Shares digital

Some strive, others survive as the rising damp of the credit crunch spreads

by Russ Mould

Banking stocks have consistently underperformed the FTSE-All Share since autumn 2006 and the chill from the global credit crunch is now filtering through to technology suppliers into the beleaguered sector, even if innovations are enabling some firms to weather the storm.

One firm to hit a bump is telecom services expert Netcall, whose customers include Alliance & Leicester and Lloyds TSB. A run of six consecutive halves of profit improvement ended with March’s interims.

‘The first half was difficult and not what we expected when we started the period,’ admitted chief executive officer Henrik Bang at the time. ‘Nor was it what our customers expected. They were hit by external factors and shared some of that with us. There was a big reluctance to make capital investments, so this hit our licensing business.’

In a carefully phrased trading statement at its AGM two weeks ago, derivatives trading software expert Patsystems noted: ‘Trading so far in 2008 for existing customers is in line with our business plans... although major purchasing decisions are concluding more slowly than usual, we remain comfortable with current market expectations for the year.’

Wins hard to come by

Patsystems undershot its target 500 deployments of its ProMark platform last year, ending December at 375, and the AGM commentary suggests new wins are proving hard to garner – even if strong recurring revenues give the £10 million cap a solid footing.

Autonomy portrays itself as likely to benefit from the sub-prime crisis, pointing to huge deals with investment banks for its compliance archiving solution, even if the banking sector is only a small revenue generator today. Banks are ensuring they have the information to meet lurking threats of lawsuits from unhappy shareholders and mortgage holders and tighter regulation. Yet even Autonomy chief executive Dr Mike Lynch noted alongside this week’s Q1 results that some customers have recently chosen to delay payment. This prompted Autonomy’s shares to slide 990p to 820p, despite Lynch’s assurances that he has seen ‘no negative changes’ so far to his outlook for 2008 overall.

Intelligent Environments’ chief executive Phillip Blundell regards such jitters over the credit crunch as baffling. ‘We in the real world don’t share the same pessimism as the City,’ he says. ‘We are busy and we see that we will continue to be busy.’

Intelligent Environments provides online software for the financial services industry, specialising in applications for credit cards, savings products and loans. Even if an application is unsuccessful, the firm still gets a fee. A market cap of just £13.3 million suggests the market remains sceptical, even though last week’s preliminary numbers revealed a 43% hike in group sales of £6.2 million last year. Partnership deals with Royal Bank of Scotland, Moneyfacts.co.uk and Unisys should further extend Intelligent Environments’ reach in 2008.