Misys: 2005/6 trading statement

7:57 a.m. Tue 27 Jun 2006

Misys banking software business performed well with strong 9% increase in total sales and a 15% increase in initial license fees (which are a leading indicator for other revenue streams). Although operating margin has fallen this the result of exceptional costs.

The healthcare software business faces more serious problems with an organic decline in initial license fee revenues of 4%, and a total closing order book that was down 8%.

Misys failed to sell its IFA network, Sesame. This business still looks like an anomaly within a software and IT services company, and the fact that it could not be sold is worrying. However, its current performance is good with 18% growth in sales and slightly stronger margins.

Just as important as the performance of the businesses is the possibility of a management buyout. It is being seriously considered but no actual offer has yet been made.

At 215p Misys is trading on a prospective PE of 15× with a 3.2% yield. The performance of its businesses is mixed and Sesame remains an uncomfortable fit with the rest of Misys.