In May we reported on Microgen’s decision to undertake a wide-ranging strategic review (see here). This is still ongoing and it could be several months more before shareholders will be informed of the management’s decisions.
First half results appear to be much as expected, with top-level revenue falling by 12%, to £14.9m, as one-off (and lower margin) consultancy revenue declined. Operating profit was maintained at £4.5m as a consequence of the improved revenue mix.
The two divisions of the business; the Aptitude Systems Division, providing enterprise level application products and solutions, and the Financial Systems Division, focused on the wealth management and banking sectors, are now roughly the same size, although the Financial Systems business is significantly more profitable.
The management is looking for additional growth in Aptitude Systems, extending its reach into new sectors (healthcare and telecoms) and through new partners.
In Financial Systems, there is currently considerable focus on wealth management operations as banks and other financial services companies rebalance their businesses. Microgen, with its established market position, should be well-placed to benefit from this activity, with the recent investment in the 5series trust and fund software.
Consensus forecasts suggest that operating profit for the year will be maintained at the 2012 level of £9m. With the solid performance in the first half and a strong balance sheet the management are confident of progress and certainly the company has many options open to it. Nevertheless, an extended strategic review cannot be helpful as customers make long term purchase decisions. We look forward to further announcements and a clear direction being set over the next few months.