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Digital delivery consultants, Equal Experts, has secured a major contract with the Department for Environment, Food & Rural Affairs (Defra).
The deal will see Equal Experts supply the Department with application development services to support Defra’s responsibilities across borders and trade, environment, rural, marine, farming, and science capability, as well as its work to modernise legacy applications and corporate services.
The call-off contract, which was awarded via the Digital Specialists and Programmes framework, is worth up to £74m over its initial two-year term. There is also an option to extend the contract for a further 12-months.
The company has performed well via Crown Commercial Service frameworks, particularly Digital Outcomes and Specialists (DOS). In 2023, Equal Experts secured income of just under £93m via the DOS framework; however, almost all of that was via its key customer HMRC. It extended this relationship through a range of new contracts with HMRC last year (see Equal Experts wins big at HMRC).
Adding a major deal with Defra is a positive step that will help reduce Equal Expert’s reliance on its HMRC partnership.
Posted by: Dale Peters at 10:05
Tags: contract public+sector application+services central+government
Denmark-headquartered IT consultancy Netcompany has announced its results for the first quarter of FY24 (ended 31st March 2024).
Revenue was up 3.6% year-over-year in constant currency to DKK 1,598.1m, though this time last year the company reported 13.7% ccy growth in Q1 2023. Netcompany acknowledges that this was “a tough comparable” to beat, however – since the international part of the group (in particular) posted a strong showing in 2023. Compounding matters this time around, an earlier Easter holiday period resulted in fewer working days in Denmark, Norway and the Netherlands too (which not even the leap year February could make up for).
Adjusted EBITDA grew 3.4% ccy to DKK 250.4m, with Adjusted EBITDA margin holding at 15.7% ccy. News to which the market responded positively this morning, with shares up 7.8% first thing on last night’s close and (at time of writing) trading higher thus far today.
Noting the comparison with the “strong performance” internationally last year, Netcompany’s UK business dropped -4.1% to DKK 157.9m in Q1 2024 (representing 9.9% of the group’s total revenue for the quarter). Adjusted EBITDA margin for the UK was 9.6% (Q1 2023: 19.7%), “negatively impacted by increased time spent on business development”. We reported in March that the company has been devoting significant resources to relationship-building and business development – see Re-use and re-imagination—Netcompany’s Public Sector growth.
UK public sector revenues declined -8.4% in Q1 (bucking the recent trend of higher performance compared with the group overall of late), compared with a stronger showing this time in the private sector – up 7.4%. However, the company is reporting that it won “a significant [up to 5-year] contact” in its public sector business in Q1 2024, with revenue expected to start materialising in the second half of the year.
Posted by: Craig Wentworth at 09:56
Significantly outpacing its larger rivals, mid-tier offshore service provider Coforge grew organically by a very robust 13.3% yoy at constant currency in FY24. A final quarter top line improvement of 9% yoy helped to lift firm-wide revenue for the twelve months ended 31st March to a record $1.12bn.
The double-digit increase in company sales came at some cost to profitability with the Adjusted EBITDA margin for the period dipping by 70 bps against the prior year to 17.6%. Order intake for the full fiscal, however, surged by 56% yoy to $1.9bn to give Coforge a 12-month executable order book of over $1bn (FY23: $870m).
Growth was achieved in all the vertical industry and geographic dimensions of the firm’s business portfolio last year. There was particularly strong progress made by Coforge in both the Financial Services sector and the European market. Sales in these segments were up yoy by c.19% and c.15% respectively in FY24.
The publication of the company’s results was accompanied by the announcement that the firm has launched an open offer to buy an additional 26% stake in Cigniti Technologies. Once completed, the share purchase will increase Coforge’s interest in the Hyderabad-based digital assurance and engineering services to 54%.
Founded over a decade ago, Cigniti today employs some 4,200 personnel worldwide. With operations in USA, UK, Australia, Canada, Czech Republic, South Africa, and Singapore as well as India, the company turned over c.$100m last year. Coforge believes that the acquisition will not only help it achieve its ambition of becoming a $2bn revenue business by FY27, but also support the improvement of operating margins by 150 to 250 bps over the next three years.
Describing the latest set of results as representing an “exemplary year”, CEO Sudhir Singh proudly commented that Coforge was “one of the very few firms across the industry that was able to deliver on the annual growth guidance given at the beginning of FY24” – a feat made all the more impressive given the level of growth achieved in a market where demand has softened significantly over the last twelve months. As we have noted before, it appears that the tougher trading conditions have favoured the smaller offshore players at the expense of their Tier 1 competitors. Two days ago, Mastek posted financials which saw sales up by 13% yoy in FY24 (see here).
Posted by: Duncan Aitchison at 09:40
Tags: results offshore acquisition IT+services
Blackstone has completed its acquisition of Civica from Partners Group. Financial terms of the deal have not been disclosed. The alternative asset management firm announced it had entered into a definitive agreement to acquire the London-headquartered business in November 2023 (see Blackstone to acquire Civica).
Partners Group acquired Civica for just over £1bn in 2017 and over the time of its ownership Civica has made 26 acquisitions, including its two most recent additions of the facilities management solution booka from Canberra-based Rollercoaster Digital and Victoria-based contractor management specialist LinkSafe. Civica has grown strongly over the period of ownership, increasing revenue by c.60%, taking it past the £500m mark.
Under Blackstone’s ownership we do not expect to see any dramatic change in strategy or approach. Civica will continue to focus on software to support customers across four key areas of the public sector: local government, healthcare, education and central government. We also expect it to remain an acquisitive business, however, the scale of those deals may increase after Blackstone’s investment.
We will be taking a closer look at what this new era for Civica may look like in next week’s UKHotViews.
Posted by: Dale Peters at 09:04
Tags: acquisition software public+sector govtech
Business process services (BPS) specialist EXL saw its share price tick up more than 3% yesterday on another solid set of quarterlies that saw it grow revenue 8.8% in the first quarter to $436.5m. Operating margin for Q1 2024 was a respectable 14.1%, down on the 14.8% for the same quarter a year ago but up significantly on the 13.1% for Q4 of 2023.
EXL’s offer remains focused and more resilient than most, growing revenue by over 15% last year despite some pretty strong headwinds (EXL grew 15.5% last year as it ramps up the AI ecosystem). The firm has always had an analytics focus but is increasingly working to take a lead in the AI enabled BPS space. EXL now has tie ups with both Microsoft and AWS in the bag and took the decision to press the button on a major skills ‘realignment’ last month, that will see 800 roles disappear, half to be made redundant and half to be repositioned elsewhere (EXL job cuts signal AI skills realignment). The New York-headquartered firm employes some 50,000 people globally, and like most SITS players had hired aggressively since the start of Covid. Staff targeted for cuts/repositioning are mostly junior roles in data analytics and digital operations based in the US and India, with the firm at the same time looking to hire workers with advanced data and generative-AI skills.
Much of the AI opportunity for the likes of EXL lay with helping clients get their data ‘AI ready’, a time consuming and often labour-intensive process. Whilst automation and AI-led BPS services will increasingly replace labour arbitrage, BPS players of the likes of EXL, with its data and process expertise, do have a window of opportunity to make hay whilst the Gen AI sun shines, but only if they have the right skills mix in place.
Looking forward to the rest of FY2024, CFO Maurizio Nicolelli outlined expected revenue to be in the range of $1.79bn to $1.82bn, up slightly on previous guidance and representing YoY growth of between 10% to 12% - down on last year’s 15.5% but still very respectable given where the rest of the market is at.
Posted by: Marc Hardwick at 08:26
Tags: results
Posted by: HotViews Editor at 00:00
DXC Technology has appointed Cameron Art (pictured) as General Manager of its UKI and Americas regions, effective 1st May 2024. In his new role, Art will report directly to CEO, Raul Fernandez, and will be responsible for developing the growth strategy for the UKI and Americas, building client relationships, go-to-market, and sales. Art will also lead DXC Technology's global strategic deals team, focusing on complex, multi-year deals. Derek Allison will continue to lead the UKI as General Manager, reporting to Art.
Prior to joining DXC Technology, Art held a number of senior roles withing IBM, including General Manager of the Americas region. During his long career with IBM, Art was also previously General Manager of Industry Markets, Managing Director and Managing Partner, Enterprise Cloud Applications and served on the Board of Directors for IBM Japan. Art holds a bachelor’s degree in business from Colorado State University.
Art is the third senior appointment to DXC Technology's leadership team in recent weeks and follows hot on the heels of the news yesterday that Patrick Thompson has joined the company in the role of Senior Vice President, Enterprise Transformation (see: DXC calls in transformation expert Thompson).
Art looks to be an experienced global leader, with a broad background that encompasses sales, corporate, technical and transformation roles. As DXC Technology strengthens its top table under the stewardship of its new CEO, the latest recruits appear to be equipped with impressive resumés. Fernandez and DXC Technology’s shareholders will of course be hoping that they also possess the ability to lead the company into profitable growth.
Posted by: Jon C Davies at 20:09
Tags: leadership appoinments
Yesterday I attended a TechUK event on Quantum readiness in Transportation, which explored how Quantum computing is already being trialled across the transportation industry and some of the many challenges the industry faces in deploying emerging technologies. Speakers at the event included the Department for Transport (DfT), Network Rail, Quantum middleware provider Q-CTRL and Quantum supplier D-Wave Systems. I thought I would share some takeaways from the event and my conversations with several attendees, who spanned government departments, technology providers and end users.
The UK's transport infrastructure is under continued pressure to address challenges such as reaching net zero, combatting rising costs and integrating new mobility solutions. Quantum computing is one of a number of emerging technologies that could help modernise and drive efficiencies across transportation. From quantum-enhanced navigation systems to alleviate traffic delays with enhanced precision, to quantum sensors and imaging technologies to ensure safer and more efficient travel, quantum computing is a technology with huge potential, but one that is still a decade or more away from seeing any real impact.
However, there are a lot of misconceptions and a lack of awareness surrounding quantum comptuing, coupled with a fear of how complicated the topic can be which can quickly shut down engagements, and hold organisations back from getting quantum investments off the ground...
TechMarketView subscribers can read the rest of this article in UKHotViewsExtra – click here
In addition TechSectorViews subscribers can read more about the practical applications for quantum technologies across a number of industries, challenges surrounding skills, and the current supplier landscape in our report Quantum acceleration is on the horizon.
The report is also available for individual purchase if you do not have a subscription. Please contact Deb Seth for further information on subscriptions or report access.
Posted by: Simon Baxter at 10:16
Tags: quantum transportation
CGI’s Q2 performance reflects a similar slowdown to that we have seen from many other major IT services providers over the past few weeks. Revenue for the quarter (to end December 2023) was up 0.7% year-on-year to CAN$3.74b, and “stable” year-over-year in constant currency. The topline will have been marginally boosted, to the tune of about USD$8m (we estimate), by the October 2023 acquisition of US-headquartered Momentum Consulting.
Notably, quarterly growth has been on the decline since Q4 2022, when year-on-year quarterly growth stood at 13.9% at constant currency. Despite that topline growth trend, CGI has maintained its Adjusted EBIT margin at above 16% over that 1.5-year period.
Across all geographic segments (aside from US Commercial and State Government), performance was weaker in Q2 than in Q1. However, the UK & Australia segment shone as the best performer with 9.2% revenue growth in Q2 to CAN$402.2m, and constant currency growth of 5.1%. Indeed, this was not too far off the performance for the full six months (5.1% growth, or 5.6% growth at constant currency), suggesting a robust business. The adjusted EBIT margin for the quarter improved to 16.0% from 15.0% a year previously, predominantly due to profitable organic growth in the Government and Communications and Utilities verticals.
We understand that growth in the UK & Australia was driven by strong performance across most vertical markets, and as in previous quarters, the UK Central Government and Space, Defence and Intelligence (SDI) units continued to shine, with double digit percentage revenue growth again this quarter. We have recently written about some significant Central Government wins, including the most recent with the Cabinet Office (see CGI wins £100m Cabinet Office Strategic Delivery Partner deal | TechMarketView).
Interestingly, it is the changing nature of deals in Whitehall, moving away from large managed services deals to framework-based arrangements (like that at the Cabinet Office), where CGI logs the order only when individual statements of work are agreed, that has had some impact on the region's 12-month trailing Book-to-Bill ratio. More broadly in the UK & Australia business, the cyclical nature of order logging across the business has also contributed. This is evidenced by the ratio for the region currently being lowest of CGI’s segments, standing at 94.1% (against the global ratio of 112.8%). Confidence is evident however that the region will return to >100% Book to Bill for the trailing 12 months in Q3.
Posted by: Georgina O'Toole at 09:54
RM plc has secured a significant expansion to its longstanding partnership with The International Baccalaureate (IB). The new arrangement will see the Abingdon-headquartered EdTech business support IB’s drive towards digital assessment.
RM has been working with the non-profit education foundation for 15 years, supporting its transition to e-marking. IB is now looking to push its digital transformation further by transitioning its Diploma Programme (DP) and Career-related Programme (CP) to digital assessment.
Talking to TechMarketView, Dr Matthew Glanville, Head of Assessment Principles and Practice at IB, said IB were looking to better reflect the way students interact with the world and that digital assessment presents a huge opportunity to do this whilst also improving access and enhancing inclusion for those with special educational needs.
Although the terms of the arrangement have not been revealed, the length and scale of engagement suggests this is one of the largest assessment contracts RM has won to date.
RM CEO, Mark Cook, said the partnership is perfectly aligned to where he wants the business to go, particularly its aims to develop a Global Accreditation Platform (see RM draws a line under turbulent times and sets sights on growth). It should also provide the good opportunity for RM to demonstrate its capability on an international stage, with 51% of IB schools in the Americas, 28% in EMEA and 21% in Asia-Pacific. The curriculum offered by IB is also growing rapidly in popularity, as demonstrated by 37% growth in the number of IB programmes being delivered over the last five-years.
As we reported in March, there is a new confidence and positivity within RM. It has been a challenging few years, but it looks like the worst is behind it. The IB partnership should act as a launchpad for growth in the digital assessment market. Other awarding bodies and education departments will be following IB’s progress with interest, which should lead to further opportunities for RM. We can also expect RM to increase the range of services it offers to help organisations break down some of the barriers to digital transformation of assessment e.g. access to appropriate infrastructure. The future is looking brighter for one of the original EdTech pioneers.
TechMarketView subscribers, including UKHotViews Premium subscribers, can read more about RM's partnership with IB in our expanded UKHotViewsExtra article here.
If you aren't a subscriber – or aren't sure if your organisation has a corporate subscription – please contact Deb Seth to find out more.
Posted by: Dale Peters at 09:45
Tags: contract education schools assessment edtech partnership digital+transformation
Insight has made another acquisition in the services space as part of its strategy to become ‘a leading solutions integrator’. The addition of Infocenter, which brings a full complement of ServiceNow consulting and implementation services, will strengthen Insight’s automation solutions portfolio.
Established in 2017, Infocenter is a well-respected ServiceNow partner. The North Carolina-headquartered business has some 575 ServiceNow experts, many of whom are based in India with a small presence in the UK and Mexico.
For Insight, which saw top line revenue decline 12% last year, enhancing its ServiceNow services capability is a solid move given ServiceNow’s rapid growth as a digital workflow platform. The expertise will also complement Insight’s multicloud capabilities around Microsoft Azure, Google Cloud Platform, AWS, and private cloud infrastructure.
The addition of Infocenter follows the acquisitions SADA and Bristol-based Amdaris, which were also designed to enhance Insight’s expertise and services in the areas that are most meaningful to its clients. In other words, the six high growth areas of the IT market that Insight is focused on as it continues its journey from product business to solutions integrator - modern platforms/infrastructure, cybersecurity, data and AI, modern workplace, modern apps and intelligent edge.
Posted by: Tola Sargeant at 09:31
Tags: acquisition
UK-based insurtech, Urban Jungle, has raised $14m in its latest funding round. The cash injection was provided by a variety of backers including the Sony Innovation Fund and angel investor Rob Devery, former Prudential UK CEO.
Founded in 2016, Urban Jungle, was the brainchild of Cambridge University alumni, Jimmy Williams and Greg Smyth. CTO, Smyth, studied Computer Sciences and Philosophy and was previously VP of Research and Data Technology at Winton Capital. Meanwhile, CEO, and first-time founder Williams, graduated with a first in Economics and Management Studies in 2007. The difficulty of securing home insurance, whilst flat sharing in London, was the founders' inspiration for Urban Jungle.
Urban Jungle’s main target market is the UK's growing army of renters. The insurtech provides simplified buildings and contents insurance, tailored to this segment, which is designed to be accessible, affordable and easy to manage. Urban Jungle’s online platform aims to make household insurance more inclusive and easier to manage with a simpler claims process. Because of the typical life stage of renters, Urban Jungle's products are also designed to appeal to the younger generation.
To date, Urban Jungle has raised more than $55m in funding. The insurtech employs 70 UK staff whilst its total customer base (including current and previous policyholders) totals around 200k in number. The insurtech plans to use the latest investment to add further scale to its operations and to expand its team.
Studies show that UK renters are woefully under insured, despite the increased risks associated with the sector. The accessibility and affordability of traditional policy types has previously been a barrier to entry, for younger people in particular. As the rental market grows in size and employment patterns continue to change, I suspect that the appeal of products such as those offered by Urban Jungle is likely to increase.
Posted by: Jon C Davies at 09:23
Tags: funding
Continuing customer concerns regarding their own trading conditions and the resulting ongoing clampdown on discretionary IT expenditure impacted Cognizant UK in Q124. Company revenue in the region for the three months ended 31st March fell by 7.7% yoy at constant currency to $456m. The apparent steepness of the decline was accentuated by the strength of first quarter performance in the prior year, which saw a 14% yoy jump in the company’s UK turnover (see here).
Our recent conversations with Cognizant’s UK management suggest that the underlying business picture is considerably more positive. The company has secured all of its contract renewals in this country so far this year. The region’s new business win rate is said to be remaining healthy and good progress continues to be made in the UK Public Sector vertical. Now accounting for an estimated 12% of country revenue from almost zero a few years ago, notable Q1 successes in this market segment included the agile development deal with the Department of Education. The UK geography also reports beginning to reap the benefits from Cognizant's global $1bn Generative AI investment programme. This is driving burgeoning volumes of both pilot projects and foundational apps modernisation work in the territory..
Firm-wide, Cognizant’s Q124 global sales dipped by 1.2% yoy to $4.8bn. The result exceeded to top end of the guidance issued in February (see here). Weaking demand from the company’s Financial Services and Health sector clients in the first quarter was largely offset by revenue growth from the firm’s Products & Resources and Communications, Media & Technology verticals. Adjusted operating margin for the period improved by 50 bps against Q123 to 15.1% and, on a trailing-twelve-month basis, bookings were up 1% yoy a $25.9 billion to generate a book-to-bill ratio of c.1.3.
Looking ahead, the company continues to take a cautious view of its prospects for the coming months. Second quarter global revenue is expected to decline by between 2.5% and1.0% yoy in constant currency. Full year top line guidance has been left unchanged with firm-wide turnover projected to land somewhere 2% down and 2% up against FY23. In common with many of its competitors, whether Cognizant ends up in top line growth territory for the current fiscal will be determined largely by how soon and how wide buyers reopen the taps on discretionary expenditure.
Posted by: Duncan Aitchison at 09:15
Tags: results offshore IT+services
First quarter results from New Jersey-headquartered business process specialist Conduent have revenue flat for the first quarter at $921m (Q1 2023 $922m) as the company announced the closure of the sale of its Curbside Management and Public Safety businesses. Profitability however, declined with adjusted EBITDA falling -23.3% to $69m (Q1 2023 $90m) with associated margins declining from 9.8% a year ago to 7.5% in Q1 2024. Cliff Skelton President and CEO stated that while revenue exceeded expectations and adjusted EBITDA/Margin were broadly ‘in line’, sales performance lagged due to the timing of several opportunities between Q1 and Q2.
In March 2023 Conduent announced a three-year portfolio rationalisation plan, designed to free up resource to focus on growth areas, particularly its Government Healthcare business (see Conduent in the UK – A Company snapshot). A key component of this was the sale of its Curbside Management and Public Safety Solutions business to Modaxo for $230m – announced at the tail end of FY23 – now closed), with actions looking to make further improvements to its growth and cash flow generation. Acquirer Modaxo is a division of Constellation Software a portfolio of businesses focused on transportation technologies – hence the deal looks like a suitable fit.
Looking forward the business is targeting flat revenue of c.$3.7bn for the FY with adjusted EBITDA Margin of between 8%-9%. Lifting this will require the business executing on its sales pipeline efficiently. Related to this the big announcement this quarter was the firm’s progress in the Gen AI space (see Conduent accelerates its BPS Gen AI push) - a key initiative - that if done well should help deliver against this objective.
Posted by: Marc Hardwick at 08:50
Capita’s CFO Tim Weller is to retire in August with Pablo Andres (pictured), currently CFO of Ventient Energy taking over the role.
Weller joined Capita in 2021 from G4S where he was both CFO and a Non-Executive Director. Andres also had a recent stint at G4S having been Group Financial Controller of the blue-collar outsourcer between 2013 and 2020. Prior to that Andres was CFO of London Stansted Airport from 2011 to 2013 having also held senior finance roles at BAA, Ferrovial, and Deloitte.
David Lowden, Chairman of Capita commented “I am delighted that Pablo will be joining Capita as the new CFO. Pablo has extensive experience operating as a senior finance executive across a range of sectors with companies directly comparable with Capita. He is highly experienced in driving change in complex businesses and has delivered significant cost savings, streamlined organisation structures and enhanced processes and systems. He has the right skillset and drive to support Adolfo in leading the next chapter of Capita.”
Weller’s period at Capita saw significant cost cutting as the business looked to improve profitability (Capita announces fresh cost savings) and drive efficiencies. Andres will be charged with helping new CEO Adolfo Hernandez find Capita’s missing future growth platform, something that will no doubt require significant levels of investment if Capita is to capitalise on the potential of AI enabled digital BPS – not an easy challenge given that current funds are looking tight.
Posted by: Marc Hardwick at 08:15
Tags: appointment
We are delighted to announce that we’ll be holding our 2024 TechMarketView Evening Autumn Reception on Thursday 26 September.
Join us from 18.30-21.30 at Mall Galleries on The Mall, London, to mingle with your peers and friends in the tech sector over drinks and canapés and discuss the latest trends in the tech market with the TechMarketView team and guests.
During the evening you’ll also have the opportunity to enjoy a Private Viewing of the Royal Society of Marine Artists annual exhibition at Mall Galleries and help us celebrate our first year post MBO. This open exhibition is widely recognised as a showcase for the best in contemporary marine art, with selected work by non-members hung alongside the work of current members.
Please save the date in your diary - further information and booking details will be available shortly and we don’t want you to miss it!
Posted by: TMV Team at 07:00
Cambridge-based medical technology company Endomag (Endomagnetics Ltd) hasn’t featured in UKHotViews previously – its innovative surgical guidance tech for breast cancer not fitting within our usual software and IT services remit. But Endomag’s acquisition by US rival Hologic for $310m earlier this week struck a chord as yet another promising UK-headquartered tech company ‘falls into US hands’.
The news comes hot on the heels of high-profile UK cyber security provider Darktrace – described by our very own Richard Holway MBE as ‘perhaps the last really exciting, large UK listed tech company’ - being acquired and taken private by US private equity fund Thoma Bravo in a $5.3bn deal (see Richard’s Dark Day for UK tech and Simon’s article, Thoma Bravo to acquire Darktrace.)
Although different in nature, both deals are clearly success stories for the two Cambridge-based businesses providing a healthy return for their investors and a secure future for the team and the tech.
Founded in 2007, Endomag is a spin out from University College London (UCL) and the University of Houston and generated revenues of c$35m last year, suggesting the sale price is c10x revenues.
Founded in 2013, Darktrace’s sale price represents a 44% premium over its average stock price for the past quarter and the deal provides it with growth funding and a strong PE partner.
Despite this, we know we are far from the only ones lamenting the fact that two more exciting UK tech businesses no longer have UK ownership. It is, sadly, a trend that we’ve been talking about for many years.
According to our data, in 1986, nine of the top 10 software and IT services providers to the UK tech market were headquartered in the UK. By 2023, our rankings only had one, Capita. Will there be any in our 2024 top 10?
There are many reasons why I would love to see more UK tech companies stay owned and headquartered here as they scale to become global tech giants, not least the positive impact it has on the tech ecosystem and the UK economy. And there are things that could be, and are being, done to help encourage this – from the government’s plans to drive more investment by UK funds into UK companies, to the idea of a UK or European ‘Nasdaq’.
Whilst there is no escaping the fact that we operate in a global economy, and a trend that has lasted some four decades is not going to be reversed easily, it will be worth the effort if it means that we end up growing and sustaining more global tech champions here in the UK (see also How can we supercharge UK scaleups?).
Posted by: Tola Sargeant at 10:07
Tags: acquisition M&A healthcare
Computacenter’s trading update this morning shows the firm is on-track to hit expectations for the first quarter.
No surprises, but worth noting a few points. Things are still challenging for the UK business, while Germany and North America are highlighted for their solid underlying performances. As was expected, Services in Q1 came in below the prior year with a continuation of the pattern: continued growth in Professional Services weighed down by the expiration of Managed Services contracts. Furthermore, the pipeline for Professional Services opportunities looks “encouraging”.
As previously highlighted, adjusted profit before tax for H1 is expected to be down on last year. Looking further out, Computacenter believes it will see growth in its Technology Sourcing business weighted towards the second half of 2024 and therefore “further progress” for FY24.
Also of note is that the start of Q2 (i.e., April) saw Computacenter begin delivery of an unnamed “large four-year public sector contract” – signed at the beginning of the calendar year. This one, perchance? This is excellent news for the Public Sector team and the UK business more broadly, but there is more work to be done to infuse a good – and sustainable – performance that matches the other geographies.
Computacenter’s FY23 showed the firm grew Gross Invoiced Income (GII) in its Technology Sourcing business by 13.1% (constant currency) to £8.44bn. GII is a key metric for resellers, with Computacenter’s total GII breaching £10bn in the year to hit £10.08bn. Revenue from Services was +3.1% to £1.6bn.
CEO, Mike Norris, recently won the plc CEO of the Year Award and has been central to the evolution of the firm and its culture – and one of the key drivers of much of its success.
TechMarketView members can read our piece out later this month following our recent catch up with Mike.
Posted by: Kate Hanaghan at 10:00
Mastek’s FY24 results (to end March 2024) reveal strong year-on-year revenue growth for the 12 months of 19% to Rs3,054.8 Crore, representing 13% growth in constant currency.
However, the company experienced a Q4 slowdown. Following robust growth in Q3, of 19.1% year-on-year, and 2.4% sequentially (see Mastek maintains momentum | TechMarketView), Q4’s year-on-year growth was in the single digits, at 9.9%, and sequential quarter-on-quarter growth dipped into negative territory at -0.6%. The EBITDA operating margin for the full year was 16.0%, down from 17.0% in FY23.
The story in the UK & Europe, however, was in contrast to the global view. Now representing 56.9% of total revenues, compared to 61.9% in FY23, the region put in the a robust performance over the full year, with total growth of 10% to Rs 2,077 Crore. The US business grew more strongly (at 33%) but was boosted by the acquisition of BizAnalytica in July 2023. In addition, the UK & Europe returned its sequential quarter-on-quarter growth to positive territory in Q4 (at 5.0%), highlighting an improvement as the year ended. In contrast, the US business had a quarter-on-quarter decline of 18%.
We understand that, driving this positive story in the UK, was a return to stronger activity in the central government market after a fallow period. Mastek won a couple of significant contracts, including a deal that will see it transform the project approval processes for one Government department by deploying an Intelligent Customer Team (ICT), specialising in architecture and requirements.
Also in the UK, Mastek’s private sector business was boosted by a strong growth in BSFI & Retail; we understand that growth in the private sector, quarter-on-quarter, in Q4 was in the double digits in percentage terms. Interestingly, success in this space included qualifying for frameworks at both the Financial Conduct Authority and the Bank of England, both of which sit ‘on the edge’ of Central Government.
Looking ahead, at the global level, Mastek is bullish about its prospects for its FY25. CFO, Arun Agarwal, states that Mastek is “confident to deliver industry leading growth”. That view is backed up by a record 12-month order backlog, and comes despite Mastek highlighting continuing macro uncertainties and customer delays.
In the UK, there are, in our view, a few areas where Mastek has the opportunity to boost its FY25 growth. For example, in the healthcare sector, we have seen Mastek appoint a new Healthcare leader, and bolster its Consulting capabilities, allowing it to open new conversations in the wider Healthcare market. It has also identified the Healthcare market as a key bet for its Gen AI offering (see Mastek partners with Microsoft to harness GenAI for industries | TechMarketView). Already, last quarter, it had success winning a role as Digital Data and Technology partner for the Department of Health and Social Care. In a similar vein, we expect the investment in its Consulting capabilities over the last two years will also positively impact its prospects as part of the Ministry of Defence DIPS framework (see Long-awaited Defence DIPS framework begins | TechMarketView).
Posted by: Georgina O'Toole at 09:58
Tags: results offshore retail IPP healthcare financial+services public sector
Amazon reported total revenues increased 13% to $143.3bn in Q1 2024, driven by growth across both its retail business and AWS, as cloud modernisation picks up pace.
Operating income was up an impressive 221% to $15.3bn, driven by a c.4bn increase in AWS, and c.$4bn from the North America business. The International business swing from an operating loss of $1.2bn in Q123 to a positive $0.9bn in Q124. A strong focus on driving cost efficiencies across the Amazon/AWS business has clearly paid off.
Amazon said retail customers are shopping but remain cautious, trading down on price when they can and seeking out deals. Advertising is also showing strong signs of growth with ad sales up 24% yoy. Amazon recently added adverts to its prime videos in an attempt to drive higher revenues (though creating a much worse customer experience I might add). A new GenAI AI tool was also launched for sellers, enabling them to to simply provide a URL to their own website, and then automatically create high-quality product detail pages.
AWS sales increased 17% yoy to $25bn, now representing 18% of the total Amazon business. AWS said that companies have largely completed the lion's share of their cost optimisation and turned their attention to newer initiatives. The pre-pandemic push to modernise infrastructure, and shift to the cloud is picking up pace again. AI demand is of course playing a key role in that, as organisations seeking to build strong data and cloud foundations to exploit internal data.
Amazon also continues to add capabilities at all three layers of the GenAI stack. AWS bedrock already has tens of thousands of customers, providing access to a broad range of foundation models from 3rd parties include Claude 3 by Anthropic, Llama 3 by Meta, Mistral AI and Stable Diffusion, as well as its own Titan modes. SageMaker, its platform for AI model training and deployment has also been gaining strong traction. Amazon gave examples of Perplexity AI training models 40% faster, Workday reducing inference latency by 80%, and NatWest reducing its time to value for AI from 12-18 months to under 7 months.
Amazon also announced the general availability of Amazon Q, a GenAI assistant for software development, which can both generate code, test it, debug and transform from one language to another. BT Group provided Amazon Q to 1,200 of its engineers, generating more than 100,000 lines of code in its first four months and automating approximately 12% of the repetitive a work done by software engineers.
Posted by: Simon Baxter at 09:39
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