FI board shares pounds 15m windfall

THE BOARD of FI Group yesterday shared a windfall of more than pounds 15m when a group of directors took advantage of the computer services company's strong share price performance to offload 4.7 million shares.

Hilary Cropper, the chief executive who personally pocketed close to pounds 6.5m from the sale, defended the decision. "Some of us have a lot of our wealth tied up in that business," she said, adding that the directors still had a combined 6.5 per cent stake. They have also agreed not to sell any more shares for 12 months.

The sight of directors selling large chunks of stock did not rattle investors, who scrambled to snap them up. It is understood that it took Warburg Dillon Read, FI's broker, just five minutes to place the shares with institutional investors.

Nevertheless, investors might reasonably ask whether they too should be taking profits in FI. The company has been one of the best-performing information technology stocks on the London exchange, doubling in value last year. It is also among the most highly rated, trading on an eye-popping 63 times expected full-year earnings.

Not that FI is giving investors any cause for concern. Results for the six months to 31 October, released yesterday, showed pre-tax profits rising by 75 per cent to pounds 7.5m on turnover up 53 per cent to pounds 109m.

The results included a contribution from IIS Infotech, the Indian computer group FI bought at the end of 1997 and which is already bringing in business. In the half, FI signed a pounds 20m three-year IT outsourcing contract with London Electricity that requires some work to be done outside the UK to save costs.

Lower wage costs in India also boosted FI's margins, which rose to 6.5 per cent, up more than a percentage point in the half year.

Meanwhile, Ms Cropper sounded upbeat on FI's growth prospects. She believes that over time its largest customers - who account for 70 per cent of revenues - will entrust more of their IT spending to FI. Work on the millennium bug, which yields 15 per cent of revenues, will tail off, but it will be replaced by preparations for the introduction of the euro in the UK and for electronic commerce.

The company is also planning to set up a division to implement Enterprise Resource Planning software - the packages that link different parts of a company, such as accounting, billing and stock management - for its major customers. It is also eyeing expansion into the United States or continental Europe, although Ms Cropper stressed that the company would not make another acquisition before the year 2000 at the earliest.

Ms Cropper dismissed fears of a slump in demand after the year 2000. "There are no barriers to growth in this market at this time," she said. House broker Warburg agreed, upgrading its full-year profit forecast by almost 5 per cent to pounds 16.1m.

Roger Phillips, an analyst at investment bank Granville, said: "Every key indicator of the company's financial performance showed an improvement. Any concerns the City has now relate to the valuation of the shares as opposed to the company's performance."

With its long-term contracts and solid forward order book, analysts think that there is little chance of FI disappointing the market in the short term. However, few in the City are brave enough to rate the shares, down 2p yesterday at 325p, as a buy.