The best piece of news we’ve had this semester for Sema Group Plc were the three facilities management contracts the group won in the first half, according to chief executive Pierre Bonelli. The Anglo-French company won a contract with TSB Plc said to be worth around ú60m over five years and another with the Pacific Rim part of Standard Chartered Bank Plc which is thought to be worth more in financial terms, but spread over a slightly longer period. This deal is actually only at the stage at present of Sema being chosen as a preferred supplier, but it is thought that the contract will be ratified by regulatory bodies as a matter of formality. The third contract, worth around ú10m is with Lansforsakringsbolagens AB, a mouthful of a Swedish insurance company. Sema turned in pre-tax profits up 21% at ú15.2m in the six months to June 30, on turnover up 8% at ú321.9m. Systems integration accounted for 61% of turnover, 2% down on a year ago, while facilities management brought in 32%, 2% up. Products make up the rest, but these are only in support of the financial payment systems and the telecommunications billing systems. The biggest turnover rises came in the UK – the largest market – and Sweden, closely followed by south-east Asia. France was the one real black spot, brought about by a sharp decline in energy revenues.
No further hardware sales
A software and hardware contract to supply equipment for eight nuclear plants was ended after the first four were completed. This left software still to be developed, but no further hardware sales. Energy revenues dropped 34% to ú37.5m. In terms of turnover destination, rather than source, the picture is somewhat different. The Pacific Rim increased by 292% to ú14.9m, while Spain and Sweden also showed good, if less impressive, growth. The largest market sector growth came again from telecommunications, up 65% at ú25.7m in sales. In Canada, Clearnet Communications Inc is bidding for Personal Communications Services licences and Sema has won a billing system order with the company. Other major telecommunication wins include two in India, automatic call distribution for France Telecom and network supervision for Retevision, the second mobile network in Spain. Details of two contracts won in the US, thought to be through the company’s work with L M Ericsson AB, remained confidential. In terms of multimedia operators, Sema became CableData Inc’s main systems integration partner in the half. Bonelli was right not to be worried about defence at the full-year stage (CI No 2,619), and the group won its first ship contract from the Royal Navy for systems integration for an ocean survey vessel. It also won a military logistics contract with the French army and increased its stake in Paradigm Pty Ltd of South Africa to 45%. Defence revenues rose 19% to ú79.5m, to remain Sema’s largest market sector. Bonelli predicted it would also remain the fastest growing – with the exception of telecommunications – for the next 10 years. With cash balances up 48% to ú34.7m, acquisition speculation will always be rife. Bonelli did pinpoint facilities management, systems integration and telecommunications as some of the areas the company will look at, but played down any spending in the second half. In terms of the US, the main obstacle seems to be legislation, and in particular the Banking Act, which rules out cross-state banking. Bonelli seemed disillusioned after numerous attempts at expansion in the US, saying we cannot spend all our time delivering paper to the Feds. The order backlog of ú700m a t the half-way stage comprised 57% facilities management and 43% systems integration, indicating further successes in the future. For the second half Sema is looking for an improvement in Germany, which has returned to profit, but is still not performing up to scratch, according to Bonelli, together with further expansion in the Far East. Sema will pay an interim dividend up 19% at 1.9 pence per share. The shares put on 11 pence to stand at 431 pence per share.
