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Y2K Bug Bites Misys Profits

By Reuters - 27 Jul 2000 10:47GMT

British business software company Misys Plc reported weaker year pre-tax profits on Thursday but said prospects were looking up now that millennium bug fears were behind them.

The company highlighted adjusted pre-tax profits of #123m ($186.5m) -- excluding goodwill amortisation, a #19m profit on an investment sale and some #12m invested in Internet projects.

This was #3m lower than last year -- but #13m lower, at #111m, if internet investment costs were included.

The results were at the bottom end of forecasts by analysts, who differed on whether to exclude the internet investment.

Misys shares opened 2.5 per cent lower at 590p -- still #1 up on lows seen in June but a long drop from the #13 peak they reached in February, when they were touched by internet enthusiasm.

"Misys I think is at the bottom of the range. That could have quite an impact on the techs," said one dealer.

Misys' full year dividend was 3.73p a share.

The company said new banking orders in the fourth quarter to the end of May were near a record and showed a strong upward trend. The banking industry accounts for 70 per cent of Misys' business.

Net debt was reduced to #21m after investing #65m on acquisitions.

Y2K BUG FEARS NOW OUT OF THE WAY

Misys said the outlook was for a much better year, after one marred by a slowdown in new business due to fears of a millennium (Y2K) computer bug.

"This so-called Y2K lock-down period had, as predicted, a marked effect on the year's trading results in the banking and healthcare markets," said Chairman Kevin Lomax.

"Since that time, we have seen a strong conversion of prospects to orders, particularly in the Banking and Securities Division, which enjoyed order intake levels approaching the record level of demand seen at the time of the introduction of the euro," he said.

"The recovery in Banking and Securities Division will continue in the current year. Given this background and good prospects in other divisions, we should enjoy a much better year and a progressive return to the group's long-term growth rate."

Revenues from continuing operations rose 11 per cent to #709m. Operating cash flow was #121m.

On the internet, Misys said policy sales on Screentrade, its online general insurance broking service, rose 12 per cent over the year and more than 20 per cent over the last six months.

It gave no trading details for m-link, its two-month-old insurance portal for professional financial advisers, but said it had enjoyed "a good reception". It said it would invest 30 million pounds this year to expand services offered.

"We are considering a number of important partnerships and alliance arrangements to ensure that the presence and value of the business are further enhanced rapidly," it said.

Another consumer insurance portal is due to start operating towards the end of 2000.

Misys sold Healtheon WebMD stock in the United States, making a #19m profit which was treated as an exceptional item, and was not included in operating profit.

In healthcare, results were marginally ahead of last year.

About 20 per cent of Misys business comes from its U.S. healthcare operations.

In insurance, revenues and profit grew strongly as a result of acquisitions and good organic growth. The Y2K issue had no material effect on trading.

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-- (Dee360Degree@aol.com), July 27, 2000