Cautious banks send Misys sales plunging

Investment banks remain cautious about spending more money on computer systems despite the widespread optimism in the technology sector, according to Misys, the software company.

Its shares tumbled 5.5 per cent on a downbeat set of interim results which revealed the company suffered a 45 per cent fall in operating profits in the six months to 30 November.

Kevin Lomax, the company's executive chairman, admitted the results were "disappointing" and warned that spending on software by customers in core areas such as banking and stockbroking was unlikely to improve until the second half of the year. Its banking division was hit by a 13 per cent decline in sales.

The company said: "It appears that banks have now started to plan for increased investment in technology and systems, and that they have been setting budgets for 2004 at levels which show some growth on 2003. However, it is equally clear that banks remain cautious about committing to investment projects and, as we said last July, that any increase in spending will probably only come through in the latter half of calendar 2004."

Sales from banking were down 13 per cent during the six months as operating profits in the division fell £8m to £12m.

Misys also saw poor results from its financial services division, where it supports a network of independent financial advisers (IFAs) called Sesame. Sales fell 16 per cent. The company said demand for its software products from the IFA market had been hit by a downturn in demand for long-term savings products among consumers and a more uncertain regulatory outlook.

Tentative plans by Misys to float or sell its IFA division are likely to be delayed until well into next year, analysts said. Misys said the short-term outlook for its IFA network remained depressed and that it was taking steps to cut costs. These measures were unlikely to stop the division from achieving full-year results materially lower than 2003, Misys said.

The one bright spot for the company was from its healthcare division, where it provides software to hospitals. Sales were up 4 per cent on the previous year.

Operating profits from its healthcare division were down £1m to £10m but the weak US dollar affected the company's returns. Adjusted operating profits on a like-for-like basis up 8 per cent to £22m.

The company also revealed that John Sussens, the group managing director, was retiring and that a reorganisation meant that divisional heads would now report directly to Mr Lomax.

Milan Radia, a technology analyst at Bridgewell, said the results were relatively disappointing. "Our view on Misys remains that no major recovery in orders will be seen ahead of the second half."

Group revenues fell 10 per cent to £471m, while the 45 per cent fall in operating profits meant it earned £17m. But it was able to increase its dividend payment to shareholders by 15 per cent to 2.44p a share.

Mr Lomax said: "While these results were disappointing, we have made good progress across the group in developing our products, strengthening our businesses, and repositioning our portfolio, in order to position ourselves for an improvement in market conditions."