Since its major crisis point in 1988, Sherwood Computer Services Plc has managed to maintain a profitability record that now spans three and a half years. This is put down, firstly, to stringent cost controls and reorganisation of the company’s operations into 12 small teams, each dealing with separate contracts, and controlled by a small management team above. And, secondly to the change in Sherwood’s business mix, with a concerted move to the more profitable open systems market. At the interim stage, pre-tax profits were up 204% to UKP1.7m, while earnings per share rose 153% to 16.7 pence, although turnover did drop again by some 11.8%. An exceptional credit of UKP522,000 resulted from the release of a provision to alter the company’s pension scheme from being a final salary scheme to a group money purchase scheme. Net assets reached the UKP6m mark, up 18.8% from the end of its fiscal year, and Sherwood currently boasts UKP2.2m cash in the bank. Thus, in view of both these sustained profitability levels and a feeling of confidence in the future, the proposed dividend increased some 16.7% to 1.8 pence. The drop in turnover was not perceived as worrying, being attributed to the transfer of disaster recovery revenue into the joint venture with ICL Plc in April 1991 (CI No 1,664). Currently contributing UKP122,000 to turnover, Guardian is quoted as performing ahead of initial expectations. Sherwood focuses its activities primarily on the financial service sectors and local government. All areas of operation were said to have contributed positively to profits, a heartening fact given the well-publicised problems in the computer services industry in general and in the group’s primary markets. Even more encouragingly, although a reported 80% of revenues is generated from existing clients, the software and services company claims to be seeing high levels of new business too. Within the insurance market, it is Lloyd’s of London that makes up the biggest share of the group’s business, contributing over 50% of turnover. Despite the fact that the Lloyd’s insurance market has suffered record losses this year, Sherwood has been cashing in on the fact that underwriters are now desperate to increase the efficiency of operations and reduce day-to-day running costs. Therefore it has been pushing its Sceptre product, a Lloyd’s underwriting system plus related services, as the solution for improving performance. Evidence of success in this venture is believed to have come in the form of new orders with G W Runoff and Lloyd Roberts & Gilkes, taken in the first quarter of this year. Financial terms were not disclosed for the first contract, but the second was valued at about UKP1m. In addition, the terms of a 10-year contract were agreed recently with Sturge, the single largest agency within Lloyd’s. Sceptre is to be implemented here within a time-scale of three years. Furthermore, a collaboration agreement with Bankside has been finalised. This involves joint research and development work on the Sceptre product as well as a joint marketing effort. Sherwood proudly declares that Sceptre is increasingly being accepted as the de facto standard in the Lloyd’s market, and is expecting many additional orders in the second half of the year. The acquisition of Cairn Computer Systems in early 1992 was considered a strategic move to broaden the group’s client base in this area, and Sherwood professes to be pleased with the integration of the company to date: positive contributions to profits are expected for the second half of this year. Another sector perceived to be very attractive is that of insurance companies. However, the attempt here to convert interest into firm orders has been proving slower than expected, a fact blamed on the state of flux that the industry is in. Nonetheless, the Gloucester-based firm is expecting to see market share grow in this field throughout 1993 via its Senator product and related services, and is hoping to repeat the success it has seen within Lloyd’s. On the other hand, some of Sherwood’s largest clients are fou
nd in the related retail financial services market, where high levels of repeat revenues prevail. This area now accounts for some 20% of turnover. The new Actuary’s Workbench product is currently being subjected to an extensive marketing campaign, and is said to be generating interest in both the life and non-life markets. And research and development work is currently underway on Life, a client-server architecture for life insurance companies. The government sector is said also to boast a large prospective client list, especially in the area of housing. Threshold, the integrated housing management system, continues to see healthy sales levels, with 15 implementations underway, five new sales in the first half and two new sales in the second. Household, the Threshold derivative aimed at housing associations, recently won a major contract with Merseyside Improved Houses, and another similar order was gained at the end of June. Likewise, the company’s agency base, which works in the central government arena, is said to be expanding and doing well on the strength of contract renewals. Sherwood, although most pleased with progress to date and confident of sustained levels of organic growth, is intent on maintaining its strategy of selective acquisition. However, interest is definitely to be centred on companies with an established client base in Sherwood’s major marketplaces.
