Slowdown in spending and ISO15022 deferrals hit Trace Financial and Datawise

Slowdown in spending and ISO15022 deferrals hit Trace Financial and Datawise

Trace Financial and Datawise, the wholesale banking subsidiaries of UK software solutions vendor Trace group, are reporting a sharp slowdown in sales as potential buyers reign in spending.

Announcing interim results for the six months to 30 November 2002. Trace reported an operating loss of £0.19 million before goodwill on reduced turnover of £8.4 million (2001 - £10.5 million) with lower package sales.

Trace chairman Clive Ingham blamed lack of new business in the financial sector for the downturn in the group's fortunes.

He says: "Package sales were significantly down, reflecting a general slowdown of investment decisions, with bespoke revenues also suffering as margins have come under pressure."

Trace has written off £1.6 million on the carrying value of loss-making Datawise to compensate for reduced revenue expectations. As a result, the company is reporting a loss per share of 13.86p (2001 - earnings per share of 3.12p), with goodwill amortisation accounting for 12.89p of this total (2001 - 2.19p). Net assets have reduced to £10.3 million.

Trace says Datawise experienced some success in selling its ISO15022 solution, but not as much as expected. The company describes the deferral by Swift of the deadline for compliance as a "bitter blow", which allowed many potential clients to go for the options of either doing nothing and using manual systems for low volumes of transactions, or making modifications to existing software rather than investing in new systems.

"We invested heavily in this area and consequently our results have suffered significantly," says the company.

Resources have since been redeployed into WebTM, a browser-based secure data collection system, implemented for Deutsche Bank in the US. However, the recent acquisition of Deutsche Bank's North American custodian operations by State Street has slowed further deployment, says the vendor.

Trace Financial, which supplies the Cloverleaf Financial middleware product and Cams corporate actions software, also suffered from the slowdown in spending, but performed at similar levels to last year.

"We are now supporting three live clients in their corporate actions businesses and are well placed to service additional clients once the market returns to investment mode," says the firm. "We expect that our activity in this area as well as in the messaging arena should help us to continue to perform at least at current levels for the remainder of the year."

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