Delphi Group Plc, the UK IT services firm, was bought last week by French temping agency Adecco SA for 167m pounds ($272m), putting to an end the downward spiral of its share price that saw its market capitalization halve in six months. The acquisition quadruples overnight Adecco’s IT staff supply, and marks the end of a troubled year for the London-based firm, which saw an unsuccessful attempt to list on Nasdaq, some disappointing financials, and an abortive attempt to make its Solutions division work.
Delphi perhaps partially fell victim to the mid-1998 slump in the prices of IT bodyshops. As the UK felt it was heading to recession, analysts predicted staffing agencies would be the first companies to be hit. LSE-listed firms such as Delphi and Parity Group Plc found their share prices tumbling. Unlike Parity, which weathered the storm due to its fingers in the pies of consultancy and bespoke development, Delphi’s concentration on staffing wasn’t enough. Its stock fell from over 7.50 pounds to less than 3 pounds in less than six months.
At the time the market had particularly little confidence in Delphi’s ability to pull off its ambitious plans to conquer the US. The group had bought Massachusetts-based outsourcing firm Alpine Computer Systems for 15.1m pounds ($25m) in 1996, and by last year Alpine’s heavy losses took their toll on Delphi. Tony Reeves, Delphi CEO, was quoted as saying: We cannot allow Alpine to bleed any more cash from us. This came after 1998 interim results showed that, despite a 22% increase in revenues, the group’s pre-tax income had plummeted 70% to 2.1m pounds ($3.4m). The group had lost 3.1m pounds ($5m) in exceptional charges, 3m pounds of which came from US operations.
Delphi decided to sell Alpine, at the same time announcing it would also sell off its 30.8% holding in French consultancy Decan. The company had realized its attempts to diversify from the training and staffing markets had failed, and announced it was to stick to what it knew best. Only 6% of its 1998 revenues came from solutions, the remainder from staffing and training. While the larger area grew by 26%, the solutions arm’s revenues fell by 1%. The Decan shares were, sold for 25.3m pounds ($41.2m) to Metamor Worldwide Inc, the Houston, Texas-based services company, six months later in February 1999, around the same time Adecco stepped to buy Delphi. As yet, Delphi has not found a confirmed buyer for Alpine, which broke even in the fourth quarter for the first time, and it remains to be seen whether the new owners will wish to continue negotiating the sell-off.
Delphi was founded in 1972 as a staffing agency, initially under the name Computer People, which continues to be the name of some of its subsidiaries. Its US operation started in 1976. It listed on the LSE in 1987, but soon found the UK recession of the late 80’s and early 90’s took its toll, resulting in a management change in 1994 to pick the company up. The group rebranded as Delphi in late 1995 to reflect the many acquisitions the company had made. Since 1994, nine companies have been bought and subsumed into the group, both in Europe and the US. Its US operation now accounts for 42% of its revenues, with mainland Europe accounting for 10%.
