Outlook positive for software firm

MISYS, THE flagship of Britain's fast-growing information technology sector, yesterday dispelled fears of a steep fall in IT investment by banks after the recent spending spree to comply with the euro and the millennium deadlines.

Kevin Lomax, the software group's executive chairman, said that although growth in IT spending would not match last year's rise of 14 per cent, it was set to remain between 6 and 10 per cent in the next three years.

His comments came as the group, a market leader in financial software, underlined the boom in demand for IT services in the past six months with a 83 per cent increase in interim pre-tax profit to pounds 59m. The results were driven by a buoyant performance in the banking division and a marked improvement in Medic, the heathcare software specialist bought last year for almost$1bn. The numbers were ahead of market expectations and triggered a series of profit upgrades, sparking a rally in the share price which closed over 17 per cent higher to 586p.

Mr Lomax maintained that Misys, which derives some 60 per cent of revenues from selling software to financial houses, would benefit from the flow of IT upgrades which had been put off until after the euro launch and after he millennium bug problem had been solved. "We believe there will be a swing back to other systems," he said.

The results came as the company announced the sale of eight non-core companies in its information systems division to Kleinwort Benson's venture capital arm, for around pounds 30m. Misys said the sale would lead to a pounds 20m charge in the full-year accounts due to a change in accounting rules.

Analysts said that apart from the exceptional charge and the possible costs of integrating a recently bought US company, the outlook for Misys was positive. David Greenall, an analyst with Credit Suisse First Boston, said the shares were better value than rivals such as Sage and SAP of Germany.

Other observers said the stock would receive a fillip from its expected return to the blue-chip FTSE-100 index in March.