||EPS - Basic
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Real-Time news about Sirvis (London Stock Exchange): 0 recent articles
|mjcrockett: Yes, good results, but no reaction from the share price. The shares seem very cheap to me.
|tp100: Not great news today but the bad news now looks to be in the share price. We will have a better idea in February.
SiRViS IT PLC
07 December 2005
SiRViS IT plc
Date: 7 December 2005
SiRViS IT plc, which provides a range of IT services including support,
consultancy and systems installation across the UK, announces that whilst sales
are slightly ahead of the corresponding period last year, trading during the
first five months of the financial year has been slower than anticipated and
gross margins continue to be under pressure.
Overheads are under review and measures have been put in place to improve
margins: however, it is unlikely that the improvement will be sufficient to meet
the current market expectations for the full year.
The Company's Interim Results for the six months ended 30 November 2005 will be
announced in February 2006 and will give a more detailed analysis of this half's
|tp100: OK, this research is now public - these are the highlights.
Net Debt £0.75m
Market Cap £10.1m
Year End May
Shares in Issue 114.1m
A corporate client of J.M. FINN & CO. This research cannot be classified as objective under J.M. FINN & CO.'s research policy. Visit www.jmfinn.com for details.
(%) Forecast change
05/03 0.9 (0.3) N/A (2.5) 0.0 N/A N/A N/A
05/04 3.2 0.3 N/A 0.8 0.0 11.1 N/A N/A
05/05e 8.1 1.0 33 1.0 0.0 8.9 N/A N/A
05/06e 9.2 1.4 33 1.2 Possible 7.4 N/A N/A
The successful integration of Linetex and the IT services division of OSE are reflected in encouraging interim results. SiRViS IT 's growing strength in the highly fragmented UK IT services market should provide organic and acquired earnings growth in the near and mid-term future. We believe that the Group's refocusing has not been adequately valued, and the stock remains at a discount to its peers.
Revenues in the six months to November 30th 2004 increased from £528,000 to £3,948,000, and the company achieved an operating profit before goodwill of £589, 000 (£136,000). Pre-tax profit advanced strongly by 170% from £129,000 to £345,000. Contracted services (many multiyear) now account for 75% of revenues, giving good forward visibility of recurring revenues. A high degree of customer stability, and an accompanying high level of business from referrals, reflects the excellent quality of service provided by SiRViS IT.
An experienced management team is implementing close control of overhead costs, and despite future pressure on gross margins, expansion of EBITDA and EBIT margins should be significant as a result of the measures taken.
Future growth will arise from increased sales (including the introduction of the IT Partner service) to existing customers, and from winning new customers. Earnings enhancing acquisitions are actively being sought.
SiRViS IT is targeting a modest dividend payment in the 2005/06 year.
Interim results encouraging
SiRViS IT provides a range of outsourced IT services including support, consultancy and systems installation to over 7,000 sites across the UK.
The present group was formed from the acquisition by SiR of Packpress in January 2004, including its principal trading subsidiary, Linetex Computers Ltd (a provider of IT support services to third party software providers), and the subsequent acquisition in May 2004 of the IT support services contracts division of Open Systems Engineering (OSE) Ltd.
The Group principally operates through Linetex Computers Ltd, into which the OSE acquisition has been integrated. The core activities of Linetex can be summarised:
Managed services outsourced IT
Project services consultancy, installations, upgrades and roll-outs
Hardware and software support service contracts
SiRViS IT provides its services to software companies, value added resellers (VARs), small and medium sized enterprises (SMEs), and the public and corporate sectors. The software companies who are customers tend to operate in a broad range of business sectors, but there is a strong focus on important vertical markets like hospitality, leisure, legal and retail. Service contracts account for around 75% of revenues, and with a move to establishing multiyear contracts, sales visibility is good. Linetex also benefits from a high level of customer loyalty, with the majority of its ten largest customer accounts having been clients for over five years.
Interim results for the six months to 30th November 2004 were published on 1st February, 2005, and further highlighted the impact of the Linetex and OSE acquisitions, both of which were successfully integrated into the Group (the IT support services division of OSE has been integrated into Linetex's infrastructure, and there have been reported immediate benefits from economies of scale) and which contributed a full six months trading to the strong results.
In the first half year, turnover increased from £528,000 to £3,948,000, and operating profit before goodwill amortisation of £589,000 (£136,000 in 1H 2004), and £372,000 after goodwill amortisation of £217,000 for the two acquisitions. There was no goodwill amortisation in the same period in the previous year. Around 75% of the Group's turnover is derived from IT support service contracts, with significant levels of recurring income and thus providing a very solid base and stability to the business.
During the last 12 months the Group refocused from being solely an educational software provider, into a provider of a range of IT services throughout the UK including support, consultancy and systems installation, and during this period expanding the number of sites supported from 4,500 to over 7,000.
The Group has also strengthened its sales function by opening a new office in Derbyshire which is targeting new business partnerships in the North of England, particularly in the leisure, hospitality, retail and legal sectors. However, in this six months period the Northern sales force became functional only in time for the final 1-2 months, so the benefits of this new sales force were not fully seen.
The immediate concentration is on selling more products to current customers and investigating new vertical markets.
The market that the Group operates in is best described as fragmented, with over 550 IT companies with turnover of up to £5m pa. International Data Corporation (IDC) values the UK IT infrastructure market at £10.4 billion in 2003, and this market is estimated to grow at a compound annual growth rate of 6% between 2003 and 2008. SiRViS IT has established a good base to exploit the large but fragmented UK IT support services market.
Strong demand for SiRViS IT's products was reported, and given the encouraging level of sales prospects in a strong pipeline and the high level of contracted revenue, the company is bullish regarding this year's trading results.
The market has been slow to appreciate the impact of the business refocusing, and despite recent share price strengthening, the company remains at a discount to ComputerLand, Phoenix IT and the sector. Given the earnings growth in prospect over the next two years, and the further potential that SiRViS IT can garner from its ability to make suitable earnings-enhancing acquisitions in a sector that is due for consolidation, we would look for a 2006E PER of 9X, - i.e. a short term target price of 10.7p.|
|tp100: where is everyone? A 30% share price rise is certainly a good start. I am not a chartist but others will be encouraged to see the mid price go above 8.5p where it has stalled many times before.
Another big agency cross at 9p (above the mid price indicating a buyer going to a seller) indicates that the price has further to go in the short-term.|
Sirvis It share price data is direct from the London Stock Exchange