CMG's rating at a dizzying high

The Investment Column

CMG, the Anglo-Dutch computer services group, is spreading a little happiness, at least to its shareholders. For a start, around 30 per cent of the company is owned by its employees.

Lucky them. Since it floated in Holland and the UK at 290p a share at the end of 1995, the price has soared. After yesterday's rise to 1,477.5p, the group's shares stand on a prospective rating of 43 times earnings - pretty dizzying even for those acclimatised to the stratospheric valuations of IT stocks.

Is this rating justified? Only partly. The company has an impressive record of attracting and keeping staff, vital in an industry where chronic people shortages are the only real restraint on growth. CMG's 11 per cent staff turnover is half the industry average. And by requiring all staff to take chunky shareholdings in the company, CMG keeps wage inflation at just 10 per cent, while discouraging job-hopping to chase the best salaries.

CMG's size and strong presence in both the Netherlands and UK also means that can attract global clients. It is also positioned in the fastest- growing IT markets - finance, telecoms and information processing represent 60 per cent of turnover - where customers such as Deutsche Bank have deep pockets.

CMG thinks it can grow faster than an already soaring market. It is certainly justified in believing that demand for IT services will continue, even when the year 2000 and Euro crises, just a tenth of its work, have faded.

But it is hard to see how CMG can sustain current growth rates. Part of the 33 per cent leap in half-year profits to June was a result of a return to profit in Germany.

Those arguing that a weaker pound will prompt further profit upgrades are considering only CMG's UK shareholders. The profit rise in constant currency would have been 60 per cent in Dutch guilders.

Just as enthusiasm from CMG's Dutch shareholders has driven the group's share price, any weakening of the pound may prompt profit downgrades in Holland.

Ross Jobber at UBS forecasts full-year profits of pounds 34.8m. On its current rating, CMG will be hit hard if it fails to match expectations. High enough.

News
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Life and Style
tech
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
News
i100
Life and Style
life
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits