anything going on, page-8

Looks like predictions aren't flash for the IT services industry and UXC is not alone in having its share price hammered...(read below commentary from Huntley re Oakton OKN)...

... it could be that the diversification of UXC to include field force could be a saving grace if this utility and government spending keeps up over this period even if the IT Business Solutions division has some difficulties:

Huntley comments from 7th November (rates OKN a BUY)- sourced from E*Trade

OKN’s share price plummeted along with other stocks in the IT services sector, as investors fret about the impact of a serious economic downturn. IT services companies in weak conditions can suffer precipitous earnings falls when contracts dry up and staff utilisation declines. At the AGM, management indicated the outlook has become less predictable: ‘General market sentiment is more conservative than at the start of the financial year.’ In relation to government IT spending: ‘1st Quarter FY2009 spend has been below last year. Spend is currently expected to increase sometime in the future following a number of reviews. H1 earnings are expected to be marginally ahead of last year and full-year earnings are currently expected to be ahead of last year.’

Business Impact: Despite several mitigating factors, there is a strong chance earnings will fall sharply over the next two years. Taking a quite conservative view we now forecast: profit to fall 20% in FY09, a further 18% in FY10, a recovery from 2011 to reach $31m in 2014, and then to grow 3.5% annually. Over this time the dividend payout ratio increases from 92% to 95% except in FY09, when we assume the potential need for redundancy payments will leave only 55% of profit for dividends. We discount dividends at a 12% cost of equity, which generates a value of $2.79. In the past, investors have regarded IT services as discretionary. Traditionally a cost efficiency tool, IT is now increasingly a revenue generating instrument, particularly since the advent of the internet. Commerce is in the middle of a transformation that we expect will elevate the volume of work for the likes of OKN indefinitely. We cannot predict where the share price is headed in the short-term, but there is a good chance it will settle around current levels until there is greater clarity regarding the economic outlook.