UK Technology Company Performances Bounce Back
Listed technology companies witnessed a
dramatic upturn during 2009 where they saw values almost double
(94%) over the year, according to the Technology Index from
financial and business advisers, Grant Thornton UK LLP.
The Technology Index tracks the performance of
142 UK-listed technology-related companies outside of the FTSE 100.
It reveals a steady improvement in the performance of technology
stocks which saw their price index peak in Q4 2009, at the highest
level since Q4 2007. This may signal a re-bound to a more
consistently positive sentiment for the technology industry as a
whole after enduring over a year out of favour with the market.
Technology companies in the index outperformed
both the FTSE All Share and FTSE AIM All share in 2009 which saw
increases in value of 66% and 25% respectively in the last twelve
months.
Niki Dixon, Head of Technology at
Grant Thornton said: "Technology stocks are recovering well
from the market downturn. The capacity for technology companies to
generate considerable capital growth over a short period of time
has made the sector an attractive prospect for investors. The
significant level of merger and acquisition activity has also
contributed to the strong performance as larger players seek out
niche acquisitions."
"Although the performance of technology stocks
took a big hit from the market downturn, this recession contrasts
to the burst of the dot.com bubble where many of the key
technologies were relatively untried. We are now in a period where
both telecoms, through the rapid adoption of mobile broadband and
smart phone technologies, and computer services through the
adoption of cloud computing and other service based solutions, have
a much stronger foothold in the market and will secure significant
revenue growth as the wider economy comes out of the
recession."
Leading the charge of Q4's index is an
increase in the performance of some of the UK's larger and better
established technology companies such as semiconductor IP group
Imagination Technologies (share price up 46% in Q4 2009), which
announced soaring profits and forecast double digit revenue growth
for 2010, and business software provider Micro Focus International
(share price up 30% Q4 2009), which benefited from increased
revenues on the back of two significant acquisitions.
"Many of the companies within the Technology
Index will not have had to use their funds to restructure
financing. Within the sector, profits are typically reinvested into
research and development rather than paid out as dividends, so many
technology companies would not have been able to secure the large
amounts of debt that were seen in the wider economy. As a result
they have been able to implement cost saving strategies that
translate straight to the bottom line. Most of the companies within
the index are also relatively young and so are not plagued by the
problems of defined benefit pension schemes."
There were some notable exceptions to the
index's positive sentiment however, which include the performance
of Nasstar, which posted increased losses in 2009. Nasstar saw its
valuation fall by 60% in the last twelve months.
"Technology stocks often improve ahead of the
general market as the recession ends, especially where customers
can use their products to increase efficiency without hiring staff.
The worry is however, that as one of the hardest hit sectors when
the market dropped, any further blows to the UK economy could
reverse the current rally in share prices and once again we may see
technology shares at the forefront of stocks being sold."
ENDS
For further information, please contact:
Stephanie Aneto, Grant Thornton Press Office: on 020 7728 2940 or
stephanie.aneto@gtuk.com