Macro economic slowdown after the US attacks will take its toll on Temenos, Global Technology`s Swiss investment, and Glotec management says it is taking a cautious stance regarding its dual JSE listing.
Gavin Leonard, Glotec`s CFO, says the company is adopting a cautious attitude with regard to the announced dual listing on the JSE after Temenos warned its margins would be affected in the short-term by the IT slowdown after the US attacks.
Temenos suspended its trade on the Swiss Stock Exchange four minutes before close of trade on the JSE yesterday afternoon, fearing news of trading difficulties had been leaked to the market before its official announcement.
In that short time the local market reacted swiftly, and the Glotec share closed at 75c after opening at 90c. Leonard believes this was an over-reaction and says the Swiss exchange is tightly governed and any suspicion calls for an immediate suspension.
Temenos, supplier of integrated banking systems, released a statement saying it is feeling the effects of the general slowdown as well as the added uncertainty of future IT spend after the 11 September attacks. Although margins will be tighter than anticipated, it is taking immediate action to protect profit.
"Following a weaker than expected September for new contracts, we are revising our revenue forecasts for the business to allow for the increased uncertainty that exists in the marketplace since the 11 September events," says Temenos management.
However, the company is moving quickly to limit damage, and is looking at extensive cost-cutting to protect margins.
Part of the plan involves transferring certain back-office development and client support operations to its technology centre in Chennai, India, more quickly than originally planned. This and other cost initiatives are expected to yield savings, which management expects to start accruing from January 2002 onwards.
The company says that although this action is expected to help margins in the medium-term, short-term margin pressure is "inevitable". It does, however, still expect revenue growth to be in the double digits.
JSE-listed Glotec has a 15% stake in the Swiss-listed company and early last month announced its intention to split its listing on the Johannesburg bourse to house its stake in Temenos in a separately listed counter.
Leonard says not all the documentation to effect the split has been signed, leaving the company with breathing space to watch proceedings before making a final decision. Investors can expect a formal announcement from the company in due course.
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