Upbeat Misys puts Y2K worries behind it

Misys, one of the UK's biggest software companies, yesterday hailed the end of the Y2K-related IT investment slowdown, providing a boost to leading shares in the sector.

Misys, one of the UK's biggest software companies, yesterday hailed the end of the Y2K-related IT investment slowdown, providing a boost to leading shares in the sector.

Speaking at the group's annual meeting, Kevin Lomax, Misys's chairman, said: "We are increasingly confident that we should enjoy a much better year and a progressive return to the group's long-term growth rate." He added: "Overall, it is now clearer that the uncertainties surrounding Y2K look to be behind us."

Misys shares, seen as a bellwether for the technology, media and telecoms sector, closed up 61p, or nearly 10 per cent, at 693.5p yesterday, the biggest risers on the FTSE 100. Misys specialises in providing software for blue-chip companies, particularly in financial services.

The optimism infected shares in the group's major rivals. Sage, which specialises in providing software for small businesses, leapt 38p to 543p. The rally marked a return to stock market form for Sage after a period of weakness amid rumours of an impending profit warning. Meanwhile Logica, the diverse IT services group, gained 25p to end at 2,360p and CMG, another integrated IT provider, closed up 70p at 1,485p.

IT investment by major companies dried up mid-way through last year amid nervousness about possible Y2K problems. Pent-up demand has taken longer than expected to flow through, contributing to a general exodus from technology stocks earlier this year.

Mr Lomax said orders in banking and securities had increased after a slow start to the year, while the healthcare division had been performing well and in line with expectations.

A spokesman for Logica welcomed Misys's upbeat comments and the positive impact they had on the sector. But he described the group's assurance that Y2K was no longer an issue as "a bit premature". He added: "We are seeing a pick-up in [demand from] the financial sector... But we tend to take a cautious approach."

A company official at FI Group, the software outsourcing specialist, said: "You can't talk about the IT sector generally. Different companies are coming back at their own pace, depending on how they were affected [by Y2K]." FI shares closed up 7.5p at 552.5p.

Misys had taken a hit on earnings before and after the start of the calendar year as companies in the banking industry, which account for 70 per cent of the group's business, put off new software orders as they waited for possible Y2K computer meltdowns to pass.

In July, Misys posted a pre-tax profit of £123m, below analysts' expectations, for the year to 31 May.