Misys warns as banks' IT cuts hit

SOFTWARE maker Misys gave an indication of the continuing fragility of the banking and securities markets today as it warned that banks would not be increasing their IT spend at least for this financial year.

Chairman Kevin Lomax said: 'It is clear that banks are continuing to bear down on the cost of professional services, and that this effect will extend beyond the downturn in licence sales.'

Lomax, giving the company's full-year results to 31 May, added that he expected some recovery in the second half of this financial year. Misys beat analysts' expectations with £59.8m of pre-tax profits after exceptionals and goodwill write-downs, £25m more than a year ago.

Excluding write-downs and goodwill, adjusted operating profit before tax reached £119m, £7m more than last year. This was due to acquisitions made last year and 'a stronger trading performance'.

But revenue was marginally down, by £1m to just over £1.01bn, dragged lower by a £23m drop in income to £278m from the banking and securities division. This was because banks of all kinds made further reductions in their IT budgets, Lomax said.

Initial licence fee (ILF) order intake at £74m was 15% below last year's, although the rate of decline slowed in the second half of the year.

The ILF order book stood at £26m at the year end, slightly ahead of November 2002 but £5m lower than at the start of the year.

The one area of growth was Misys's US- focused healthcare business, helped by the acquisition of Hospital Systems, formerly Sunquest, in the previous year. Revenues increased by £37m to £298m.

Misys's financial services industry - supplying software to independent financial advisers - slipped from £452m to £438m.

The company partly blamed its financial services division's performance on an increased number of IFAs leaving the industry or retiring because of 'uncertainties surrounding the changes in the regulatory regime, together with more stringent regulation in force since December 2001'.

From August, Misys will bring its five independent financial advice businesses into a single division trading as Sesame, ahead of a demerger and listing planned for the second half of 2004.

The company announced today that corporate development director Ross Graham will retire at the end of the year and fellow director Jasper McMahon will take over his duties.