Misys posts first half revenue rise; dismisses credit crunch concerns

Misys posts first half revenue rise; dismisses credit crunch concerns

UK banking-to-healthcare vendor Misys is reporting an upbeat set of interim results, with revenue rising three per cent and operating profit jumping 27% in the six months to 30 November 2007.

Misys said in December that its business had not been hit by the credit crisis and that its first half revenue increased year-on-year across all divisions, beating its own internal targets.

In today's statement the London-based vendor says like-for-like revenue rose to £230 million in its first half, compared to £223 million in the year ago period. Like-for-like operating profit rose a healthy 27% to £35 million, from £27 million last year. Misys says its total order intake during the period was up three per cent to £110 million.

Misys is also reporting a "good first half" at its banking division, with strong demand across the product range.

Total revenue at the unit came in at £74 million, four per cent ahead of last year. Total order intake rose three per cent to was £37 million. However revenue from initial licence fees fell one per cent to £19 million during the period, although ILF order intake at the division came in at £18 million, up six per cent on last year.

Misys also won a number of new contracts from customers in emerging markets - such as India and China - where it has inked a number of partnership deals in a bid to drive sales.

In addition, the vendor says development of its BankFusion platform - which will run on the Sap NetWeaver platform - is "on track" and an un-named tier 1 bank in southern Africa will be the first implementation.

Revenue was also up at Misys' treasury and capital markets division. Total revenue at the unit came in at £63 million, six per cent ahead of last year. Total order intake at £28 million was up five per cent from the comparable period last year.

But ILF revenue fell eight per cent to £17 million while ILF order intake dropped a hefty 23% to £13 million, compared to the same period last year. Misys said it December that ILF intake at the unit was down, mainly due to "sales execution issues". The vendor says these "issues" have now been addressed.

Services revenues at the unit grew significantly, increasing 44% on the previous period.

"Despite the difficulties facing some institutions from global credit issues, IT spending by banks varies, and although banks are prioritising their spending we continue to make good progress," says the firm in a statement.

Looking ahead, the vendor claims it has seen "no material change in the buying patterns" of its customers, despite the global economic uncertainty. It says it remains confident "that we will achieve results for the full year in line with expectations".

Last year UBS analysts downgraded Misys amid concerns that banks were reviewing IT budgets. The analysts forecast a 20% decline in treasury and capital markets licence sales in the first half of 2008.

However Misys CEO Mike Lawrie told reporters that "there has been no slowdown in the sales pipeline" and there wasn't any "risk to revenue projections". He said the group's second half revenue is expected to grow by between two and three per cent.

Lawrie said banks would cut spending by laying off staff rather than cutting IT budgets.

He also signalled a repositioning of the business revenue model, away from ILF order intake to subscription-based and consultancy services.

"Software as a Service (SaaS), Application Service Provider (ASP) and Transaction Services offerings are growing parts of our business and becoming more important to our customers and our revenue growth going forward. A growing proportion of our revenue now derives from sales which are subscription based and we expect this to continue as our business develops," he states. "In addition, revenue from our global services unit is also growing faster than ILF. We therefore expect that ILF order intake will continue to become a less important indicator of future performance across the business."

Despite the rosy picture painted by Lawrie, the City remained skeptical. Misys stock was down 6.8%, or 12.25 pence, in mid mooring trading to 167.00 pence.

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