The bigger boys are getting bigger at the expense of local minnows, according to Cor Stutterheim, CMG?s chairman, which is good news for the acquisitive company.
It reported rock solid financials for the six months to June 30. With a 64 per cent rise in post tax profits to #15.6 million on turnover up 38 per cent to #194.2 million, CMG is recommending a dividend of two pence per share. Earnings per share are 12.2 pence from 1.3 pence.
The main markets are buoyant, said Stutterheim and CMG had an excellent first half. ?Nothwithstanding a tight recruitment market, we anticipate that the second half - traditionally our better half - will enable us to produce a further strong set of results for the full year.?
If there is a cloud in the CMG sky it?s a people thing. Recruiting the right skills is difficult enough, but attrition is high, around 22 per cent in London. CMG?s exit interviews suggest the lure of contracting is proving too attractive while those with specialists skills like SAP and some areas of Microsoft, ?are receiving very peculiar offers and incentives, like joining fees,? said Stutterheim.
CMG is tackling the skills issue by introducing more flexible hours and easier career changes and by moving closer to the IT skills base. With new offices in Bristol and Derby it?s looking at other European locations.
Mobility is less of an issue in the UK and France where people are used to the concept of commuting, said Stutterheim, ?but in The Netherlands and Germany, they think a half-hour drive is a long journey and then they want to park right next to their desk.?
People aside, the venerable services company performed consistently well across all regions and divisions. The IT services sector is benefiting from exceptional demand, said Stutterheim, and CMG is gaining market share in nearly all areas of business. UK and The Netherlands performed very well, will UK profits up 100 per cent to #4 million on #49.5 million turnover, up 48 per cent.
Margins were on target at 8.2 per cent. The Benelux region saw exceptionally high margins - 16.7 per cent from 13.6 per cent. Stutterheim attributed the rise to hiring experienced staff who are productive more quickly and incur lower training costs. Similarly Germany upped operating profit by 83 per cent, turnover by 42 per cent, and margins by six per cent. France was virgin territory this time last year, but Stutterheim said CMG France is expanding rapidly and comfortably. ?The market is very similar to the Netherlands.?
CMG opened a Paris office at the beginning of the year, and the #768,000 loss was planned, according to financial director, Chris Banks, who expects similar results for the second half. CMG has acquired three French companies and recruited 250 staff in the six months: Alias in February, Cometh in July and Techside in August. The last two are SAP specialists, reflecting CMG?s new focus on the enterprise resource planning (ERP) space.
ERP products are important now, said Stutterheim, and they will become more important. He added, ?We need to know and develop projects around them, integrating the bespoke and with new standards.?
SAP and Baan constitute around eight per cent of turnover, and because CMG and ERP vendors share a large customer base of blue-chip clients, Stutterheim expects that business to grow.
The Year 2000 and the Euro are generating big business for all vendors, but ?the Euro is taking a higher priority now,? said Stutterheim. He describes it as a golden opportunity for IT, in terms of ?technical conversions now and in the creation of new systems for the future.?
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