The UK’s insatiable demand for large scale integrated business software, like SAP AG’s R/3, has helped Druid Group Plc to another successful half year, as the Chertsey-based consultancy reported profits for the six months to December up 35% to 1.6m pounds on revenues which climbed 52% to 14.3m pounds. But the substantial up-front costs of recruiting and training consultants have depressed pre-tax margins by two points to 17% in the period. Recruitment consultants routinely charge 20% of the first year’s salary, and with a dearth of eligible candidates, companies like Druid just have to pay up. Druid recruited 123 people in the last six months. Add to this a three month training period for every recruit, consisting of zero chargeable hours, and profits begin to suffer. Although with a ratio of chargeable to non-chargeable staff of nine to one, the group’s margins are still highly desirable. Druid, once exclusively an exponent of SAP, has broadened its scope slightly to include offerings from Oracle Corp and Peoplesoft Inc, a fact which might help allay analysts’ fears about over-dependence on the German software giant. But revenues are still 70% SAP-related, added to which, half of the company’s revenues derive from just five major clients. But then there seems to be no stopping the ERP (Enterprise Resource Planning) boom, with the only constraint on a company like Druid being a lack of human resources. Druid’s own estimate for the size of the global ERP services market is $13bn in 1997, with an expected growth rate of 40%. But while Druid’s share price continues to build on its anticipated profits growth, a general downturn in the UK equity market could signal serious trouble. Druid, and every company like it, must recruit heavily to fuel its growth. Share options now play a huge part in luring in new employees, but in a falling market, these become worthless, leaving the smaller players like Druid looking far less appealing than say an Andersen Consulting or a Siemens Nixdorf. Faced with this hypothetical scenario, Druid’s managing director, John Pocock, could only postulate that his staff were motivated by more than just making a quick buck. Time will tell.
