Admiral Plc is carving out a reputation for itself as the UK’s most profitable and reliable IT services company, and the continued escalation in its share price has moved the Camberley, Surrey-based group into the higher profile FTSE Mid Cap region. Net profits for the year to December 31 surged up 55% to 11.3m pounds on revenue that rose 29% to 117.2m pounds, all of which came without a single acquisition from Admiral throughout the whole of 1997. And the shares, which have risen eight fold since 1992, shot up another 10% to 792.5 pence. But the headline growth figure masks what newly appointed finance director Adrian Auer considers to be the real story at Admiral, which is the group’s ongoing ability to grind out improved profit margins. For 1997, pre-tax margins rose by two and a half points to 14.9%. This is at the high end of Admiral’s peer group, which includes the mighty Sema Group Plc, which also reported on Tuesday, but which achieved pre-tax margins of just 5.6%, albeit from a more diverse business mix. Shareholders should look hard at what we do here, says Auer. There are no expensive new Headquarters, no expensive executive toys, and we convert our profits into cash. Around 1m pounds of the increased profits came from improvements in Admiral’s products business, but the gain was clearly considered inadequate and the Mind product line was sold to Prime Response Limited in January (CI No 3,329) to help Admiral push margins even higher. Auer thinks a lot of the success with generating profits comes from a willingness amongst Admiral’s customers to bear the cost of salary inflation amongst its consultants. And they will continue to bear these costs, says Auer, because of the good business relations which Admiral has built. As for acquisitions this year, Admiral will not be bullied by its shareholders into throwing cash, or its high flying shares, at overvalued frothy competitors looking to sell out at the top of the market. But prudent acquisitions in Germany, Holland or Scandinavia are being energetically pursued, the company said. The dividend for the year rose 29% to 2.9 pence.
