Learmonth & Burchett Management Systems Plc of London W1, following its profits warning made in March (CI No 1,392), has duly reported pre-tax profits down 69% to UKP450,000 on turnover up 45% to UKP1.8m. One might be forgiven for jumping to the conclusion that the problems must stem from Learmonth & Burchett’s acquisitions made over the past year. Between them Michael Jackson Ltd and Meta Systems Inc have contributed UKP2m to group turnover and UKP245,000 to trading profit, but dragged pre-tax profit down by UKP161,000. However, group chairman Rainer Burchett is adamant that the group’s problems stem from the core businesses which have not grown as they might have. At year-end, consulting produced 46% of turnover, training yielded 27%, with software products close behind at 26%. These last two businesses have led to Burchett’s disappointment. And the cause of this disappointment can be attributed to three main factors: IBM, the nature of competition in the UK software market and the delayed launch of Learmonth’s Systems Engineer product. The group has suffered from the postponement of several major contracts – one of these was a UKP300,000 order from a UK client which was put back because of the late arrival of IBM’s OfficeVision. IBM’s AD/Cycle announcement has also softened the market. For while it has made copmuter-aided software engineering a mainstream topic, has increased market awareness and expanded the market, IBM is not delivering any products and users are taking much longer to place orders, or holding off purchases altogether while they wait. He does not believe (as some IBM partners seem to) that this is a deliberate ploy on IBM’s part, but rather sees it as a side effect of the complexity of developing a repository. Learmonth & Burchett intends to launch a new repository of its own towards the end of 1990 which will be marketed as a repository integrator, configurable to mirror the facilities of IBM’s repository – so that the same objects can be linked together in both repositories. Aside from the IBM environment, it will run on DEC VAXs and Unix workstations. It will be sold as a configured management facility for large, multi-location projects, or as a large corporate repository, or/and for use with reverse engineering tools. Meanwhile, those postponed contracts are still showing no signs of coming through, so Burchett says that the company will pursue pro-active selling by suggesting non-IBM software components operating in the Windows environment. The art of selling is also changing as the UK software market gets tougher.
Board directors
Bid teams may now even include several board directors among their number, something that was unheard of a year ago. Burchett says that there are also rumours that some software houses are bidding for contracts at cost price. Finally, Learmonth & Burchett was late launching its Systems Engineer product (one of the reasons for the wait was that the product was developed in the Windows environment, which while user friendly is reputed to be developer hostile) which meant that it wasn’t winning the strategic corporate accounts that it might have been. In the meantime the AutoMate products held up well but were winning only small accounts. Burchett said that it is very unlikely that the company will be making more acquisitions this year, rather the focus will be on reducing the group’s UKP2m borrowings and getting the company’s software development costs down to a smaller percentage of turnover – at year end they stood at 15%. He is cautious about predicting a return to growth of profitability, but hopes that a wider, more sophisticated product and services portfolio, particularly in the area of reverse engineering will see the group through the short to mid-term. – Katy Ring
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