The Investment Column: FI paints bullish growth picture

Everyone knows the information technology (IT) industry is booming. The reasons are familiar: pressure on companies to improve their efficiency by automating, the need to prepare IT systems for monetary union, not to mention the dreaded Millennium bug. But any boom brings the risk of a bust. The first worry is of staff shortages, which could force IT groups to postpone contracts, thereby hampering their rate of growth. The second is that, having successfully squashed the ``millennium bug'', the rush of work will dry up and the IT industry will go into a slump.

When a company has just reported a 54 per cent increase in first-half profits to pounds 4.31m, as FI Group just has, raising these fears may seem overly gloomy. But Hilary Cropper, chief executive of the applications management specialist, has a convincing response to both. She points out that fixing computers' inability to recognise the year 2000 as a valid date currently accounts for just 12 per cent of the group's sales. What's more, the rush to fix the problem has prompted firms to put other, less pressing, IT projects on hold until the next decade. By then, the UK's likely entry into monetary union will have thrown up a whole load of new gremlins for FI to tackle.

FI's real secret weapon, however, is IIS Infotech, the Indian computer services company it bought for pounds 25m last month. By farming out work to India, the group will be able to tap into a labour market which produces more software graduates than the US each year, all willing to be employed at a fraction of the cost of a British programmer. That allows FI to move beyond serving its traditional areas of finance, retailing and the service sector. The group thinks it can start undercutting its competitors and pinch contracts in the manufacturing and consumer goods industries, as well as the City.

All this adds up to a very bullish growth picture. That said, the shares reflect this. Brokers reckon full-year profits will be pounds 9.5m, rising to about pounds 13m the following year. That prices the shares, which edged up 5p to 1002.5 yesterday, at a staggering 38 times April 1999 earnings. FI is an impressive business with better prospects than most of its peers. But for the time being it's hard to see the shares rising much further from these heady levels.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Administrator

£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

Recruitment Genius: Dialler Administrator

£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

Ashdown Group: Contracts Manager - City of London

£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Day In a Page

Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
RuPaul interview: The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head

RuPaul interview

The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head
Secrets of comedy couples: What's it like when both you and your partner are stand-ups?

Secrets of comedy couples

What's it like when both you and your partner are stand-ups?
Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

Satya Nadella: The man to clean up for Windows?

While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
The best swimwear for men: From trunks to shorts, make a splash this summer

The best swimwear for men

From trunks to shorts, make a splash this summer
Mark Hix recipes: Our chef tries his hand at a spot of summer foraging

Mark Hix goes summer foraging

 A dinner party doesn't have to mean a trip to the supermarket
Ashes 2015: With an audacious flourish, home hero Ian Bell ends all debate

With an audacious flourish, the home hero ends all debate

Ian Bell advances to Trent Bridge next week almost as undroppable as Alastair Cook and Joe Root, a cornerstone of England's new thinking, says Kevin Garside
Aaron Ramsey interview: Wales midfielder determined to be centre of attention for Arsenal this season

Aaron Ramsey interview

Wales midfielder determined to be centre of attention for Arsenal this season
Community Shield: Arsene Wenger needs to strike first blow in rivalry with Jose Mourinho

Community Shield gives Wenger chance to strike first blow in rivalry with Mourinho

As long as the Arsenal manager's run of games without a win over his Chelsea counterpart continues it will continue to dominate the narrative around the two men
The unlikely rise of AFC Bournemouth - and what it says about English life

Unlikely rise of AFC Bournemouth

Bournemouth’s elevation to football’s top tier is one of the most improbable of recent times. But it’s illustrative of deeper and wider changes in English life
A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

A Very British Coup, part two

New novel in pipeline as Jeremy Corbyn's rise inspires sequel
Philae lander data show comets could have brought 'building blocks of life' to Earth

Philae lander data show comets could have brought 'building blocks of life' to Earth

Icy dust layer holds organic compounds similar to those found in living organisms