While software house MMT Computing Plc is still ticking over, it believes that attempts at broadening its skills base to cover open systems as well as its traditional mainframe business will help restore margins to pre-recession levels. While turnover was flat at UKP3.2m, pre-tax profits rose 23.8% to UKP535,000. But this was after gains of UKP225,000 from selling part of its stake in Total Systems Plc. This has now been cut from to 3% 6.7%, but according to chairman Mike Tilbrook, the remaining holding continues to show a useful paper profit. Moreover, director Paul Haines said that one of the London-based group’s tactics for boosting profits was to look for bargains among the competition – the stake in Total was bought at a very low price, he says – then buy a small stake, and cash it in. This not only generates extra profits, it also helps build relationships, with other companies, so, for example, MMT may be able to use a partner’s staff if necessary and vice versa. And the group is well placed to do this, he adds, because with UKP4m in the bank, it is cash-rich. So, because the board is quietly optimistic about the future, it is recommending an interim dividend or 1.25 pence per share, a 14% increase on last year. This optimism is based on several factors. Although the period from Christmas to the end of February – MMT’s accounting period for the first six months of its fiscal year ends then – was very quiet because a lot of orders were completed around that time, Haines says trading has now picked up again. Significant new business includes contracts won from Mercury Communications Ltd, the Ministry of Defence and The Rank Organisation. Furthermore, competition has reduced somewhat because a number of the smaller software houses have disappeared due to the recession; and the group is recruiting again, after having frozen this activity for the past couple of years. During the past couple of weeks, MMT has taken on three or four extra staff, and plans to add one a month for the forseeable future, as needs dictate. The new recruits have specialist skills in open systems, particularly fourth generation languages such as Oracle Corp’s and Ingres Corp’s, as well as in networked personal computer systems. The group has also set up an in-house Oracle development facility at a cost of UKP15,000.

Open systems

In the past, it had to use customers’ own equipment to develop applications. While approximately 80% of revenues still come from mainframe-related work, Haines sees open systems as a major growth area because, he says, MMT’s customers are generally drifting in that direction. Although margins have been hit over the past few years by competition from contractors and because the company has kept its prices fairly constant, he said the decision to cross-skill employees should result in increased margins. Before the recession, staff utilisation levels were between 95% and 99% at any one time, but during the recession, this fell to about 90%. But, if staff develop skills in multiple environments, productivity should rise again. Also, Haines reckons that fair play has helped it win repeat orders. While much of the competition charged more for new skills, for example in distributed computing, MMT’s policy, he said, was to charge the same rates for all types of expertise. So, because it didn’t take advantage of customers when times were good, it now has the long-term advantage of customer loyalty. Important for a firm that focusses on generating repeat business from big blue-chip companies rather than one-off jobs from smaller organisations. MMT has two main lines of business: developing, implementing and supporting custom applications; and software facilities management, where it looks after the day-to-day operation of a customer’s software. In-house facilities management and development generates about 25% of revenues, UKP1m comes from long-term software support, the rest comes from on-site time and materials consultancy and development work. MMT’s main business, based in London, specialises in retail and finan

ce. Traditionally the major revenue earner, it was adversely affected by difficult trading conditions, particularly in the retail sector. Of the branch companies, MMT Computing South East Ltd, which is more consultancy-oriented than its big brother, benefitted from a buoyant insurance market. MMT Computing AS Ltd, the only one to deal in a vertical market AS/400 software – saw a lot of new work because, Haines said, many users are converting from mainframes to mid-range systems. The 47%-owned Reading business made a modest contribution, much improved on last year, but the training division continued to make a loss. MMT operates purely in the UK South East where Haines claims 2% to 3% market share, and has no plans to set up a regional office up North until this market is saturated, although an acquisition is possible.