Shares in JBA Holdings Plc just kept on rising yesterday, as the markets digested its fourteenth successive year of growth and an aggressive expansion program at the UK manufacturing software developer and IBM Corp AS/400 reseller. By last afternoon they were up 55 British pence, or 14.9%, to 448 pence, a 52-week high. Pre-tax profits for 1995 were up 42% to 8.7m British pounds, turnover rose 38% to 124.7m pounds. To capitalize or not to capitalize. That is the question facing many UK software and services companies at the moment. And JBA has decided to do a bit of both, but was very careful to justify every last penny of its capitalized software development. After the recent shenanigans from Quality Software Products Holdings Plc (CI No 2,878), and evangelism from Coda Plc’s chairman Rodney Potts last year attacking companies that capitalized development costs, JBA’s chairman Alan Vickery said that as far as his company was concerned, the story stands up. JBA embarked on a program to develop a software development tool, Guidelines in 1993, and laid out a four-year capitalization plan. Guidelines is a tool to create business objects and generates C++ code. A version to generate Java is currently being developed. The company always expenses all of its applications development, and when the tools start to generate revenues, they are expensed as well.
Flick a switch
Research and development was 11.3% of sales, down from 14.8% last time, and Vickery said it is not likely to get any lower than that, and may be nearer 12% this time. Most of the work is done by two teams of 60 people each in Sri Lanka and Ireland. JBA’s core product, System 21 is now available for IBM’s AS/400 and RS/6000 systems, Hewlett-Packard Co’s HP-UX and Digital Equipment Corp’s Alpha-based systems. Vickery said the product, a system for managing manufacturing and distribution sites, is identical on each system, and the ability to flick a switch to flit between each one at the company’s new technology center in Warwickshire, UK usually seals the deal. System 21 for Windows NT will be ready for internal use by the end of this year and out commercially early in 1997 and it will also be launched under OS/2 this year. Revenues from software support services were up 18% to 35.9m pounds, product licenses grew 39% to 48.6m pounds, maintenance rose 15% to 13.2m pounds and hardware saw the biggest leap, up 102% to 23.4m pounds, largely driven from the US, where JBA is also a reseller of IBM AS/400s. But in what could be a significant boost for the company, JBA is also to begin a pilot AS/400 reseller program in the UK later this year. JBA made two acquisitions during the year. HB&A in Melbourne, Australia and Ratioplan Unternehmensberatung Datenverarbeitung GmbH, or Ratioplan to its friends (CI No 2,703). Both were long-term distribution partners for JBA’s software, and contributed 8.1m pounds of revenues and operating profits of 955,000 pounds during the year. Substantial growth is expected from both this year. HB&A cost around 250,000 pounds this year as part of a three year earn-out, and Ratioplan cost 1.75m pounds in shares. Ratioplan was bought to give a Germanic face to the all-important continental Europe marketplace, where each country has its quirks that need to be included in System 21. Ratioplan is using Guidelines to do just that at the moment. JBA’s biggest competitor is, of course SAP AG, but even that company is not dominant in the European market yet, and Vickery reckons it is wide open for a truly pan-European company to come in and take over. The market share is pathetic of any one company, he said. In terms of geography, European revenues were up 26% to 58.8m pounds, all of it software and helped by Ratioplan. The Americas surged ahead 56% to 57.8m pounds, boosted by hardware sales. Asia-Pacific was up 47% to 6.6m pounds and South Africa fell 38% to 1.5m pounds as there were no big deals there last year. Three acquisitions are already lined up so far for this year. EDS – no relation to Ross Perot – is a software di
stributor for JBA with six centers in the Asia-Pacific region. JBA has plans to move into China and the two have agreed terms. JBA is doing due diligence at the moment. The other two are described as a small food company in the UK, where both parties want it, but no agreement has been made, and a French company that JBA is getting to distribute its software as part of the due diligence process. It is part of a larger group, which complicates things further, said Vickery. And if you are going to San Francisco, IBM’s object-based application development environment, you will be using framework building tools created using JBA’s Guidelines and IBM’s VisualAge tools (CI No 2,854). Once it is ready, JBA intends to develop business objects and put them on top of San Francisco and sell them as new applications, but it will be 1998 or 1999 before it contributes anything to revenues. After 14 years of turnover and profit growth, JBA has never started a new year in such a strong position, according to Vickery. It is looking good for another strong year. The final dividend of 3.0 pence makes a total for the year of 4.0 pence, which is up from 3.3 pence the previous time.
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