The Investment Column: CMG needs fresh direction

THE BOOM for well-positioned information technology groups has shown few signs of slowing so far this year. That may only beg the question of what impact the millennium bug will have in the coming months.

CMG, the Anglo-Dutch IT company, shed little light other than noting that the millennium bug will have a negative effect, while maintaining that the company would continue to surpass the industry's 15 per cent plus annual growth rates.

Rated at 49 times expected full-year profits of pounds 79m, CMG has to perform better than the industry average. It did just that yesterday, posting better-than-expected interim results showing a 51 per cent rise in pre- tax profits to pounds 36.8m.

Sales soared 50 per cent to pounds 290.5m. What's particularly impressive is that organic growth accounted for over 80 per cent of the sales gain; acquisitions added a relatively small amount. Given CMG's single-digit market share in most countries outside the Netherlands - there it commands 12 per cent - there's little reason why organic growth can't continue.

Of CMG's four revenue streams, systems development, including installation and integration, accounts for around 60 per cent of total sales. However, the reliance on financial services clients - in particular investment bank ABN Amro, which accounts for some 5 per cent of total sales, is a potential source of weakness given evidence of IT budget pruning among banks.

Other sectors, including telecoms and trade and industry, delivered respective 95 per cent and 65 per cent revenue growth in the half. Indeed, CMG's mobile message product has around 50 per cent market share in Europe.

The 4.5 per cent gain to 1,940p in CMG's shares yesterday was the market's gut reaction to thestrong results. Though the group has ample capacity to grow further across Europe, four-fifths of earnings still come from the Benelux region. In that respect, CMG is an old story that needs to write new chapters in other markets such as the UK, France and Germany. Pending further evidence of earnings diversification and clarification of the impact of Y2K, the shares are fully priced.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...