Monday, 30 March 2009

The importance of touch....

Just by coincidence, one of the companies I met last week was fired up by the use of touch screens using an “iPhone”-like user interface, and over the next week I hope to be looking at a product developed using such technology alongside very large screens in some highly innovative application areas. Then, at a dinner, I raised the topic of such a “Touch” PC being installed in kitchens, primarily for use with cooking and recipes – and was surprised by the remarkable interest it received from the cooks around the table.

Windows Touch will be included in the next version of Microsoft Windows 7, and includes a very usable touch interface (see this
BBC article for a short demonstration). This touch interface is very similar to the user interface built into the iPhone and is apparently being incorporated into Apple Snow Leopard OS Update. (Indeed Windows 7 has been described as slick to the (Apple?) core.......)

Microsoft had a false start with this technology a couple of years ago with its
Microsoft Surface (TM) technology, based on tabletop computing. This technology was superb to use on a high-resolution, large screen laid flat as a tabletop – but for some reason the product doesn’t appear to have caught on and seems to be limited to the giving of very exciting demos. However, Microsoft Surface has now been rolled out to countries outside the USA, and appears to have gained some take-up in non-hostile user environments – although I’ve yet to see the technology in live operation myself, although perhaps it’s still early days in the UK (as its official launch in the UK was only last week).

Personally, I believe that on the back of Windows 7, touch technology will really start to take off. No, it’s unlikely to be adopted for “power” or professional” users who use a PC for hours on end each day – but for the adhoc user (e.g. the “kitchen” PC) it could become the ‘norm’ for good user interface experiences. If you are not yet looking at such an interface, then I would encourage all product managers to investigate and start planning now for the use of the touch facilities of Windows 7.

Wednesday, 25 March 2009

Maxima and Touchstone

Following on from yesterday’s post on listed software company valuations and private equity interest, I now turn to two more software houses that have grown rapidly through acquisition, but, following recent setbacks, have seen their share prices plummet (to a level where they have become acquisition targets themselves). Neither is heavily involved in the supply of software and services to the UK public sector, although both have completed projects for Government organisations.

Through my involvement with Microsoft, I have been a close follower of both Maxima and Touchstone who have sought to grow by acquisition of many smaller software companies over the past few years, primarily focussed on the supply of software and services from Microsoft’s Dynamics range, although both supply software and services based on other supplier’s accounting systems and infrastructure products.

Both companies have issued profit warnings this month – Touchstone’s was expected, as its share price was already down 90% since its peak in 2007, and only moved down a bit – whilst Maxima’s was a bit of a surprise which saw its share price plunge to under 60p (down from a peak of 330p in 2007).

There is obvious concern about both companies’ performances deteriorating further, but looking at the revised expectations for the two companies:

Touchstone Maxima
Revenue c. £30M £50-56M
Forecast profit £0.3M £5M
Net debt None/minimal c. £15M?
Forecast eps 1.9p 19.1p
Current share price 18p 57p
Market Cap £2.3M £14M
(apologies for the poor formatting - I've yet to find out how to publish tables in Blogger format)

Looking at these revised estimates, Maxima seems to managing the downturn better than Touchstone – perhaps due to over 50% of its revenue being recurring, and therefore giving the company some time to cope with any contract terminations – whilst Touchstone seems more dependent on new sales, and these seem to have been much more difficult to make in the current financial environment.

The concern must be that Maxima’s downturn, partially protected by its contracted recurring revenue, might be just as great as Touchstone’s but the downwards curve is perhaps 6-12 months behind Touchstone’s. However, if their share price continues its downward movement in expectation of this, perhaps Maxima will decide on a “kitchen sink job” for reporting in the year to 31 May 2009, so as to make the future prospects more palatable.

As with all shares, the key is to call the bottom – I think (hope?) Touchstone’s was the 15p it touched last week – meanwhile I fear that Maxima’s lowest price is a few months away. However, both are acquisition targets as soon as the worst news is out of the way - and then I wouldn’t be surprised to see them both bought by their existing management once the credit markets have recovered.

Of course, a merger of the two would build a very strong player in the Microsoft Dynamics market, a market that I believe will grow very rapidly once the financial climate changes for the better......

P.S. I have been a short-term holder of Maxima shares twice over the past 2 years, both times exiting at the right time – which is good as I’ve been a long-term holder of Touchstone, with my profits on Maxima only just off-setting my losses on Touchstone. I still hold a small number of Touchstone shares.

Tuesday, 24 March 2009

Private equity starts to target software companies again?

With many listed software companies shares prices hammered over the past months, there is no surprise that private equity has started to target these companies. In the Public Sector market, these depressed share prices and company valuations are likely to lead to more consolidation of suppliers (e.g. by the likes of 3i behind Civica, or KKR behind Northgate).

I’ll cover other companies in later posts, but looking at today’s news....

The Innovation Group receives bid

Ok – TIG is not really into the supply of public sector software, but it is a well known, listed software supplier with a chequered history, that has had some very well known names on its board (the most recent being Geoff Squire who resigned as Chairman recently).

Its share price had dropped from 55p in 2005 to 20p last year on the back of reduced profits, only to be hammered down to just over 4p recently following December’s announcement that it was being sued by one of its Canadian customers for £42M.

Now it is on the receiving end of a
potential offer of 15p from the private equity group Carlyle, valuing the company at c £100M – offering to complete due diligence in the next two weeks, but placing a pre-condition that the legal case be defeated by TIG....

The interesting hook is the timing of any court cases ... “Carlyle said that it could complete the first round of due diligence in two weeks and that its cash offer was subject to Innovation defeating a C$75 million (£42 million) lawsuit from Allstate, of Canada.” Clearly, if this case is to go to court (and possibly appeal) it will take years to get a court decision. So what are the options?

Firstly, I guess that the purchase price is discounted by all or part of the potential £42M claimed – leading to a bid price of around 8p (perhaps explaining why the current share price is only around the 7.5p mark).

Next, the Board is encouraged to agree a quick settlement with the customer out of court – say agreeing to pay £10-20M – personally I think this is unlikely – having been in such a situation before, senior management will be firmly entrenched in a “we will win at all costs” mode rather than a pragmatic “let’s get out of this as quickly and as cheaply as possible” mode.

The most probable scenario is that the case remains open, and the £100M offer is discounted by, say, 20% to cover a potential settlement (which the new owners are more likely to look for, to enable them to clean up their acquisition). So the current 15p offer drops to, say, 12p. (Or there is the risk that Carlyle do not bid at all).

The other option is that another bidder appears who is prepared to make an offer without any conditions on the legal action (except that his price will reflect whatever discount the current bidders have applied against their 15p bid). Then a bidding war might break out, without any pre-conditions.

If you are a shareholder like me, then I think it’s time to sit tight and see what happens – the bidding war would result in the best price, but without it, I’d bet on at least 12p from the current bidder.

Monday, 23 March 2009

apologies for the typo

Please accept my apologies for the typo in my previous blog - I've corrected the post, but for thos of you that received the post by e-mail or RSS feed, the sentence in question should read:

(However, projects like NPfIT where the contracts appear to have limited this ability for suppliers to exploit changes to fund overruns, have shown that in such confrontational approaches no-one ‘wins’, both client and contractor lose – and the end user gets an IT system that does not meet his needs).

Sunday, 22 March 2009

Civil Servants to lose their large pensions?

The IT disaster known as C-Nomis - an initiative, begun in 2004, by the National Offender Management Service to build a single offender management IT system for the prison and probation services – has been well documented over the past week following a National Audit Office investigation that found that the project had been hampered by poor management leading to a three-year delay, a doubling in project costs and reductions in both scope and benefits.

Computer Weekly used the project to illustrate one of its top tips for project managers, in its

“Number one in the list of Computer Weekly's top tips for project managers is advice that's supposed to be humorous, even slightly cynical. It says that projects with realistic budgets and timetables don't get approved.

But reality trumps our satire: big projects keep being approved on the basis of unrealistic estimates of their cost and time to completion.

One government project executive has told Computer Weekly that budgeting in government is a game: if the Treasury and the department in question want the scheme approved, they turn a blind eye to irrationally low initial estimates of the cost and the timescales.”

C-Nomis joins many Central Government projects that have been unmitigated financial disasters – costing taxpayers over half a billion pounds – but small in comparison with other failed or failing projects like NPfIT that have cost taxpayers billions of pounds.

In any commercial environment, there would have been an internal search for the guilty, inevitable unemployment, and (if the taxpayer had to bail out the company) potentially loss of agreed pension rights. It has been suggested that the same fate should befall civil servants who bear responsibility for these IT disasters – not only unemployment, but also loss of their valuable, taxpayer funded pensions. Will it happen?

No chance.....

Firstly, we’ll never find out who was truly guilty – as I noted in my post
NHS NPfIT – a successful Government project? the definition of a successful Central Government project is one that lasts more than two years. As civil servants typically only stay in their positions for around two years, this ensures that the person that started the project doesn’t finish it, and the person that finishes it doesn’t start it. If the project is a success, both can claim the credit; whilst if it fails, both can blame each other.

Next, it will always be the fault of the supplier – “underestimated the project”, “Government had no choice but to fund the overrun”, .... etc .... To a certain extent, and in some cases, I might agree, but in most cases the supplier has no choice but to work on the incomplete brief given for the project, bidding low to win the business, on the basis that the gaps in the requirements can be exploited to increase the contract value greatly. (However, projects like NPfIT where the contracts appear to have limited this ability for suppliers to exploit changes to fund overruns, have shown that in such confrontational approaches no-one ‘wins’, both client and contractor lose – and the end user gets an IT system that does not meet his needs).

Finally, and I would agree with this, through no fault of any one individual, the current method of Central Government procurement of major IT projects remains seriously flawed – contracts are insufficiently scoped, requirements incomplete, end-users inadequately consulted – and contracts let prematurely, before either client or contractor know what is really required. (e.g. see my post
How NHS NPfIT should have been procured)

We must move back to a procurement process that allows for major projects to be properly analysed and designed before final contracts are let – ideally in a phased approach that, whilst giving us less certainty on final costs, is more likely to wind up with a properly designed system to meet real end user requirements, for less cost and shorter timescales than the current processes......

Tuesday, 17 March 2009

Where now for Gladstone?

Unsurprisingly, but in a very close vote at yesterday’s EGM, Gladstone shareholders have rejected spurned bidder, Constellation’s request for a place on the Gladstone Board. As noted in the announcement:

“The Board of Gladstone hopes that the unsolicited approaches and initiatives by Constellation Software Inc. will now cease. Shareholders have twice voiced their rejection of Constellation's moves and their support of the current Board. The Board expects Constellation to respect this statement by its fellow shareholders and work constructively with the Company as a major shareholder. The Board of Gladstone looks forward to delivering the growth plans and shareholder value they believe is inherent in the business.”

So where now?

Firstly, the recent failed bid and EGM vote will undoubtedly have cost Gladstone a six-figure sum in fees and expenses, let alone a significant amount of management time. The diversion of time from the management of the company will inevitably have impacted the business, so even though the external costs will no doubt be shown as exceptional costs, the business will have suffered – let’s hope not too much.

Now the Board must try to concentrate on “delivering its growth plans”, something that will be difficult enough in the current financial environment without Constellation’s diversions. Gladstone is financially strong, a clear market leader, and should be able to succeed in growing both its revenue and profit – left alone, I’m sure that it will prosper.

But will third parties leave Gladstone alone?

Hopefully yes, but most probably no. I suspect that Constellation will keep its 29% stake, wait until the end of the year and then, when Stock Exchange rules allow it, will bid again for Gladstone. Had they bid 28p rather than the 25p they bid last year, I suspect they would have won control (30p would almost certainly have won). The risk is that, with Gladstone management time diverted into defence against last year’s bid and the recent EGM, Gladstone’s growth plans will suffer, and Constellation will again try a low-ball bid of 25p (or less).

Alternatively, will there be a white knight or third bidder? My view is that this would only happen if Constellation decided to give up and sell on its stake. I’m sure there are many potential bidders out there that are put off bidding by Constellation’s 29% stake, but I’ll bet that there will be a few people sounding out Constellation’s intentions and required price for purchase of their 29% stake.

Personally, unless they get a really good price offered, I think Constellation will hang in there and play a waiting game to see how Gladstone performs this year.

Tribal moving up

Tribal Group has today, as expected, announced an excellent set of results for the year to 31 December 2008, with revenue up 12% to £234M and adjusted profit up 21% to £18.6M. More importantly, net debt is just under £20M, and EPS up 20% at 14.7p. The current share price is 109p (up 5% today).

Looking forward, Tribal notes that “general economic conditions remain very challenging and the Group anticipates further tightening in overall public sector spending in the UK, particularly following the next general election. However, key areas such as education and health will remain priorities for government and we believe that we are well-positioned to support reform and changes in the implementation and delivery of public policy.”

But, as I
noted a few weeks ago, I would fully expect Tribal to use its “resilient” business model to help it avoid cost wherever possible and achieve some profit growth in 2009. Tribal has made great steps forward since the disposal of it Mercury Health venture, and I remain a strong supporter of its abilities in the UK Public Sector.

Monday, 16 March 2009

iPhone rumours

Regular readers will know that, despite being very much a “Microsoft person” in the past, I was totally sold on the Apple iPhone’s user interface, and moved across to a 2G iPhone last year. With our contracts up for renewal soon, it’s interesting to note the rumours relating to Apple’s mobile phones.

Firstly, with thanks to
The Register for bringing all rumours together, it would appear that the next version of the iPhone software (version 3) will at long last provide support for cut-and-paste, a major omission from the iPhone to date, and a facility that I could make great use of (when it is made available .... and always provided it works).

MMS is also rumoured to be on its way (Multimedia Messaging Service – the ability to send and receive pictures and/or video) – another embarrassing omission from the current iPhone software portfolio - although I am unlikely to be a regular user of this, as the iPhone camera itself remains weak, with poor resolution.

Other enhancements mooted include tethering (the ability to use the iPhone to connect a PC to the Internet), background running for applications, and the ability to run multiple applications concurrently (although I suspect that the iPhone hardware will limit any support for the latter).

We should all know more this week as Apple announces the new software version 3.0 tomorrow, Tuesday.

However, rumours also abound about a new iPhone being launched around June/July – at around 18 months after the launch of the first iPhone, and 12 months after the 3G version, this would be around the expected time for a new product (indeed – possibly a bit later than normal). Although the rumour of a “Nano-type” iPhone, smaller with reduced functionality, seems to be debunked by a number of sources.

Perhaps the biggest indicator to support this new product is reported in
Mobile Today, who expect that O2 will make the existing 3G iPhone available free of up-front charge on monthly contracts - trying to clear its stock of iPhones in time for the new product?

Hmmmm – I think I’ll wait until the middle of the year to see what the new product is or isn’t......

Thursday, 12 March 2009

Dead cat bounce?

There have been some comments about my prediction that the FTSE100 will drop to 3,200 – most probably around April – followed by a dead cat bounce. Firstly, what did I mean by a dead cat bounce?

In short, and at the risk of again teaching grandmothers to suck eggs, a dead cat bounce is small and temporary recovery in a financial market following a large fall.

Typically, when a financial market suffers a consistent fall traders attempt to detect when prices are at their lowest and then buy stocks hoping for a bargain. If they buy too soon prices may rise temporarily but then decline again. This is called the dead cat bounce. The idea being that even a dead cat will bounce if you drop it from a great height.

Did Tuesday’s big rise (4.8%) in the FTSE100 represent a dead cat bounce?

Given the falls over the past 6 months, I suspect not – it might be classified as a small bounce – but personally I still expect the FTSE100 to fall further, say to 3,200 - before a real dead cat bounce back to, say, 3,800 – followed by a return towards the original low.

However, please remember that, whilst a dead cat will bounce if you drop it from a high building, it doesn't mean it's alive. I still think there is more bad news to come out of the financial sector (Barclays in particular), the extra costs of pension funds, further declines in property values and continued de-stocking.....

Wednesday, 11 March 2009

A new player in LA Financial Management

I note with interest that TechnologyOne, the Australian software house, has won its first local authority customer in the UK (it is already one of the largest suppliers to local government in Australia and New Zealand).

In a testament to persistence (I think they bid their first UK LA tender some 5 years ago),
TechnologyOne has won Scarborough BC, supplying its financial management and works/assets solutions in a contract worth £218k. This must be a double reward for Joe Slattery, TechnologyOne’s Regional Director as it not only potentially opens up the UK LA market at last, but also gives TechnologyOne a win over the Civica (one of their main competitors down under), the incumbent FMIS supplier at Scarborough.

However, the UK local authority FMIS market is littered with the grave stones of failed attempts of new suppliers to become significant suppliers of their FMIS solutions to UK local authorities (with suppliers like Coda, Ross, Northgate, CyberScience, Foundation, Flex and JD Edwards all winning their first sites, but then failing to get more than a handful of other LA customers - in many cases, only one or two – before deciding that it’s not a market for them and their product). It can be a tough market, with users demanding more from their FMIS than some suppliers expect (or their products can supply).

But, having researched TechnologyOne during my time in Radius and Civica, I believe that their product, whilst lacking some key functionality for the UK LA market, can be enhanced relatively easily to fill any gaps. With their track record down under, a range of excellent bolt-on modules, and a friendly user interface, I suspect that TechnologyOne will succeed – albeit they will have to go through a pain barrier to achieve live operation by the target October of this year.

Will TechnologyOne be successful in the UK LA market?

My view is yes - most probably – but it will take a long time. I’d rank their core functionality, width of product offering, and technology above many incumbent suppliers like Civica, iBS, COA and Consilium – all of whom appear to be looking to preserve their existing customer base, rather than win lots of new UK LA business. TechnologyOne is in many more sectors than just local government, and will also be able to rely on revenue from those sectors to fund its overall investment in attacking the UK market.

I think that, long term, TechnologyOne can compete with the likes of Agresso, and possibly even SAP and Oracle – but it will take many, many years – I just hope that they are prepared for a very long battle to gain a significant foothold in the UK LA market.

Problems with e-mail distribution

For those of you that subscribe to pssst.... by e-mail, it would appear that the Feedburner distribution system didn't issue e-mail updates yesterday, Tuesday.

As I didn't receive e-mail updates to a number of other blogs to which I subscribe, I think the fault is with Feedburner, rather than this blog. Hopefully e-mail distribution will restart today....

Tuesday, 10 March 2009

Blog post 100

Since transferring my blog to this open pssst... blog last September, Google informs me that this is my 100th post, so now is the time for a quick review......

According to the statistics that I have, the most popular posts relate to my comments on the NHS NPfIT projects (greatly helped by a Computer Weekly article and a number of other blogs that linked to one of my posts), with Capita’s acquisition of IBS coming a close second, and the Constellation/Gladstone battle an easy third.

The most controversial posts have related to the use of Open Source, where this blog has followed and commented on both the Tories' and then the Government's attempts to adopt Open Source -
Conservative’s move to Open Source – a major mistake? and Open Source – who poached whose policy? It would appear that several of my readers fervently support Open Source (whilst some others, just as fervently, oppose it).

The blog has received many hits from search engines based on “FTSE predictions”, where in an Off-Topic post I’ve
predicted that the FTSE100 will drop to 3,200 – most probably around April – followed by a dead cat bounce, and then a return to around 3,300 by the middle of the year, with a recovery starting in September leading to the FTSE100 rising to around 4,200 by December. The FTSE100 seems to be on the way to 3,200, but now I’m beginning to doubt my optimistic prediction of a return to 4,200 by the end of the year.....

I’ll also point out that, as long ago as last September, I
predicted that many bank shares would be all but worthless, and that nationalisation was on the cards. In practice I’ve been proven right – bank shares have plunged by 90% since then (Barclays 85%) and both RBS and Lloyds/HBOS are nationalised in all but name – whilst I still suspect that Barclays will follow them in the fullness of time.....

On other predictions, this blog:

Successfully predicted a bid for Gladstone -
After Anite and IBS – where’s the next big acquisition? . And successfully predicted the failure of that bid - Decision time for Gladstone shareholders.

Followed the Northgate/Anite and Capita/IBS acquisitions and correctly predicted that the Northgate/Anite acquisition would not be referred to the Competition Commission, but that the Capita/IBS acquisition would be referred -
Capita's acquistion of IBS is referred

Was one of the first to predict huge losses for Local Authorities in Iceland, and to identify the use of Anti terror legislation by the UK Government -
Councils lose £0.5billion in Iceland terror attack?

However, I will own up to have predicted the demise of HIPs by this March (
HIPS will go - but when...) – this is now unlikely; although I still believe HIPs will go, I think this will now not happen until there is a change of Government. Also, although I still think that the PIGS will fly the EU this year, I wonder if the I is now for Ireland rather than Italy (P being Portugal, G Greece and S Spain).

I will aim to continue giving predictions where possible, mostly aimed at the market for, and companies in, the supply of software/services to the UK Public Sector; but as I have noted before, please remember that this blog does not aim to offer investment advice and you are advised to DYOR (do your own research) before you make any investments yourself.

In response to requests from readers, I will aim to continue comments on project management issues – typically general advice initiated by a significant project which is in the public domain (e.g. NPfIT or
FiReControl), or prompted by similarities with other areas, e.g. When Project Managers and Directors disagree......

Finally, I’d like to thank those readers who have sent me, some anonymously, items of interest, areas for investigation and, in some cases, good gossip (some of which I just can’t pass on......). I always welcome any suggestions and/or ideas for topics to cover in the next 100 posts – and all your comments. I maintain strict confidentiality on all such suggestions/comments and will not attribute them to the author without prior approval. Please e-mail me at

Monday, 9 March 2009

Capita/IBS – Northgate notes published

In my last post on the Competition Commission’s progress on investigation of Capita’s acquisition of IBS, I noted that the CC had yet to publish the summary of its hearings with Northgate. It would appear that the parties have agreed the editing of the summary notes of those hearings, and the hearing summary is now available for download from the CC web site.

The summary mentions the Social Housing (SH) market, but tends to focus on the Revenues & Benefits (R&B) market where the reduction in the number of suppliers brought about by the acquisition is significant.

I believe that the significant comment in the summary is that “Northgate did not consider that a merged Capita/IBS could dominate the R&B or SH markets, although it would be a very competent competitor to Northgate”. This, combined with comments about the threat of LA’s outsourcing IT procurement and management in their entirety not being seen as a major threat, suggests that Northgate has not strenuously objected to the acquisition (perhaps because Northgate may also benefit from the removal of IBS as a competitor?).

The one area where Northgate appears to have expressed concern is in the creation of shared service operations where Northgate “would be at a disadvantage bidding for shared services arrangements where it was not the incumbent supplier for at least one of the partners” - Capita’s acquisition of the IBS customer base clearly increasing the chances of this happening in the future.

According to Northgate, “the R&B market could sustain three competitors although it could decline to a point where it could only sustain two players” – but (unless their comments have been edited out) don’t appear to be saying whether that point has been reached yet or not (I would argue that it has – particularly when Northgate predicts that “there would be about six tender opportunities a year for R&B software”).

Confirming recent comments on Civica’s involvement in the R&B market, Northgate appears to have said “that Civica was no longer a serious contender in the R&B market, and that Civica had not been actively bidding.” And that “although 3i’s investment made it possible that Civica might re-emerge as a stronger competitor in R&B, the recent economic downturn made this less likely.”

Looking at the chances of a new entrant into the R&B market, Northgate notes that "significant technological or legislative changes requiring large-scale re-writes of R&B software would create opportunities for new suppliers to enter the market". However, later highlights that “the level of upfront investment needed to enter the market, and the time required, as further barriers to entry” (however, Northgate’s apparent estimates of cost and time for development have been edited out). Let me repeat that I believe the likely cost of development and testing of a new suite of back office R&B applications from scratch to be near £10M and take over two years to first delivery (and significantly longer to get to a stage of having three live reference sites).

In summary, therefore, unless some significant comments have been edited out, it would appear that Northgate comments have confirmed many of the points already raised in other hearings and documents. I’m sure that the hearings with Northgate have enabled the CC members to get a much better view of the overall R&B market, but I suspect they’ve not helped the CC to any decision other than the acquisition has reduced competition.

My own
opinion remains that Central Government could act in a more joined-up way, with the DWP coming up with a clear strategy (and funding?) for R&B software suppliers to enable increased investment (by both existing suppliers and new entrants) – although I fear this is unlikely, and most probably impossible. Unfortunately, the DWP’s funding of LA’s to purchase R&B systems over the past few years has not resulted in what the DWP would have wished for. Going forward, if it wants more than two real competitors, there must be more money put on the table – but hopefully in a way that delivers what Central Government wants.

Without it, even if the CC forces Capita to divest IBS, I suspect that there is a strong chance that there will still only be two main suppliers – Northgate and Capita – with a strong possibility that existing IBS customers will not have the security, nor negotiating power, that they would have had with IBS as part of Capita.

If the Competition Commission were to let Capita continue to own IBS, it has a great opportunity to put in place protection for the interests of existing & future IBS users, and possibly even some safeguards for other Capita R&B customers. Unfortunately, Central Government is not joined up, and I fear that the CC will have no choice but to act against its own restricted remit, and will be unable to provide the initiatives that this market really requires.

Thursday, 5 March 2009

Gladstone/Constellation update

I know that this blog has a lot of readers interested in the ongoing battle between Gladstone and its spurned bidder, Constellation Inc. There has been a new letter to shareholders from Gladstone, urging shareholders to reject Constellation’s request for a place on the Board.

In the letter, the Gladstone Board is complaining about Constellation’s actions at last week’s AGM, removing the Finance Director and constraining Gladstone’s ability to either buy more shares in the market, or sell existing shares held in treasury. Something that I fear the Board may have to get used to if it cannot resolve its current dispute with Constellation.

Gladstone has also taken the unusual step of obtaining the names and addresses of shareholders who hold their shares through nominee accounts, and using Grant Thornton to write to them with a voting form for the EGM vote, urging them to vote against the resolution. This, combined with Constellation’s success at the AGM, suggests that the EGM vote on 16 March could be close....

Unfortunately, this disagreement does little to help the Gladstone business – it is incurring extra costs to fight off Constellation, and the fight is undoubtedly taking up significant amounts of management time – time that should be used to manage and drive the business forward.

I remember that when Radius was listed we had a dissident major shareholder who, similar to Constellation, was a constant thorn in the side of the Board, requesting EGMs and involving senior management in vast amounts of unnecessary work. No-one won out of the disputes, and the company suffered through the diversion of senior management time – and I suspect that may well be the outcome of this protracted battle between Gladstone and Constellation.

In practice, Constellation owns just under 30% of Gladstone, and one could argue that they should be allowed a seat on the Gladstone Board on that basis alone. One thing I learnt from the Radius experience was the need to have your major shareholders on your side – if they’re not, the company will be unable to function properly until either they are, or they are no longer shareholders.

But I suspect that Constellation is not about to give up its shareholding – even if they fail to get a Board position (unless there is a new bidder offering a significant premium to the 25p Constellation paid for its shares). Whilst if they get a Board position, I’m sure they would shake up the existing management – yes, they might use their position to try to acquire the company on the cheap – but without Constellation on the Board, I fear that the current Board may not deliver on their promise to grow the business over the next year any rate, and if so, Constellation may still get Gladstone “on the cheap” early next year.

No doubt Constellation will respond to Gladstone’s latest letter – it will be interesting to see what new attacks they make on the existing Gladstone Board.......

Wednesday, 4 March 2009

Definition of a pessimist

Following yesterday’s blog on Project Management truisms, one of my ex-managers reminded of one of my discussions with colleagues - several years ago - following my review of forecasts for projects and sales within a new division for which I had acquired responsibility. I was quickly branded a pessimist, and asked if I could produce reports which were more optimistic. My (standard) response was to refer to the definition of a pessimist:

A pessimist is an optimist with experience.

Although I left the organisation shortly after the above discussions, i was reminded that in practice and the fullness of time, it turned out that even my pessimistic forecasts were proven to be mildly optimistic.....

Tuesday, 3 March 2009

Project management truisms

It seems as if the on-line community has decided to publish collections of statement, sayings and jokes about project management over the past week. Many of you will have read my collection of rules of project management, but Tony Collins of Computer Weekly has published a list (which you can read in full here) – several of which I absolutely concur with:

Projects with realistic budgets and timetables don't get approved – and the best example here has to be NPfIT, although I’m sure every organisation has a number of projects that fall into this category.

The more desperate the situation the more optimistic the progress report – and in my own experience “the heavier the progress reports get”

A freeze on change melts whenever heat is applied – which is where the hairy-arsed project manager, who enforces his moratorium on change forcefully, comes into his own (but typically also alienates himself from senior management and future work with the same organisation)

If at first you don't succeed, rename the project – I always admired a competing company to Radius, whose director insisted that project names included the scheduled completion date (e.g. NPfIT December 2008) – although I still didn’t see their projects being delivered on time

Everyone wants a strong project manager - until they get him – again an absolute truism – my best project manager was PeterB – someone who spoke his mind and was difficult to keep under control – but his projects were (nearly) always successful and on schedule - his customers knew their responsibilities and he managed them as forcefully as our own staff, to achieve successful outcomes.

Projects don't fail in the end; they fail at conception – as regular readers of this blog and web-site will know, in my consultancy work to turn around problem projects, almost everyone has gone wrong before the original contract was signed – NpfIT being one of the most notable examples.

Finally, if you want some of these truisms illustrated in cartoons, click

Monday, 2 March 2009

IDOX & Gladstone – a tale of two AGMs...

In last week’s post before their AGM’s, I pointed out the need for both IDOX and Gladstone to produce positive, informative announcements at their AGMs to address the drift in their share prices. What we got were two totally different approaches – and two totally different results....

IDOX produced a one paragraph
statement along the lines of “steady on the tiller”, that was short on any detailed information. However, the AGM appears to have gone well, with some discussions about “large pipelines”, “bid activity ahead of last year” and “robust demand”. But there appears to have been some frustration expressed by Directors at the lack of recognition by the market of IDOX’s value (a view that I would share). All AGM resolutions were passed, and the share price rose marginally.

Gladstone meanwhile, in the face of an attack from spurned bidder and 29% shareholder Constellation, produced a really positive, long AGM
announcement and combined trading statement. Although short on quantified values, the announcement named customers, including some significant new customer wins, and detailed numbers of sites and facilities to be supplied. All-in-all, a very positive view......

Yet at the AGM (see here for the AGM results
announcement), the majority of resolutions were voted down, the Finance Director not re-elected, and the auditors not re-appointed. In addition, the company’s ability to use its cash pile to buy shares in the market was curtailed (as was its ability to sell any of the 4.5M shares currently held in treasury). Whilst I have little doubt that this happened because Constellation wished to show its strength (and the constraints on the company buying/selling shares will assist them in their ongoing battle with the Board), questions have been raised about “dark forces” being at work, and perhaps there is another agenda in place – that does not include Constellation......

As a result, the share price has also increased marginally, and from a recent low of under 19p has today returned to be above 20p, but still some way away from Constellation’s 2008 bid of 25p.

What next ? – the EGM on 16 March 2009, to vote on Constellation’s request for a position on Gladstone’s Board. I think this whole saga could run on and on – unless another bidder appears – something that I feel is unlikely at the moment unless Constellation wishes to dispose of its shareholding – and I don’t think they want to do that just yet......

Update: the Gladstone situation made it into the FT today. The FT article quoted Constellation as saying it was committed to Gladstone’s future success but had voted down several resolutions because of concerns about corporate governance, director conflicts, compensation and other financial matters. “We believe that the removal of Mr Montgomery from the board was a necessary step towards addressing these concerns.”