IT firm Sema has announced its second-half profits will be no higher than in 1999.
Anglo-French IT services company Sema announced this morning that its second-half results would be well below market expectations. The markets greeted the news with a 40% fall in the company’s share price. Sema has two major problem areas: its newly acquired telecoms billing software unit LHS, and its outsourcing business.
Regarding LHS, Sema has seen its sales plummet in Q3, chiefly due to problems surrounding the acquisition. Although it was announced in March, regulators delayed it until the end of July. The delay in integration disrupted the business substantially.
Unfortunately, Sema’s outsourcing business, which provides managed IT services for large companies, has also performed poorly. Q2 revenues are expected to fall by about 10% on last year due to deferred contracts in continental Europe. And the long-term prospects for this business are less than great, since the market is expected to remain static over the next few years.
However, these troubles don’t fully reflect the future for Sema. 13% revenue growth points to strong performance in its IT consulting and systems integration activities. The group’s other telecoms operations are doing well, with further strong growth expected. Unlike many of its competitors, Sema has built up a strong position in the fast-growing market of eBusiness integration solutions, enabling companies’ existing systems for B2C and B2B transactions, particularly in the financial services sector.
If Sema can bring LHS into the fold of its successful telecoms business, then it should return to profit growth. As long as it manages this task, and keeps on doing well in the sectors that account for the majority of its business, the future for Sema looks brighter. After all, with the company strongly positioned in eBusiness integration and less subject to the declining demand for commodity IT services, it is in a better position than most of its competitors.
