System House

The monthly review of'the financial performance of the UK software and computing services industry

Volume 10 Number 12 Available by subscription only ISSN 0967-2583 October 1999

This month saw the launch by the London Stock Exchange

of techMARK. It received a mixed reaction with many

regarding it as too little and too late.Regardless, it contains many of thefeatures for which we hadcampaigned...but omitted many too.

The new marketFirstly the details. If you want the

full monty, the LSE put up anexcellent new internet site

(www.londonstockexchange.com/techMARK).- techMARK is NOT a new exchange.Rather it is a grouping of companieswhich are already (and will remain)listed on the LSE. in other words,Misys will continue to be a FTSEtOO

company as well as being part of

techMARK.- new l-☁l'SE indices will be produced

to track techMARK and itssectors.

sub

- all companies currently classifiedas computer hardware, computer services, internet,

semiconductors. software and telecommunications will be

automatically included. This means that Vodafone, with a

market cap of £78b, will be the largest company in

techMARK. By contrast the largest 308 company is Sage

with a valuation of ☜just☝ £3.3b.

- in addition, and probably most controversially. techMARK

will include other ☜innovative☝ technology companies such

as Glaxo Welcome, SmithKline

Beecham, GEC (electronics),AstraZenica (pharmaceuticals),British Aerospace (aerospace and

defence), and Nycomed Amersham

(Health).- 174 companies with a total mkt cap.of £430b will be included on day one.

- NO AIM companies will be included.

- a new set of listing requirements

are proposed for new entrants toallow companies with trading records

of less than three year to be floated.

However, under these new rules

referred to as Chapter 25, thesecompanies must have an initial value

of at least £50m and will initially haveto report quarterly. We were

particularly pleased to see that new

lPOs would have to sell at least

£20m of shares and make at least

25% of their shares available for free trade in the lPO.ew or existing shares☝.However, these can be ☜n

techMARK

techMARKBy Number

ElectroricsGtElectrical 2%

Equ☁prrent Software ant Corrputuu

Services457.,

interest still further.

statements)

The cons

techMARKBy Market Cap.

Electra rics & Electrical

Equprrlnt a5%

health1%

Aerospace

IT l-hrdware

Teleoorms

477.,

Soltuz: and Corrpulrrg

Savlces

7%

It should be noted that companies with < 3 years trading Com/nuedonpageg

October 1999 1

record can still lPO with a market cap. of <£50m. This

exemption also applies to companies moving from AIM.

- Chapter 25 also proposes new

rules, amongst others, to bring

forward reporting dates and prohibit

misleading or deceptive

announcements.

- techMAFlK will go live in

November.The pros- the ability for companies like Sage

to keep their hard won FFSEtoo

status is to be applauded.

techMARK could not have got off

the ground without this feature.

- we have already seen a major

increase in interest - and analysts -

covering UK technology stocks.

(Our own revenues tend to testify

to this!) New indices. new tracker

funds (Close has alreadyannounced its fund will be launchedin Nov.), specialist tech. funds etc.

which might come from techMARK will only increase

- we fully support many of the new rules (25% free float, <

3 years trading records, tighter rules on deceptive

- the exclusion of AIM is a major error. it could mean the

end for this junior market, particularly if it does not join

Euro.NM. Either companies will goto the main market or to Euro.NM

or EASDAO.- techMARK will have no pan-European - or international -perspective. Indeed, this was

quoted as the main reason behindthe decision this month by JSB (seep12) to de-list from AIM in favourof EASDAQ - the first such UK 808company to take such a decision.

- the £50m minimum initial valuation

is too high. We would have settledon half that.

- there seems to be no added

incentive for investment, such as

rollover CGT relief, VCT status etc.to attract "retail" investors.- the inclusion of companies likeVodalone and Glaxo ☜overwhelm☝

techMAFlK. Vodafone, valued at£7Bb, represents 18% of techMARKThe Top Ten techMARKcompanies represent a massive 82% of techMARK - and

System House _

Continued from page 1

NONE are SCS companies.Although SOS companies represent 45% of techMAFtKby number, they represent <7% by value. Indeed, even in

the SOS sector, the Top Five companies represent 57% of

the techMARK☁s SCS sector. All FI'SE Indices are weighed,

so the effect could have been that, although SCS stocksare a very minor ingredient of the techMARK index, a profitswarning from Vodatone could send the techMARK indexcrashing with a consequential effect on sentiment towards

808 stocks.Rest assured, however, we will continue to bring you ourunweighted 808 index to compare against techMAFtK!

Note - The LSE has told us that, because of this problem."we have decided to cap the larger companies so that,

say, any company comprising more than 5% of the index

has their weighting limited to 3% or 5%". Even with this

concession, the Top ten companies could still represent40% of the index and many think such capping will cause

more problems than it solves.ConclusionOverall, we are in favour of techMARK Maybe it's a☜compromiSe☝, ☜too little too late" and without theinternational spread we had hoped for. But at least it stands

a chance of getting off the ground.As we have said before to those who say ☜who cares?", a

buoyant tech. market in London is vital, not just for jobs in

the City, but also to the UK IT industry and associated

jobs. Unfortunately, companies tend to migrate jobs - eventheir HQs - to the country of their primary listing. We wouldrather that was the UK than Germany or the US.

☁ company within 3☁ we '_theyare 94m,3 tey éust't

☁ $1 to'the ☁FTSE 2100'

Note: Shale price at [line of MI Yea resu||s alumnaemer☁lE75 and Snare pdce aqusted tart-bid bouts Issue

239

:12;

Logica plc

PBT, EPS and Share Price

Relative to Martin Read joining in mid-1993

WW

The trana☂bmmwn'in 3| "35'"

at Logica has'b'e " ' mm☜iusttortheshare " ☁ j @501?

:tromo559 td'so'ver in tit pie or}, Logica is now a☁ well teased; 'bot☁éatso ; 1993 1994☁well f0Lt d§d,ngup.ving_odggqua 2. Vammamnm

l ago'wisané 16% margintafget set; .

players 7

,margin of 9.8% was reporteeimrien wesaidv Readfwetlt.☁ yduiairggowitarita H p Hreplied ☜Oh no. we have upped that target now Richard☝. Such ls the character or Readt, V. 'Logica really is a star at which the UK'should be; proud; so who says new that the UK Can☁t V ,

£241"!434:

mum

iudv

am:

1995 1996

-PBTm EPS +Share Ddce

2 E

971/ f"

_System House

2 October 1999

Ftage Software prospersComputer games company Rage Software has doneextremely well in the year to 30th Jun. 99. Revenue wasup 144% to £8.8m, PBT increased almost threefold to£3.1m with EPS up over threefold at 1.03p. But still no

dividend for shareholders at present, although a proposed

capital structure reorganisation might enable divs in thefuture.

Chairman John Roberts said "Over the last year we haveformed partnerships with some of the largest companiesin our industry This has allowed usto present the Ragebrand to a worldwide audience... Our position is at theforefront of games technology..." These partnershipssecured are with the likes of Microsoft, Sony, Saga andlnfogrames. Their OEM relationships were strengthened

with the addition of Dell together with a new publishing

partnership with Interplay in the US and Canada.Comment. At one time we had our doubts asto whetherRage could transform itself successfully from a owner/operator of snooker halls and amusement arcades to acomputer games company. They had huge losses in 1997after disposals. You needed a strong constitution to ridethe share roller coaster (down at one time below 4p) butthis month they have increased another 42% to 31p -makin rise of 279°/ this ear to date

Optimistic at Financial ObjectsAt the interim stage for the six months to 30th Jun. 99,Financial Objects had revenues up just 4% to £10.7m

although PBT increased 67% to £2.65m. Diluted EPS wasup 26%. F0, under Chairman Roger Foster (ex of ACT),

supplies advanced technology banking software andservices. In August this year, they acquired GlobalFinancial Systems for £10m plus up to a further 25m

deferred.Foster said ☜1999 has started well and we have made

significant progress in fulfilling the strategic goals we setout during flotation... Whilst the effect of the Y2000 freeze

being implemented by most banks is difficult to predict,our customers are continuing to order.... we remain optimisticabout the outlook for the full year☝.

FO floated last December at 230p. The shares rose slightlythis month to end on 299p - a 30% premium to the float

rice.

CFS Group grows fastCFS (systems for asset based finance industry) has

continued its fast growth at the interim stage to 30th Jun.

99. Revenue almost doubled to 26m. PBT increased 63%to £262K but EPS was only up 5%. An increased

willingness by financial institutions to buy packagedsoftware fuelled growth. Chairman Alfred Stein said ☜overallthe prospects for the year are excellent" although he alsoexpressed some fears on the possible Y2K ☜microclimate☝

impact.

on prospers - but e-commerce slowERP consultancy Axon Group was a new issue in Marchthis year at 175p. The shares have done well since and

ended the month on 308p. At the interim stage to 30th Jun.99, revenue increased 57% to £11.7m, PBT went up almostsixfold with EPS up nearly as much. Excellent. But theycould have been better according to CEO Mark Hunter whosaid that e-commerce sales had diminished in the half butactivity was nowpicking up. Their core SAP implementationbusiness "grew strongly" although to fewer clients. Thecompany remain "confident" about the full year especiallywith their now much faster rowin e-commerce business

Druid Group plc

PBT and Revenue Record

Relative to 1994

IREVBnuaFBT

. lkedhere who stilti☁eppear to be in

y .d etre is protect antithat wasalwaysm H 2000 could look really great.

October 1999 3

System House ☁♥

Compel Group plc

Ten Year PBT and Revenue Record

Relative to 1990

l Revenue PBT

1990 1991 1992 1993 1994 1995

Van mungm

Morse is one of the UK☂s leading systems integrator and ☜the leading Sun and HP reseller in Europe☝ with 650 staff. Intheir rather excellent results for the year ending 30th Jun. 99, revenue rose 31% to £283.9m, PBT increased a massive

60% to £18,9m with diluted EPS up 17%. Yes that☂s a 6.7% margin - pretty good for a reseller. Morse has undertaken

two acquisitions since their float but these only accounted IIfor some £2.7m revenue, so organic revenue growth is still a Mm☜ H°'d'"95 P'°ihealthy 30%. Most of Morse☂s revenue comes as a reseller 6☁" Mm☜ G'°"p upt°1995)ibut we have been told by CEO Duncan McIntyre that total PET and Revenue new"!services revenue rose 75% to c£30m, making a contribution nemwem 1991after third party and direct staff costs of 027m. "It is estimated

> that during the last year, services revenues embedded in the☁ sales price of Morse☂s products more than doubled. Separatelybilled technology integration services for the Group rose 67°n

* to £14m in the yeaf☂.,The company have six divisions; Morse Computers UKl(£130m revenue, +27%), Morse Computers Germany

l(£30.6m revenue , + 70%, Morse Data UK (£90.2m revenue, ",9, ☁m 'm ☁99, .995 me ☁99, W mg

+ 12%, Morse Data Germany (£3.6m revenue), Morse CPS human...f (revenue more than doubled at £12,2m) and Morse Business☁Systems (£600K revenue). The UK accounts for the bulk of revenue at £246m, with Germany at £35m and France just

£2.5m. All regions are profitable with the UK☂s PBT on £17.6m, Germany £1.1m and France at £108K.

☁Non-Exec. Chairman Richard Lapthorne commented "Trading in the current year has started well and is in line with☁ expectations☜. But "there are market indications that demand will slacken towards the end of the year although the Group☁ has yet to see evidence of demand slowing". They anticipate that any slowdown will be for ☜weeks not months☝.

lComment. Morse has an excellent financial record and, but for the special circumstances at the time of the M80 inE 1995, they would have been awarded a coveted ☜Boring Award" - they have not had an earnings reversal since 1988 onitrading figures alone. The IPO price was 250p in Mar. 99. Surprisingly, given their record, they have been consistently

ltrading below this since and ended September on 243p - atrier unfair in our opinion.

☂Systé t☂HéiUé☁é " 4 October 1999

Quoted Com anies - Results Service Note- Hi hli hted Names indicate results announced this month.

Admiral lc Eidos lc MDIS Grougplcmlenm-1m93L Paul-news menrn-Jun99J Compansmn Final-M9798 nal-#4137993 Campansxon F1na|~Dec§7 Fmal-Decsa Cumuanslun

REV 5651906000 ☜47,137,000 594,927,000 429.1 REV 5137234000 5226294000 464. REV 5116925000 5133014000 +1391791 £10,329,000 523,479,000 410,936,000 45. PET 516,507,000 537,920,000 4121.7 PET £221,000 53,966,000 4169:

41 1 3 . ElectronicDaaPmcessin l1: Mazo lc

hlenm~Jur158 51:01-09:90 lnlenm-JunSS Compansmn 1mm.M1193 .m1. :696 lntenm-M9199 omnanscn r1na1.1m99 51101-117199 CompansmnREV £113,000 £909,000 £336,000 241. REV 55012000 511,510,000 55,469,000 -5. REV 524234000 531,025,000 420P91 51,064,000 451,444,000 5716000 Lass both 591 £1,235,000 52210000 51225000 -0 P91 £10,060.000 410,400,000 94

NT Grou IC F.l1 Grou lc MERANT l1:Mavea InaI-M9799 ompansmn 11114144699 117.314 99 ommnsnn 51031-197199 11131740793 Cnmnansmn

R V L) 556030 LI7A50,W 俉88 REV £161,59S,lm (XX) *4] REV B7,UIS,WJ £215,473,000 micammmbl:PET {2164.000 £2764,000 427 7 P91 910,670,000 517,025,000 469. P91 £15217,000 511,572,000 Prom 10 loss

AniteGrou I0 . . n. - . Mia- 19Inal»A 98 FInal-Apt amps/19100 IntenmAJun98 FIMlADBCSE InlEnm Jun93 Com nston lnlenm-Junsa Flnzl D0998 Inlenm»Jun99 Compansmn

REV £149.540.000 4190029000 420, REV 910275000 521652000 L10,690,000 44. REV 532560000 570,105,000 515,472,000 52P191 529,049,000 15,799,000 -76 P01 £1,599,000 53,439,000 52,649,000 466,7 P91 512115.000 {9.492000 51,516,000 419.

' - - - - Floma'icsGrougplc Miays lchlenm~Jm98 nal-0909B Nehru-1177199 0014103051011 mienmdunQE 11713003999 14134171100119: Cum ns1on Fmal-Ma 99 Funal»M3V99 Companslon

R V 57,499,000 520,024,253 511,744,000 4569 REV £2,930,163 56,910,106 £3,443,222 "L117 REV 5447,700000 592,000,000 90.P91 {297,000 51,924,401 51,606,000 «497, P91 -£268,699 £394,123 5149.606 Loss 00111 P01 551,700,000 591,400,000 476

Azhn Grou lc Gresha'n00m utin lc Mondas Ic1ml~MaISE malAle99 0m nsmn lmenm-Apr% Flrul- :198 InlEnm~Apr99 0111997151071 FInaLAprBG FmalvADrQB Cammnslun

R V 5292073000 543,000,000 4174 REV 59,522000 523,063,000 516,301,000 491.391, REV 5297.169 £955,301 4221.PST 57,960,000 53900000 Loss 106-0111 P91 £1,017,000 53,003,000 51,493,000 445, P91 -£494,322 5520.770 1055mm

- A ll 1 .

:1 . » ~ . .. . Guardian l0 Moor (iron Ihle mnlmga nal-09098 1n1em.1m99 Cumpansmn InlEVlm 1114193 mum-02:99 |ntenm~Jun99[_Compansmn lntenmuunSa may 02:99 1111mm 10n99 Cammnslen

REV 57970000 59903512 59,910,000 423.1 REV 513,706,000 529,693,000 519,647,000 443 REV 53,191,000 £036 .609 55562000 RaP91 5,523,000 55,173,012 516,000,000 L055 001 P91 52959000 £5,629,000 53,614,000 4221 P91 51,141,000 52,043,492 51,617,000 4417

. 1 1 4Bron Corporation plc Ha'vEy Nsh Grou l0 . » . . . .

Fm: Au 97 ED9E-ADI99 F1naI~AuK9俉 Campansmn Fmalean98 ml ☜"99 Cnmpanslun Fmal~Jun98 Fmal-Jun99 CompanslanREV 5375?: 51,513,000 52,364,000 371 REV 555,796,000 104,551,000 437. REV 5216101000 5203943000 91,4P91 £95,000 494,000 {175,000 P10141010☜ P91 £5,205,000 19,369,000 4704 P91 511,799,000 £10,953000 4599

Bond Intemationa] Software plc Hignams Systems Savioes Grou I1: MSB lntemaional p101.416117414101190; nal-0:696 lnlenm-Jun99 Cummnsron '1 FmalrMavsa FInal~Mar99 um um rum-1:090 rma1-Jan99 Com nsmn

REV 54,320,000 90 .69 54,567,000 457 REV 52 143,421 86,069,950 «3 REV 123. 93.000 191,345,000 449.P 91 £294,000 5335,3713 £327,000 4151 P 91 51,393,327 51,524,055 410 P 91 53,043,000 521,065,000 »10

9 6 7 v

Cadeenlre Grau lc . . - . . . - . .. .1461.1711799 F1naI~M3799 empanslon 51101-115199 rma1-Jun99 Cummnsron Fmal-MaVSE ☜60M; 99 Cum nSIon

REV 517,727,000 5171361000 409 REV 535,991,000 540,047,000 +11. REV 529179.951 51,996,513 4349PET 52,754,000 53,001,000 9. P91 52702000 £4,335,000 604 P91 £502,442 51,641,522 P1611110 loss

0 P v P l

Capita Grougplc ilion Gvou I0 ' = 5 omam-104199 7141614er% 1.4191444101144991 (20771037151011 1nxenm»1un99 nal-09095 Inlenm-Jun99 Cemmnsmn Pema141un93 rum-101199 Cummnsmn

REV £11 907,000 5237002000 5150227000 4274 REV £120,100,000 5244903000 5131900000 499% REV 51,139,923 £1,969,751 473.P91 510,494,000 527,019,000 514,115,000 434 P91 51,150,000 53243000 (610,000 473%. 5-91 52,057 5279962 1.055 16 Pmln

Cedar Grou lc - -~ . ~ - - NsB mails ems II:Fmal-MJIQG F1ml~M3799 Campansmn InlanmAJungé Flnal-DECQS Inunm-Jun99 Canansmn Flnal☁DEC97 FmaerecSG Cummnsmn

R V 512, .000 523,046,000 4943 R V £2,627,000 £6,633,113 £4,090,000 +657 REV 53,294,464 £3,366,637 4154.P91 52564,000 52007000 49, P01 5974.000 51,024,104 4370.000 Loss 00m 9131 5937.516 51,477,993 +76

. . . Internet Tedmol Grougplc 0111070 Molecular Elc1111671014ng9 51:91-00:99 Inlenm-Jm99 Cummnmon 11413114114099 1114151400199 0194141140799 0001037151011 R1enm~1m99 szl~D9098 hlenm-Jm99 Compansmn

R EV £3,160,000 510,999,000 56,090,000 4927 R Ev £4,296,000 511012000 59,054,000 4106, R EV 57,737,000 521,505,000 510,161,000 431P91 5.161.000 51223000 £262000 4627 P91 5164.000 155,000 51,599,000 L055 6010 P91 -£2195,000 512213.000 -£4,194,000 L055 00111

.1 . . 1 .

IrIanm-Jun% nal-0909a |n|cnm~Jun99 Compansmn Inlznmdmsa anl-Decga Intenm-Jun99 Cummnsmn lnlEnm~Jm95 FIml~Dec97 lmenm~Jm99 CummnslonREV £1,664,000 5.039301 £1,561,000 ~6 REV 54,200,000 59,745,633 £4,300,000 42.4 REV 5134997000 5290200000 5153555000 413P 9 1 5205000 5275594 1253.000 423,4 P 9 1 5404.000 5942.394 5.362000 104 P 91 59754000 520,032,000 5102401000 417

1 4. . 9159301140er11:

mum-1111199 rum-02:99 Imam-101199 Cnmpanslon 1.413414110117199 r1na1.03c99 Intznm-Ju SS Commnslon mam-114199 Ema-04:99 1111:anme CommnswnREV £1941 , 5443932000 5290496000 449 REV 550,172,000 $105,729,000 560,969,000 421, REV 57,410,000 514,979,000 59,121,000 9PET 523960.000 557,492,000 535,759,000 449 P91 522139.000 57345000 £4,055,000 93.7 P91 5532000 5929.000 £96,000 .964

4 .Comino plc JBA Holdin lc PhoneLink BIC

szl - M3798 F1n2I-Mar99 Cemnsmn Fmal Dec 97 nal-122598 Comwnsmn 511190143499 Fmal v M3159 CommnswnREV 513,151,000 519,595,000 1414 REV £221.737,000 5291537000 431. REV 53206000 510,014,000 2124P91 51,950,000 52,719,000 4394 P91 55,233,000 51,696,000 Pmmtnhss PET 53,746,000 453,391,000 Loss both

. .- . .. : 4 .~ 3 4u~ - PmilHoldina lcF1rul-Ju096 Final-N719? Cowman 51114141113195 F1nal-May99 Commas-6n szl-A 99 r0014 99 Cum um

REV 1210003000 5293750000 439 R v 53362000 54,003,000 4191 REV 101,000 ,6 6.000 466P91 59,021,000 512,679,000 440 PET 56.000 51,314,000 P1611116 loss P91 55,291,000 51,570,000 Losstn 0mm

Com maomter plc Kamoo Computer Grou k: - . 1 - .menm~1m98 Flml- 2:93 lnIenm~Jm99J_ Campansmn 511151443199 57:61.445199 ompanswn hlenm»lm98 F1nal» 4:99 ImenmAJun99 06m nsmn

REV , , 1. 6,313,000 5904016010 415. R V 565, 11,000 55970000 40. REV L5. ,000 11333. , 1 . 2PET 531,332,000 564,603,000 540,732,000 430 P91 52,329,000 52,199,000 L055 1:01 291 £161,000 £697,390 5500.000 4204,

4 , .I - - - KewillS ems I0 3 - - - -

munm.1m99 mil-D0098 InIEnmAJun☁BS nmpansmn Fmal M9798 sz»M3799 empansuon mum-101199 Flnal DEE98 mum-11.199 CompanmnREV , .000 £110.) ZWO £ RAILW 60] REV ☜4586.000 550.079,☜ 434.7 REV ☜40.030 MU!☝ £506,000 ☁15P51 53,053,☜ {7351000 £3,364,0w 910 PET ISSAGDCD £7.196Dw 0934 ET {SEEM £981,m IBISLDO L053 both

I7 I..;- ~. - -» 1 ~ -- - 1-. FrotherimlcInlnrlm- ul FInaIvDCCBS hlenm-Jul99 Campanswn Final-M3795 FlmlvMa799 Cnmmnsmn nal-Mal szl M3199 Commnsmn

REV 53,167,000 06, 77,000 04,51 .000 442 REV 5436.742 5.1595217 4251 REV £179,000 £696,000 .291P91 £116,000 126,000 {214,000 105510 190111 P91 £751,499 52400057 L055 661 91 54,127,000 53,917,000 L055 mm

. . , . . .4Delcan Ic - - - 0 ☁ -

Interim-Jun☝ FlnalADeEBE lnlEnm-Jun99 ampansmn FInaIvJUnBG nal-1117199 Commnsl n hlenm Jun nal-D6138 Imam-101199 CommnsmnR EV 56,479,637 513,735,249 57,677,004 419 R EV 4472967000 5659469000 439 4 R EV 519135000 041219.436 522166000 422P91 5675577 51,419,549 5.509.549 L065 10 010111 PR1 £41,925,000 550,504,000 .401 P91 51,295,000 54,604,930 51422000 4107

D' anal lc London ☁ 11 I0 Qumtim 10mm 9 In: 4401799 Inlenm M31799 emgnsmn Intenm 1111499 1199 um nsmn Intznm M01799 1 1 74an Intnnm M3 99 cm mmn

EV 1,060, 01,179, 537,141,000 416 REV 59,054,000 000 4141, REV 55.5739.,000 15,164,000 296, «25P91 £3,053,000 £7,314,000 54350000 442.7 P91 52,705,000 «30 P91 51209000 53,460,000 51,593,000 «23

P .Dial Cor mien Qlc . - . HM k;

lnlenm Jun rmlvnccaa lnlgnm 119199 Cummnslun In",anan Funal-NuVBB 1.197.111.1415 99 Compansmn Llntenm 11101961 PM 5:11:99 1111mm muse Commn 1011R EV ,750,W £170,752 30 £37,3WJXX) -l, R EV WDQN-m £138,407,☜ £703☜),le 06. R EV £50 473.000 HESQQM £71,115,☝ {40P91 15,990,000 55,564,000 51,700,000 .757 P91 52,499,000 52,549,000 51,572,000 Pram to loss P91 5636.000 510,037,000 52493000 392

' ☁ "' L xGrou lc -.« 3 .-.n 1 1171.116 51101 107199 ommnsuon Inlcnm- .1499 .1151» a 99 hlenm-Marag Compan 1641 F103! 101199 F. 1 1 06m 1110!!

R V , ,000 5.59.7 9,000 44 REV 190,393,000 190,9 0000 5103944000 429 REV 53,&3,000 ,04 ,000 41431,P91 59,044,000 511,216,000 4394 P91 55,526,000 513252000 50,370,000 415 P91 £960,000 53.121000 4262 94☁

6ECsatt (iron to MMT Comm☜: RDL Grou k:

lntenm-Jun F1na|>DeE96 lnlcnm Jun☝ gzompnnston Intlnm-Feb98 nal-Amiga lnlunm~Feb99 Commnsmn Flml §e59z hlenm-MJI☁B☁) "ml 2 98 C 00 "15011R V 193,900 2,211,000 196,000 413 REV 516,991,000 690,690 521,536,000 426 REv 510,615,000 , 21:00 1 .69.,000 ~47 ,P91 52,992,000 59,100,000 520417.000 1 001 54,250,000 510,006,754 55,119,000 4204 P97 5299000 5451000 51.154000 4297

. 4 71.

October 1999 5

System House _

Flnzl Mares

lF1nal»De:% trilenm-Jm99 Compansn

[215,580,000

1.. -Shawood In

£8,000

. .. :;.,.Iernational - lc

(21,770.000 £15.53sz[2882.000 £1.775,000

. :34. 3-,.

F.nal.Apr98279231.000£15,109,ooo

: u.

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Late News. Cap Gemini warns of wars than expected trading in UK. Shares fall 12% _ on 30th Sept. Skillsgroup also warned that growth in current FYwilI be c25% ♥ halt"☁ that expected - due to Y2K lockdown. More next month and on HOTNEWS☁

Staffware does well at interimsDue to major investments in new products and a major

reorganisation, last year☂s final results for Staffware(workflow automation software) were disappointing. But

Chairman Paul Fullagar saidat the time he thought theoutlook was ☜encouraging? His confidence appearsjustifiedat the interim stage to 30th Jun. 99. Revenue went up 16%to £11.2m, but PBT more than trebled at £716K with dilutedEPS almost up threefold to 3.5p.CEO and founder John O☂Connell said "Prospects remainbuoyant lor the rest of the year. However we are keeping a

tight rein on costs, as it is unclear whether or not Y2Kfreezes will delay until next year decisions on some of our

bigger opportunities". This all seems a bit familiar nowadays.Despite the results, and no doubt because of the comments,

Staffware☂s shares fell but then recovered to end slightly

up. Chairman Fullagar commented (FT 8th Sept. ) "investors

had failed to recognise the potential of their software".

....as does DCS GroupDCS provides systems for motor manufacturers and hashad a pretty impressive run since Tim Robinson took overas CEO back in Dec. 97. In the six months to 30th Jun. 99,

revenue went up 60% to £74.4m and PET increased 10%to £3.4m (or +32% to £4.1m before goodwill amortisation)

Diluted EPS fell 10% (or increased 2% before goodwill).Operating margins therefore fell from 7.3% to 5.9%☜reflecting the losses in the UK automotive business andthe change from IBM agency status to rose/left industrySolutions had ☜excellent☝ results (revenue +61% to £35.8m),with Automotive Solutions turning In revenue of £27.2m

(up 70% although UK revenue was actually down 10% dueto "repositioning of the business to focus on larger

dealerships, outsourcing and web based services☝), Therest came from Outsourcing (revenue +37% to £11.4m).Robinson said "These figures re ect strong growth in core

Profit warnings from...Jom/ng the ever growrng list ofover 20 quoted 808 companies (out of c100) which have

issued warnings in 1999, this month comes.

Computerland has issued its second profit warning thisyear quoting lower than expected sales. The shares fell20% this month to end on 66.5p.Lynx Group also issued a profits warning saying thatdifficult trading conditions will mean the full year profits to

Sep. 99 are going to be well below the analysts predictionsof c£15.8m. A figure of around £12.7m or lower is nowmore likely. The shares slumped 24% to end on 108}.

markets and the early success of our strategic focus on a-business... we are well positioned for future grow! ". indeed

their new business-tc-business web site has signed up more

than 600 dealerships with 100 web-based staff.

Losses down at Intelligent EnvironmentsAt the interim stage to 30th Jun. 99, IE increased revenues56% to £4.1m and reduced losses from £874K to £370K.

Chairman/Clive Richards_is V"delighted"._m_

_System House _ October 1999

.4☁.

9Z5?

GEC has bought a 15% stake in Xcert International (digitalcertificate software) for $15m.De La Rue has sold its smartcard division to French FrancoisCharles Oberthur Fiducaire for £200m.

Electronic Data Processing saw its shares rise sharply after

they announced a free Internet service this month.There is alsospeculation that they are to launch a bid for struggling Pegasusas EDP have just purchased a c7% stake. Pegasus confirmed

that it was in talks ☁WIth a number ofdifferentparties"which may

lead to a merger/takeover (perhaps readers would like to refreshtheir memories by rereading our past comments on the previous

Sage approachl)Cadcentre has acquired the lPFis to the SCOPE softwareproducts from Kvaerner ASA for £1 .7m.After rejecling a bid from Dutch Landis last July at 114p, ilionhave now indicated acceptance of a fresh offer from Landis at160p. Did wonders for the share price which immediately shot

up 28p to 151p. They ended the month even higher at 155p.Cyberdesk - an £10m MBl from Mlsys in Feb. 98 - has appointed

the receivers. Cyberdesk comprised Mlsys Computer Services

and Misys Integrated Solutions and had c£27m revenue backin 1998.

Touchstone has acquired Independent Computer Solutions

(ICOS) for up to £1 .5m cash. ICOS had 1998 revenues of £3.3m,operating profit of £302K and now has 34 staff.

Synstar has acquired Lancare ("a leading UK specialist multi-service network, integration and support company") for £10mnow and up to a further £2.5m on profits. Lancare had 1999

revenues of £1 .6m and PET of £494K. Seems an excellent t forSynstar and will immediately be ☜earnings enhancing".Broadview acted for Lancare.0neview.net, a specialist in providing intemet services for smalVmedium businesses, is to seek an AIM listing which is expectedto value the company at c£20m. Oneview.net was only set up inJanuary, and in its first six months lost £623K.US Concentric Network Corp. is to buy InternetTechnologyGroup for $235m (£146m) in orderto enterthe European intemetaccess market. At c253p per share, this represents a 5%premium over the previous day's closing price (but c62% abovethe share price when rumours about apossible takeoversurfaced in August) and is payable part cash/part shares. At thesame time, assets worth c£14.6m will be sold by Concentric toa company called Fled Wave pic (in which lTG's CEO has aninterest).IMS Group plc (telephony services) has acquired IMC(datacoms) for 24m. IMC had 1999 revenues of 22m and made£232K profit.Sema has bought Argentinian Informatlca TechnologiaServicios for an undisclosed sum. ITS specialises in outsourcingdistributed systems and consultancy and had 1999 revenuesof £1 1 m and 300 employees.Sema also acquired a 10% stakein Prepayment Cards, a UK smartcard venture company, andalso Business Protection Services (disaster recovery inIreland). No amounts disclosed.London Bridge has placed 470K shares at £21.50 to raisechOm in order to meet the deferred consideration on recentacquisitions. Simultaneously Chairman & MD Gordon Crawford

ls releasing 1.41 m shares at the same price plus the dividend.This will reduce Crawford☁s stake to 50.7% worth a mere £369ml365 Corporation, a specialist not content provider, is

considering a flotation later this year.The valuation expected isbetween the wide margins of £300m-i☁500m.

Lynx Group (also see page 6) has expanded its US operation

by acquiring Advlsor Technology Services from FidelityInvestments for $600K. ATS has contracted maintenancerevenues of c$300K.Eldos has bought 19% of newly formed Black Cactus, another

October1999 a☜ m '

Mergers and acquisitions - continuedcomputer games developer, for an undisclosed sum.UK NASDAQer 4Front has acquired CVSI Inc. ☜a Ieadingprovider

of lTservices☝for $25.5m cash. ☜4Frontanticipates that CVSI will

contribute revenues of at least $100m in 2000☝. Half of CVSl☂srevenue come from Europe, 35% from America. CVSI, like 4Front,delivers hardware and software support and other associatedservices. 4Front also announced revenues up more than doubleto $115.6m(ail European) and net income up 73% at $4m in the

interim results to 31st Jul. 99. 4Front now reckons it has

annualised revenue of $350m ☜of which 75% will be servicerevenues☝.Voss Net (AIM quoted ISP) is to raise £630K by a1-for~3 open

offer at 60p. Voss Net has also sold its internet consultancy

business Webbed Feet in an MBO for £489K.WF made PBT of£28K on revenue of £203K in year to 315☁ Dec. 98. In addition

Voss Net has acquired IPOSS (builds e-commerce sites) for£180K in shares .

Voss Net announced a pretax Loss of £51 1 K (2151 K last time)in the six months to 30'" Jun. 99, on revenue of just £270K(£232K).Gladstone has acquired Microcache (membership card systems)

for£8.1m. Microcache had 24m revenue in 1998.

US Pacific Gateway is to acquire Onyx Internet for an

undisclosed sum. Onyx has revenues of c£1 m.

US lnterliant Inc. has acquired CHM company SaiesTechnology.Amount paid not disclosed.

Canadian Geac Computer has succeeded in its bid for JBA at

250p per share with acceptances totalling 83.5% of stock.Jetcam International (sheet metal cutting software!) are buyingCamtek (systems for metal cutting industry) for£4m.Cedar Group is to raise £26.7m in a 7-for-10 rights issue at110p. Part of the funds are to be used to launch e-Cedar - Cedars

ASP. Yet another "products to services☝success (and also add

Oracle and Microsoft with their announcements this month).

li

iwhen we leamad l

market☂and i

assented acid ofmy 6 This Was a,

☁ 10121 in the}

ate-with

j investmentm a $3, an _ , , 2e: Futures i☁t' staff)

a n s orets in a mix ctinstmmeats and. Ewe understand,- represents '5:signi cant»er stake☝. it is all i☜(tempo of. 1311!, clever the valuation (teams like its <tl3rd

revenuesi». _ , . , . -mesa. computer Futures- (you might know them better as☁Massive ☁ u☂xléy Assesses. sameness it. Mercer Gray) 1was, the . ☁e 15staff Agency in the UK (Delphi - nowMemories o1) ersckoned they had revenue ot£215m in1,998 and now understand that revenues ☜in excess ol£250m☝are to cast for .1999 when profits ☂of cgaomare expected. An*IPO , ' . . Mbrhé yesre☝. Watlthatkilsomeone doesn☂t1make titemaber☁ter offer below then. ' ☁ ,Yet more, evidence at an ITSA slowdown {if you still need it!),§Reed Computing Personnel ☜sh emda setback withpermanent:ifjoasgawn 25%". .

♥ System H5353

*3/stem Houses

1 IT Staff Agencies

j Resellers

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Impressive turnaround at OSPThe turnaround at QSP over the last few years has beenimpressive and has continued at the interim stage to Jun.99. Revenue increased 22% to £22.2m, PBT went up 11%

to £1.4m and diluted EPS was up 17%. Now 65%of theirrevenue comes from consultancy and support (from zero

three years back) and professional services revenue grew43%. But the exciting bit is that they now have c15%revenue from managed services - in other words long term

contracts - and have signed a contract to offer the productas an ASP with a US ISP. The first deal is expected soon.QSP is proposing a 1♥for-4 rights issue at 480p to raisec£17.3m to further expand the business. This caused theshare price to fall and they ended the month down 14% on503p.

Losses as expected from MSW TechnologyAfter their profit warning last month it has come as nosurprise that MSW made a loss of £1.6m (PBT £502K) onrevenue down 35% to just £1.9m in the year ended 31st

May 99. Losses were blamed on a big contract not finalisedwithin the last financial year. Their shares are nowjust 84p- below the float price of 97p in Nov. 98.

Reduced losses at UltimaUltima Networks has managed to narrow losses from£1.1m to £610K at the interim stage to 30th Jun. 99.Revenue fell 22% to £6.5m. "Market conditions remaindif cult in the software markets in which we operate".With the share price of just 3p and a capitalisation of only£63m, it☂s a bit hard to see if they have a bright future.

'Lon☁en plungesinto I☁When a☁ company☝ delayit☁s usuatly because☁theytoipass at Lorie» in{results to☁Mayssv V coghas plunged 'ii☂iw hé' rip'revious PBT of £2.5m! ☁77er last six monmshay

gout tateth tTSA report. That; s ,198 - they now- stand on 35ust☁92pg'z VE independent .companyuloeks a'tritle: an

Pleasing results from Systems IntegratedEducational software supplier Systems Integrated (SiFl)has terminated discussions with a potential bidder as theywere unable to reach agreement. However they are pleased

with the results for the year ending 31st May. 99. Revenuewent up 35% (but still only stands at £1.4m) and theprevious loss of £493K has been turned into a PBT of£140K. Although in the fast growing educational area, SIRare no RM! At least they are now in the black again - let'sjust hope they can survive or get a willing buyer.SIR was an AIM float in Mar. 96 at 115p. At one time theshares stood at 18p. At least they have recovered a bit toend the month on 30p.

Europe now Guardian iT☂s ☜stronghold☝Guardian iT sees no sign of a slowdown in business dueto the Y2K microclimate. Mind you if a disaster recoverycompany can't do well over Y2K,we don☂t know who can!In the six months to 30th Jun. 99, revenue grew 43% to£19.6m, PBT was up 22% at £3.6m with diluted EPS up asimilar 22%. Their contracted order book - a remarkable£79m or 2.5-times revenues - ☜gives us considerableconfidence for the future" according to Chairman RichardRaworth. Guardian is now the market leader (or is in theTop 3) in disaster recovery in the UK, France, Germany,Belgium and Scandinavia helped by aseries of recentacquisitions within Europe. Indeed these purchases willimpact much more in H2.

_System House __

Anker buys struggling RivaStruggling Riva has been acquired by Anker,the former

electronic cash transfer division of BTR for £42m. Thisoffer values Rivaat 115p per share - up 28p on the previousclosing day price. Granville acted for Riva.

Policy Master well up at interim stageIn the six months to 30th Jun. 99, Policy Master ("leadingsoftware suppliers to the UKinsurance industry☝), increasedrevenues 53% to £7.7m, with PBT more than trebling at£500K. Diluted EPS was up 165%. Operating profit after

goodwill amortisation was up a lower 80%. Recent

acquisitions » Mediquote and Media Maker - had little affect

at the interim stage. Shares were up 3% this month to end

on 310p. They listed on AIM in Jul. 98 at 150p.

October 1999

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The ups and downs of Trace Computers plc

PET and Revenue Record

Relative to 1989

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I Revenue PET

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1539 1990 1991 1992 1953 1994 1995 1996 1597 1598 ☁999

Solidperformance fromSema had two causes formcelebration this month. They re-entered the l-☁I'SE100 and they announced better thanexpected figures at the interim stage to 30th Jun. 99.Although total revenue was only up 10% (due to the disposalof their BAeSema JV last year), continuing revenuesincreased 25% to £66.8m. Similarly continuing operatingprofit was up a higher 27% compared with a 22% increasein PBT at £37.9m. Diluted EPS increased 21%. The orderbook (about 1 .3-times annual revenues) is strong at a record

£1.8b - without the Olympic contract.The strongest revenue growth came from systems

integration with a 30% rise to £293m, although outsourcing

also did well with a 24% increase to over £300m (45% ofrevenue). Geographically, the UK was the star with a 34%rise to £254m, France +19% to £181m and Scandinaviaalso +19% to £87m. Spain had a 70% increase but still

only accounts for 7% of revenue. Telecoms remains Sema☂stop strategic priority and represents 17% of revenue (down

slightly from 18%). Indeed Sema is now the world market

leader in 'prepaid☂ mobile phone CRM systems. Public

Sector grew from 14% to 19% thanks mainly due to UKoutsourcing with Finance the third largest at 21% (up from

18%). It is expected that the major growth area in H2 willcome from Telecoms with a lower growth in Public Sectorand Finance areas.Other achievements in H1 include a strong pipeline for thesecond half (especially in telecoms and UK public sector

outsourcing), successful launch of SemaVision with sixmajor wins, continued outsourcing success and abreakthrough in e-business. In July Sema concluded theacquisitions of ltalian DSTelematica (£22m) and Argentinian

ITS (£11m) which combined will have a £15m impact on

H2 revenues.

CEO Pierre Bonelli said "Given the strength of the orderbook, and the strong prospects, we are confident we will

not suffer any expected downturn due to Y2K uncertainties.As we look to expand into new markets and technologies,

; we are con dent about the continued growth in size and'proiitability of Sema Group".

Sema still hasn☂t consummated that ☜$1 billion" USacquisition - although there were rumours linking it withCambridge Technology this month. In any event this was asolid halt-time performance from Sema.The shares ended the vmonthrwith a 10% rise to 743p.

DRS back into the blackDRS Data & Research Services has made a small profitof £214K (previous loss £316K) for the 28 week period \ending 17th Jul. 99. Revenue in the period went up 43% to£4.5m. "...the full year performance is likely to be betterthan that delivered in 1998, resulting in modest profits. We

expect this trend to continue into 2000☂1

Bfr't

t.Baltimore Technology for NASDAQBaltimore (nee Zergo) is to obtain a quotation on NASDAQas well as its present AIM listing to raise o£95m capital.The shares immediately leapt substantially on the newsand ended the month up 25% on £12.13p.The company also announced its interim results to30thJun. 99. Revenue rose 23% to £9.8m but losses widenedfrom £523K to a massive £16m. CEO Fran Rooney blamed

the losses on increased investment in products, sales andmarketing. They will de nitely need the extra capital illossespersist at this level.

Clinical Computing does better - at lastClinical Computing has had a series of appalling results

since its float in Feb. 94 at 124p. At least at the interimstage to 30th Jun. 99, their results were a bit better. Although

revenue tell 6% to £1.56m (due to the removal of a non-recurring royalty payment of £100K), PBT went up 23% to£253K - almost as much as they made in the whole of1998. EPS increased 25%. Chairman M. Gordon believes☜that the Group is well positioned to take advantage of themany commercial opportunities that will follow thesuccessful transition beyond Year 2000". The shares endedthe month. 36p -still well below the float price.

_System House_

10 October 1999

Desktop support leads ITNET growthITNET recorded revenue up 21.5% at £61.0m, operating profit up 39% at £4.0m, PBT (after goodwill) up 84% at £4.1m

and diluted EPS up a massive 135% at 4.0p in six months to 30th Jun. 99. Of course what makes ITNET different is the

longevity of customer relationships/contracts. ITNET records a forward order book of £326m ...over 2.8-times annualised

revenues They don☂t come much better than that. g

It looks as though all ITNET's businesses did well, desktop support especially. Here ITNET supports 8,000 PCs and 250servers at London Transport in a £25m/5yr deal that was their biggest private sector contract so far. ITNET's traditionalstomping ground is the local authorities and the £60m/10yr contract with the London Borough of Enfield helped here too.The ☜main event☝ of the period was their acquisition of Technosys in May 99 for an initial £9.1m + £4.2m earnout, which

has since "performed in line with expectations". Acquisitions in continental Europe are on the agenda.ITNET adds to the list of players seeing strong demand for SAP post-implementation services. They have launched a

monthly subscription-based on-Iine SAP rental service - Entield has already signed up for 500 users.And what about Y2K worries? ☜We believe this is mainly due to discretionary spend having been brought forward toaddress Y2K issues. However. asonly a small proportion of ITNET's revenue is discretionary spend this slowdown is notexpected to impact ITNET materially". In other words, the longevity of their order book should see ITNET through anyshort term blips.Comment: ITNET has boosted business in the private sector to 43% ot the total (including c6% from ex»parent CadburySchweppes) and are winning chunky desktop support contracts. SAP outsourcing surely ☁haslegs' and their new e-

business service looks promising. There are a few wobbles with BPO - but nothing they shouldn☂t be able to sort. Eventhough there☂s still considerable opportunity for ITNET here in the UK (e.g. 065% of local authorities still do no outsourcing

at all) they probably now need to consider wider geographic spread. ITNEI' was a new IPO in June 98at 350p. Theyclosed end Sep. 99 on 483p. Given this performance, the 38% premium might be considered "modest" in the circumstances.

Better now at ICM Computer GroupAt the interim stage, ICM☂s results were disappointing due

to two large contract deferrals. But for their maiden fullyear results to 30th Jun. 99, the position is much better.Revenue increased 12% to £40m, PET was up an excellent60% at £43m with adjusted EPS up 21%.ICM is the archetypal IT services company providing arange of services and project-based solutions to companiesfrom blue chips to small businesses. Each of their threecore activities, IT Support, Business Continuity and IT

Solutions enjoyed "solid growth☝. ICM earns about 75% ofits gross profits from its on-golng support side. Indeed,forward contracted revenues in IT Support/Bus. Continuityexceed one year☂s revenue at present.CEO Barry Roberts said "We provide the right quality ofsupport, continuity and consultancy which will drive bothexisting performance and ourpotential to win new business☝.ICM were an new issue in May 98 at 180p - they ended themonth up 21% on 290p.Comment. ICM is not a company that seems likely to setthe world on fire, but they are able to ride any Y2K bumpsetc. much better than those without long term relationships.

Barry Roberts told us that he has seen little evidence ofany Y2K slowdown for ICM. He accepted that ☜Dec/Jan.might be rather shorter months than usual☝ (well we knowwhat he means!), but thereseems to be little to fear here.

7,15% margin. In:(only'59% organic)

,m☁a margins down§' ☂ . .'aoduisitions§

mimoperé ngi

,. , , m emei'm☁and Folred =with'words like

.givt☁ngfus inqeasingvoon d☂ence our abiin to continue to?E'gtow☂ ahead of our chosen markets next yearand beyond☝. I☂☜We isn't! remain .short of resources☜.

Optimistic IS SolutionsIS Solutions (SI, FM and internet outsourcing) has

announced PBT down 10% to £362K on revenue up slightlyat £4.3m. EPS fell 7% in their interims to 30th Jun. 99☁Despite this, they are ☜optimistic☝ for the second hall and"encouraged" bytheir future prospects as a result of strong

UK trading coupled with growth in web☁specific outsourcingbusiness. Launched on AIM in Sep. 97 at 134p, the sharesended the month on 290p.

Kewill unveils new contract

We don☂t normally comment on new contract wins, but whenthe company shares immediately leap over 20% on the news,we feel obliged. They secured a huge deal with Federal

Express likely to be worth up to an estimated $3m. Kewill will

need to invest $10m on e-commerce product development.

October 1999 1 1

System House ☜2

JSB to abandon AIM in favour of EASDAOJSB Software Technologies (Internet, connectivity and

networking software products) announced revenue up 19% at. £4.0m but a Loss before Tax of £1 .3m (PBT £16K last time) in

year to 315' May 99. However their SurfCONTFiOL divisionboosted revenue by 864% (sic) to £482K

JSB also announced the acquisition of SurfWatch SoftwareInc. (Internet access management and monitoring software)from Spyglass inc. for $29m ($12m in shares $17m in cash)dependent on raising $50m. To enable this JSB will float on

. EASDAQ and the issue of ADRs in the US. SurfWatch has

V revenue oic$2.65m and a loss of $6K in 10 months to 31"July99. investors should note that JSB intends to cease trading onAIM once the EASDAQ quote is in place. AnotherblowforA/Mand London. Steve Purdham of JSB stressed that AIM had

I been ☜excellent☝ for JSB and had enabled them to completetwo rounds of fund raising. Although JSB had been acceptedas a ☜special case"move to the full LSE and therefore techMAFiK

' (even though they have <3 years record and market cap.

PET and Revenue Growth for UK

Quoted 508 Companies

40% 34%

30* as as

32:: m M , a 2"☜ <£50m), they had decided on E_ASDAQ as a precursor to a

10% § - move to NASDAQ. Purdham said that EASDAQ stock had a0% . j >\ perceived value in the US - a value which was more difficult to

Reva☜ 9W" ☜TQM☝ ☜7☜We☝ prove with just a London listing. He felt it would be much easieraidisposals to raise money for the kind of acquisitions and other activities

DFillyear1996197 Elhierirrs 1997/98 I FLIJ year1997I98

they planned. Purdham described iechMARK as "confused".JSB was an AiM |PO in June 98at 200p and ended the month .down slightly at 320p.

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