ACT Group Plc, based in Birmingham, used its interim results announcement to announce the intention to buy back shares with surplus cash generated by its spate of disposals, most recently three businesses to Parity Plc for UKP8.3m (CI No 2,523). Downsizing the equity should harden the share price which has been bouncing around the 100 pence level, down from 180 pence this time last year, and lift the earnings per share. The company already has permission from the shareholders to buy back up to 10% of the shares in issue, the number taken depending on the shares remaining good value. Repurchasing shares will act as a counterbalance to the diluting effect of recent disposals and make the company more focused. Bank interest returns on the cash, which totals around UKP17m, fail to match the dividends the company is paying on the shares, so the move makes sense. More significantly, the move signals the end of ACT’s major acquisitive period and its metamorphosis from hardware, services and maintenance firm to financial software company.
Double whammy ACT is now focusing on integrating the businesses and has unveiled a strategy for all its products, Distributed Banking Architecture, which outlines and timetables the modifications to be made to existing products and the reorganisation will be complete by March 31 1995. As to the results, in the six months to September 30, pre-tax profits fulfilled ACT’s previous warning (CI No 2,436) falling 91.3% to UKP1.0m on turnover that slid 1.2% to UKP106.3m, though the results were distorted by the exceptional goodwill write-back of UKP18.2m on the disposal of businesses. Some 96% of ACT’s profits and 88% of turnover now derive from the Financial Software Products Division. However in the interim, the UK arm, ACT Financial Systems, proved disappointing. Profits fell 79.1% to UKP960,000 on turnover down 13.4% at UKP28.3m. This ACT attributes to an UKP1.5m increase in research and development spending in the half, UKP2m off sales of Quasar, the investment management system, as it was being reengineered and the market was depressed, and to the diverse nature of ACT’s UK businesses, including a bureau based on the volume of shares traded on the Stock Exchange, where trading was low. As chairman Richard Foster put it we have been caught in a ‘double whammy’. ACT also admits that although it added new modules to Quasar, it didn’t address the architecture at an early enough stage. ACT sees the UK bouncing back, as business in the second quarter was up on that done in the first, and this trend appears to be continuing. International financial software products unit, ACT International, by comparison, performed well. It is dominated by BIS, and profits rose 73.2% to UKP10.3m, on turnover up 102.3% at UKP44.9m, though comparisons are skewed as BIS contributed for only three months of last year. The Information Systems division, dominated by ACT Medisys, but also comprising ACT Managed Services and Sigmex BV, saw profit up 1.2% at UKP412,000 on turnover 5.0% ahead at UKP10.0m. Medisys performed well, profit up 56% at UKP390,000 on turnover down 16.4% at UKP4.6m, and Foster has no need to sell it. The City liked the news about the share buy back and added 5.5 pence to ACT’s share price to 104 pence. ACT will be maintaining its interim dividend at 1.75 pence.
