The Investment Column: FI stands for fantastic investment

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The Independent Online
FI must be a very jolly place to work. Not only can employees of this forward-thinking, female-led software group trade holidays, cars and even their pensions for cash, but three-quarters of its salaried workers are also shareholders.

Happily for them, FI could be renamed Fantastic Investment. Floated at 235p just 15 months ago, the shares, which rose another 6.5p yesterday, now stand at 521.5p. All the signs still look good.

Demand for outsourcing information technology services is being driven not only by the familiar euro and year 2000 issues, but also by deregulation in the energy sector and mergers in the financial world, 38 per cent of FI's turnover.

Profits for the year to April rose 40 per cent to pounds 6.58m, all organic, on turnover a quarter ahead at pounds 99m. FI's order books are busting, rising 52 per cent to pounds 110m. Renewal rates on contracts are high and FI's well- crafted share option schemes, where employees can earn multiples of their salaries, means that FI is attracting and keeping staff despite a chronic shortage of IT experts.

Hiliary Cropper's shift from chief executive to deputy chairman, and eventually executive chairman, makes sense. Overseeing strategy will give Ms Cropper the chance to investigate untapped markets such as desk-top management and human resources. Though margins are still growing, FI may come under some pressure as contract rates fall and staff costs rise, but with demand still exceeding supply that is not a pressing problem.

Ross Jobber at UBS forecasts pounds 8m profits for 1998. The shares are rated at 30 times 1998 and 25 times 1999 earnings. Pretty steep, but in line with the rest of the IT sector. Given the illiquidity of the stock, FI's share price can swing a bit. But a quality company, so hold on.

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