AGM,” explains Misys. “However, we have signed orders in all sectors of the market and the pipeline remains robust. Hence in our view the overall state of the Banking and Securities market has neither improved nor deteriorated.”
Initial licence fee (ILF) order intake at 32m was 22% below the same period last year, while ILF taken to revenue was lower by 8%. The ILF order book at 25m was lower than at the end of May 2002 but slightly ahead of November 2001. Despite the lower order intake the number of large orders (over 1m of ILF) remained broadly in line with the level achieved in the equivalent period last year. The lower level of ILF revenues over the last twelve months has further slowed the growth in maintenance revenues. More significantly, the level of professional services has been disproportionately affected by cut-backs in IT budgets.
“We have continued to keep our cost base under review and during the first half took further action to reduce our costs in the Asset Management and Securities Trading businesses,” adds the company. “The one-off cost of this action, which totals 1.4m, will be charged to operating profit in the first half. In light of the current levels of activity, particularly in the area of professional services, we have commenced a review of staffing levels within other areas of the Banking and Securities Division. The redundancy costs arising from this review will be charged against second half operating profits and will be quantified when we announce our first half results in January 2003.
Operating profit in the division, before the redundancy costs of 1.4m, is expected to be broadly in line with last year’s operating profit in the first half of 28.1m (which was stated before the exceptional costs of 10.1m.
By contrast, Misys Healthcare Systems and the Financial Services Division both increased revenues significantly in the first half.