FI Group Plc, the UK-based services group, is now sniffing out potential acquisitions on the east coast of the US as it pursues global ambitions following a period of robust growth in its home market.
Net profit in the year through April 30 rose 63.1% to 7.8m pounds ($12.3m) on revenue that increased 41% to 228.4m pounds ($359.5m). And while Y2K work, which accounted for 12% of FI’s business, is fading away as a driver for growth, FI’s order backlog at the end of the year stood at 267m pounds ($420.3), 50% higher than a year earlier.
An expansion into higher-margin businesses increased the net operating margin from 6% last year to 7.1%. FI believes its margins will increase even if market growth slows. Very rapid growth is an expensive thing to do in a people business, said managing director Hilary Cropper.
FI is expanding on two fronts; adding new products and services to its core applications management business and looking for geographical growth – essential when its own clients are expanding their business overseas.
The completion of its 106m-pound ($171.7m) acquisition of IT business consultancy OSI Group Holdings Ltd, completed earlier this month (CI No 3,666) fits perfectly into this strategy. It already has a modest base in Europe and the US, has no overlap of clients with FI, and gives the company a more rounded range of services to offer existing and potential clients.
Europe is a key target area for acquisitions. While France has been ruled out, for the moment, as too difficult a market for a UK company to enter cold, Germany and Northern Europe are areas where FI is keen to build a presence. With roughly 100 staff already in the US, FI is looking at the Boston, New York, Philadelphia corridor for the kind of services company that could fit in with its operations.
Applications management in the retail, financial and services sector still account for 65% of revenue. But the February 1998 purchase of the Indian company IIS Infotech, which now has about 1,000 staff, gives it the ability to offer software services worldwide. The subsidiary turned in a profit of 2.1m pounds ($3.3m) on revenue of 23.5m pounds ($37m) last year. FI has also moved into ERP implementation work and now has a team offering e-business services.
FI has always proceeded cautiously on the acquisition front. The company insists it is only after quality players and a flurry of purchases are unlikely. But with a buoyant share price and cash in the bank of 22.8m pounds ($35.8m), it will not be held back by resources. Cropper concedes that there is always a risk to acquisitions. But she adds, The biggest risk is standing still.
