Highlights of the interim results:
- Operating profit (pre-goodwill amortisation) of£5.7m (2000:£1.9m loss)
- Profit before tax (pre-goodwill amortisation) of£5.3m (2000:£2.3m loss)
- Earnings per share (pre-goodwill amortisation) of 5.1p (2000: -1.7p)
- Forward order book of£250m at 30 June 2001 (2000:£236m)
- Growing success in the public sector market winning six new contracts this year for the provision of IT services enhanced by e-solutions through our OneGov range of services
- Growth in SAP with one new contract win in the public sector division
- ITNET has won four out of six of the Siebel implementations in the UK's public sector market to date
- ITNET and Southwark LBC have signed an outsourcing agreement worth at least£30m for a period of up to seven years, to provide ICT services including desktop support and SAP. ITNET is working in partnership with the council to enable it to meet the challenges of the e-government agenda
- ITNET has signed a£9m contract extension with Hounslow LBC taking the total contract value to£30m over seven years. This extends the scope of the existing revenues and benefits contract and delivers continued improvements to the existing revenues and benefits application system
- Haringey LBC has awarded ITNET the contract to provide Customer Relationship Management (CRM) services using Siebel for the council's 'Access to Services' project. The contract is worth£3.5m over seven years, with an option to run for an additional three years
Commenting on the results, Bridget Blow, chief executive, said:
'We have taken full advantage of a buoyant public sector market, winning 11 out of 15 bids to date - the introduction of services like OneGov has differentiated us in this market place.
'Our strategy to focus on long term IT contracts and project opportunities with our existing customers continues. We have demonstrated an ability to capitalise on new market opportunities such as Modernising Government. This, coupled with the strength of our order book and forward pipeline, supports our confidence that our underlying growth for 2001 will be in line with expectations.
'The management team continues to demonstrate a strong commitment to the business and is enthusiastic about its future prospects.'
Public Sector Highlights
A number of business wins with local councils has resulted in underlying revenue growth of 15% to£36.7m (excluding Hackney LBC). Revenue in the first half of 2001 from Hackney was£3m and ceased on 31 March 2001. New contracts totalling£62.3m covering a period of up to seven years have been signed in 2001 to date to provide councils with IT services that address the expanding scope of e-applications used by councils. An immediate requirement is to enhance the more traditional back office applications to provide citizens with electronic communication channels for constant access to local authority information.
Such new contracts include Southwark and Haringey LBCs, Epsom and Ewell BC, Cotswold DC, Wycombe DC and Milton Keynes Council. We have maintained our excellent relationships with existing customers and have provided additional services to our them to the value of£22.8m including Hertfordshire CC, Enfield LBC, Colchester BC and Birmingham City Council.
Enfield LBC has upgraded its SAP service with our Business Direct product, in a contract extension to incorporate e-procurement and an additional 350 users. This is now the largest SAP/ASP service running in local government. We are now experiencing an increase in interest from other local authorities for our SAP/ASP services and have a new contract win at Worcestershire CC to supply SAP software and initial implementation services such as training. In addition, we announce preferred supplier status with Oxfordshire CC, who plan to utilise our SAP model to achieve 'e-government' with SAP HR, financials and e-procurement solutions.
Within the central government market, we have added our first win with a regional development agency, the South West of England Regional Development Agency. This is an example of how we can successfully offer Modernising Government capabilities to government agencies. The partnership agreement was drawn up to provide desktop management services incorporating a host of CRM solutions. These include video conferencing and digital TV at every desktop, network infrastructure, IP telephony, website and intranet development, document image processing, Cable and Wireless' web-hosting services and Siemens' Metadirectory, in addition to Windows 2000 desktop and server outsourcing services.
Service delivery has continued to improve in our revenues and benefits contracts. We have today signed a contract extension with Hounslow LBC for a revised contract involving the delivery of additional services and payment of additional revenues (the contract is now worth£30m over seven years). The Hounslow council tax collection rate in the financial 2000/2001 was the best ever achieved by the council. Similarly, the benefits service has also improved and we will be using our model to enhance further other benefits administration services. Since signing the original Heads of Agreement with Islington LBC in January 2001, we have achieved substantial improvement in the service delivery for the council. We expect the contract to go forward benefiting both the council and the group.
Public sector success is expected to continue with prospects looking promising, as 94% of local councils have submitted Implementing Electronic Government (IEG) plans to fulfill the government's 'e-Government' vision and to secure the funding that is to be released between 2002 and 2004. We have successfully established OneGov as the answer to Modernising Government with much interest being generated across the sector.
The forward order book has shown consistent growth and stands today at£276m. This gives us confidence in our ability to meet our full year financial objectives in line with expectations. In addition to the committed order book, there is a strong pipeline of potential orders that we are well positioned to win. This, together with the new market opportunities, supports our confidence in the future prospects for ITNET.