Sema throws its weight around

Sema, the Anglo-French information technology group, always had the air of a heavyweight, even when it was a fraction of its current size.

Though not yet a member of the FTSE 100 index, it can hardly be long before this fast-growing systems integration and outsourcing company, employing 150,000 people and capitalised at pounds 1.6bn, is promoted.

Shares in Sema have outperformed the market by 144 per cent over the past five years.

Less than two years ago, Sema's share price stood at less than 500p. Today, ahead 7.5p after strong half-year results, the price is over pounds 14. That reflects the impressive pace of change wrought at the group in the past few years by Pierre Bonelli, the group's charismatic chief executive.

What initially released the group's share price was the sale in late 1995 of Cap Gemini's 28 per cent stake. Before that, Sema had been 41 per cent owned collectively by Gemini, Paribas and France Telecom and trading in the group's shares was sticky at best.

Since then, Sema has not put a foot wrong. Acquisitions such as Olivetti's Italian outsourcing arm, Syntax, and BR Business Systems, which supplies the fare and timetabling database for Britain's railways, have shown Sema's ability to buy potentially high-growth businesses for bargain-basement prices.

The company has also been highly successful in developing global critical mass. The US, which represents just 1 per cent of sales, has until now remained out of reach.

But the recent overhaul of its complex shareholding structure means that Sema is no longer classified under US banking law as a bank.

As a bank, Sema was severely constrained in the US, able to supply only certain types of financial products, such as billing and related software systems for mobile phones.

Now that the Paribas stake has been converted into a simple minority shareholding, the US is open season for Sema.

With more than half the world market in outsourcing and systems integration in the US and huge opportunities in telecoms, that is pretty good news for shareholders.

Mr Bonelli says he would be disappointed if the US did not represent at least 10 per cent of group activities by 2001.

Any concerns that Sema might get stuck in the maturing defence and energy markets look groundless.

Half-year results to June, where profits rose 32 per cent to pounds 26m, show that finance has overtaken defence as Sema's largest sector, with telecoms growth a hefty 91 per cent on the previous year, boosted by acquisitions.

UBS forecasts pounds 63.5m profits for the full year. Though a forward price- earnings ratio of 37 is steep, this one should keep going.