Investment: Royalblue has finger on IT pulse

WE'VE HAD the millennium, the euro, and the Internet. But a new fad is about to hit the UK's information technology industry.

It's called customer relationship management, which basically means installing software that helps companies to keep their clients happy. In a few years' time, the experts insist, every self-respecting firm will have such a system.

Royalblue, the software firm, provided evidence of that trend yesterday. Its financial trading systems division, which has been the traditional source of growth, reported revenues up 41 per cent to pounds 15.7m - a spectacular increase by most standards.

But its customer interaction software unit - which supplies IT help desk and customer support systems - grew even faster, expanding revenues by 63 per cent to pounds 11m. Excluding the costs of last year's flotation, Royalblue's pre-tax profits jumped 50 per cent to pounds 4.54m.

"Increasingly it is customer service that gives companies an advantage," says John Hamer, Royalblue's chief executive. "That's driving demand for customer support systems."

The demand is bringing in new clients. While Royalblue still works closely with the large investment banks who use its trading systems, the company has started supplying customer services software to clients as diverse as Barclays' online banking division and the Lancashire Constabulary.

Mr Hamer dismisses suggestions that demand is likely to slow down later this year. "We think the market will accelerate," he says.

As a result, Mr Hamer sees no need for acquisitions. He prefers to spend heavily on developing new applications, such as derivatives and treasury products, which are based on the same basic architecture as its existing software.

For analysts, this is the key to the company's value. "The prospects of the business probably justifies the current valuation," says Ian Spence, an analyst at West LB Panmure.

Stockbrokers forecast profits of pounds 6m this year, putting the shares, which hit a new high of 450p yesterday, on a forward earnings multiple of 39 times.