Detica reports 'sharp decline' in business from banks

Detica reports 'sharp decline' in business from banks

Shares in UK business and technology group Detica slumped after it reported a "sharp decline" in business from investment banks towards the end of its first half following the global credit crunch.

Despite posting a healthy set of first half results, Detica saw its share price fall over 25% to 221.75 pence after it reported a sharp fall in demand from investment banks towards the end of the period and warned of a slowdown in bank orders in the second half of the year.

Detica posted group revenue of £98.8 million for the six months to the end of September, a 45% increase on last year's figure of £68.3 million. Group operating profit rose 70% to £10.3 million.

However the results were mainly driven by growth at the company's government division, which covers the public sector and accounts for nearly 60% of revenues.

Nevertheless the vendor reported a 78% jump in revenues to £22.9 million at its financial services business, although this increase was driven by the acquisition of capital markets consultancy ma partners last year.

The vendor warned that full year revenues at its commercial business unit - which houses its financial services business - would be "somewhat lower" than last year due to the tough market conditions.

Tom Black, Detica chief executive, says the commercial business unit performed well but, with the global uncertainty in financial markets, "we are not expecting growth here in the second half".

Analysts at Charles Stanley told reporters at The Times that the market reaction to Detica's interims "reflects increasing nervousness in the markets over the outlook for IT spending generally".

Fears of a decline in bank technology spending also hit Misys shares earlier this month. The stock fell after UBS analysts downgraded the UK banking systems vendor from 'neutral' to 'sell' and warned clients that banks are reviewing all spending programmes closely which could lead to lower licence sales for firms like Misys.

UBS analysts predicted a 20% decline in treasury and capital markets licence sales in the first half of 2008.

The first signs of the possible impact of the credit crunch on banks' IT budgets emerged in early September when dealing room vendor Tibco warned of a sudden drop in licence sales at the end of its third quarter.

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