Investment: CMG proves its case on upbeat IT outlook
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Your support makes all the difference.IF YOU want a gloomy assessment of the prospects for information technology, steer clear of Cor Stutterheim. The chairman of CMG, the Anglo- Dutch computer services group, has been consistently upbeat about the prospects for the IT industry. Yesterday, CMG produced the figures to match his bullish stance.
In the six months to June, CMG managed a 59 per cent jump in pre-tax profits on a 38 per cent increase in revenues. Admittedly some of this came from acquisitions, but CMG's organic growth was still an eye-popping 34 per cent.
What's more, the company was able to soothe worries on almost all the factors IT investors tend to worry about. Staff shortages? Sure, hanging on to skilled staff is tricky, but CMG is tackling this problem by opening up more regional offices, thereby giving workers the chance to move where they want to. Yes, wages are rising but the cost increases are being passed on to customers.
Indeed, CMG even managed to boost its margins by hiring more experienced staff who require less training. As a result, it now makes a 12 per cent return on sales - among the highest in the industry.
As for the year 2000 computer bug and the single European currency, fixing those problems accounts for just 10 per cent of CMG's turnover. And when these areas of business have worked their way through the system in a few years' time there will be new projects, such as electronic commerce and data mining, to keep the company busy.
Meanwhile, Mr Stutterheim is resisting the temptation to rush into expansion with potentially troublesome deals in the US and India. CMG shares soared 10 per cent yesterday, rising 187.5p to 1,862.5p.
The company remains one of the most solid stocks in the IT industry sector. But, with the shares still changing hands on a multiple of 64 times forecast 1999 earnings, it is hard to see them outperforming.
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