The management of Peresys, the financial software development arm of financial services group Peregrine, is angling to buyout the business after its parent posted dismal results for the past financial year.
According to Peresys MD Ashley Mendelowitz, Peresys is a sound business with a steady stream of annuity income, although its new business has dropped off considerably with the decline in the IT industry and the financial markets.
Peresys is one of two companies that supply trading systems to JSE stockbrokers in the form of its Hermes system. It also supplies various trading support products to the financial services industry such as a retail portfolio system, a securities lending administration system and a broker research document management system called Greenjar.
Mendelowitz says Peregrine has been in contact with possible local and offshore suitors for Peresys, but a buyout is management`s preferred option.
"There has been a divergence between expectations and direction between Peregrine and Peresys, especially with Peregrine`s new strategy," he says.
Earlier this week, Peregrine reported a 51% drop in headline earnings for the year ended March 2003 to 25.8c per share as profit from operations plunged by 47% to R69.4 million and attributable earnings tumbled by 86.6% to R13.4 million. However, revenue grew by 10.7% to R255.7 million.
The financial results statement indicated that Peresys was up for grabs as the group`s focus returned to its core business of wealth management as illustrated by the purchase of Citadel.
Peresys`s net operating profit plummeted to R836 000 in the past financial year from R3.449 million the year before as the new installations of its Hermes product was completed following the implementation of the JSE`s Stock Exchange Trading System (SETS). Hermes is the system that the dealers see on their screens, while SETS is the conduit for distributing the market information. Hermes is used by about 20 of the JSE`s 70 registered stockbrokerages.
Cost increases for Peresys have included employing more staff (from 35 to 65) to support its products and an increase in research and development to bring more products to market. There has also been an effort to expand into overseas markets with the appointment of sales representatives in Australia and Europe.
"We aim to use the current slump in the financial and IT markets to bring the company right in terms of developing products that will do well when the market upturn happens," Mendelowitz says.
Peresys recently won the tender to develop a trading system for the Bond Exchange of SA and is developing a messaging system that will meet international financial markets` standards.
"Hopefully, we will conclude a deal about the sale of Peresys within the next six months. First prize will be a management buyout," Mendelowitz says.
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