It was another rough day in the markets yesterday as fears of recession in the US loomed large once more. The FTSE 100 closed down 1.1% to 5,819 whilst the Megabuyte Leaders Index slipped 1.0% to 878.1 and is now over 6% lower than a week ago. Logica was again the worst performer with a 4% decline to 90p - getting very close to the company's previous all time low of 80p in April 2003. Some may see this as an indictment on Andy Green's performance at the results meeting last week but we just see it as a realisation that things at Logica are worse than many had thought. It's all still to play for for Green and it will be fascinating to see how he annunciates the new strategy in May and, more importantly, how well he executes against it over the coming years. Outside of the MB Leaders, share prices generally sagged. The recent shine came off eServGlobal which dropped 7% to 57p and First Derivatives has come rattling back from its 320p high following last week's trading update. On a more positive note, AT Communications added 3% to 34p on news of a large contract with De Le Rue and Computacenter was also better on the day - 4% to 187p.
No dramas from Axon
Full year results from SAP services group Axon are at the top end of expectations and are accompanied with a confident outlook statement. Revenues for the year to December grew 49% to £204.5m - growth helped by acquisitions but organic growth was still strong. The US remains the engine of growth with 130% growth of which 41% was organic. Importantly, the US growth story remains in tact when one looks at the sequential performance where H2 revenues increased 13% over H1. Margins in the US also improved to 12% in H2 from 10% in H1. EMEA revenues grew an impressive 22% to £129.3m and our concerns about the sustainability of the EMEA margins so far look unfounded and the H2 operating margin from the region actually increased to 21.7%. Overall, adjusted pre-tax profits were up 69% to £35.5m. Cash flow was again excellent, especially when one considers that a people business like Axon should consume working capital as it grows. Operating cash conversion was over 100% and, despite spending £9m on acquisition, the company's cash balance rose by over £19m. We'll post a more detailed comment on these results later but, in short, this look like another excellent set of results from Axon which continues to confound its doubters.
Latin American contract comes in for Intec
The long awaited contact which was highlighted by Intec Telecom Systems in its November interims has finally landed. The multi-million pound contract, which is Intec's largest contract to date, is with the state run Uruguayan operator Antel and it for Intec's convergent billing platform. The Latin American region was a weak spot on Intec's 2007 results but this contract, which is to be delivered in 2008 and 2009, should underpin growth from the region and will also make hitting group numbers for the year to September that much more likely.