FI Group Plc, the Hemel Hempstead, UK-based IT services group, looks poised to break out of its domestic UK market and fulfill its ambition to become a force in international markets. While it is still enjoying buoyant growth in the UK, with mid-term net profits up 75% to 5.1m pounds on revenues which climbed 53% to 108.9m pounds, FI has its sights set on international markets. This is likely to see it make acquisitions overseas, although the company indicates there will be no early moves and could not comment on its likely target countries. The company has just recruited Brian Gunn, a top man at Groupe Bull’s worldwide integration services, to be managing director of international operations and he will lead the push into new markets. The US would be an obvious region for expansion. FI already has a presence there but it has provided the company with only 2.5m pounds in revenue and 93,000 pounds in operating profit over the last six months. The company has also shown itself willing to make acquisitions. It bought the Indian software developer and Y2K IT services specialist IIS Infotech in 1997 for 22m pounds. This provided a cheap source of labor to supply off-shore programming services to US and European businesses. For FI’s last results, Infotech generated 8.8m pounds in revenues and 710,000 pounds in operating profit. Provision of Y2K services currently accounts for 15% of FI’s revenues but its work to help companies prepare for the Euro is expected to help lower its dependence on Y2K budgets. Some 68% of its revenues came from application management, with the FI training and recruitment divisions providing the other 3% and 12% of revenues respectively. It is now looking to offer additional services in new areas to maintain its growth rates. One of these is the ERP market, through its enterprise systems division. Demand for ERP services has spread outside of the manufacturing sector into FI’s core areas of finance, services and retail and leisure. These divisions accounted for 41%, 33% and 26% of revenues respectively. Surprisingly, FI is not embracing SAP but is looking at the PeopleSoft and Oracle alternatives feeling it has honed its PeopleSoft implementation skills by rolling out the suite across its own organization. FI is also aiming to extend its interests in outsourcing. Last year it struck a novel deal with the Bank of Scotland (BoS) where the two companies set up a joint venture trading as First Banking Systems Ltd (FBS). The BoS holds 51% of the joint venture’s equity. In its first year of operation FBS saw revenues of 6.3m pounds, with 370,000 pounds in operating profit. FI’s contracted order book looks substantial, up 86% on last year’s level at 253m pounds, and as such FI is likely to continue enjoying rapidly rising revenues, even without a move overseas. Since floating on the London Stock Exchange in April 1996 its share price has risen from 55 pence to 363 pence today, with a valuation up from 100m pounds to 728m pounds. The current valuation reflects its success in gaining blue-chip accounts, such as London Electricity, Halifax Plc, Marks & Spencer and The Post Office. This is partly a result of its innovative human resourcing options. It can outsource, in the sense of absorbing a client’s staff and adding then to the FI payroll. Insource, in that its own employees are seconded into a customer’s IT department. And co-source, by taking responsibility for all the people involved in applications management from third-party developers and client IT staff to its own consultants. As a sign of its growth FI has recruited 60% of its 4,000 staff, of which 1,160 are contractors, in the last year. The problems of managing such rapid expansion while maintaining profits is a difficult act to master, although its seems to be doing so at the present, in part due to its success in encouraging share ownership. Some 41% of the company’s equity is now in the hands of FI staff with 90% of its employees taking last year’s bonus in shares. This optimism seems to be matched by the city’s estimations but its foundations for growth really rests on expansion outside of the UK.
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