Misys set to be the first IT company in the FTSE 100

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The Independent Online
Misys, the fast-growing software group, is set to become the first British information technology company to join the FTSE 100 when the members of the index of leading shares are reviewed next month. Peter Thal Larsen reports on how the City has warmed to the sector.

Shares in Misys have risen strongly in the past two months as investors have responded positively to the creation of a separate IT sector by the Stock Exchange.

As the largest constituent of the index, Misys has attracted a lot of the attention from institutional investors seeking to raise their exposure to the sector. Since the index was announced early in December, Misys shares have gained almost 50 per cent in value.

The shares rose strongly again early yesterday, but fell back when executive chairman Kevin Lomax and several other directors revealed that they had sold some of their shares at 2358p. They ended the day up 10p at 2502p.

Still, at yesterday's closing price Misys is worth almost pounds 2.8bn, making it the 93rd largest company in the UK and virtually guaranteeing it formal entry into the FTSE 100.

Misys' inclusion will be a symbolic moment for the British IT industry. The market has enjoyed explosive growth in the past 15 years as more and more companies have introduced information technology into their businesses. Demand has grown even faster in recent years as firms attempt to prepare their systems for the millennium and European monetary union.

However, many in the industry feel that the City has been slow to recognise the attractions of IT companies, and that this has starved them of funding and hampered their development. Until recently, British IT companies were valued less highly than their US counterparts, prompting several groups to bypass the London market entirely and list on Nasdaq.

But Mr Lomax believes the City's aversion to hi-tech companies has eased. "The quality of research is improving and investors are getting better served," he said.

Formed in 1979, Misys floated on the Unlisted Securities Market in March 1987 at a share price of 95p and a market value of less than pounds 10m. Eleven years on, the company is worth 280 times as much and its share price has seen a 26-fold increase.

The company started out selling software for the insurance industry, but most of its growth has come from banking software. "We noticed that the software industry was very fragmented while the customers we were selling to were very large," said Mr Lomas.

Mr Lomax ascribed Misys' success to sticking closely to its business model and carefully controlling its cash flow, which it has used to fund acquisitions. Since joining the stock market, Misys has done roughly 30 deals, ranging from tiny software operations to last year's pounds 584m acquisition of US healthcare software group Medic .

"Anybody who can grow a company that quickly deserves considerable praise," said industry analyst Richard Holway.

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