IT industry performance-experian corporate Health Check.Experian  The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. with major companies such as NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98). NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Semiconductors, Compaq (Compaq Computer Corporation, Houston, TX, www.compaq.com) Compaq was the leading PC manufacturer when it was acquired by HP in 2002. Founded in 1982 by Rod Canion, Jim Harris and Bill Murto, one year later the company shipped 53,000 PC-compatible COMPAQ Portables, resulting in $111 , Motorola (Motorola, Inc., Schaumburg, IL, www.motorola.com) A leading manufacturer of semiconductor devices, electronics, telecommunications and satellite systems. Founded in Chicago in 1928 by Paul V. , Fujitsu (company) Fujitsu - A Japanese elecronics corporation. Fujitsu owns ICL, Amdahl Corporation, and DMR. Home USA, Japan. , Cisco, Hewlett Hewlett may refer to: People with the surname Hewlett:
The average return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). among IT companies has fallen by a fifth over the last 12 months and by more than a third in three years, with the fall in the latest quarter from 22.76% in Q4 2000 to 20.8 1% in QI 2001 the steepest quarterly decline seen in the sector since Q4 1999. Three years ago, the IT sector's profitability was 2.50 times the industrial average; it has now dropped to less than twice the industrial average although it has continued to hold on to its third place in the industrial ranking. Average profit margins among IT companies have fallen at a quarter of the rate of the fall in ROCE ROCE See: Return on capital employed over the last 12 months but the rate of decline has accelerated in the latest quarter, with the average margin down from 5.15% in Q4 2000 to 5.04%. Perhaps surprisingly, average profit margins in the IT sector have always been lower than the industrial average. However, whereas three years ago the sector average margin was 10.7% below the industrial average, by QI 2001, it was 29% below. The sector ha s also slipped one place in the industrial ranking in the latest quarter, to 17th place. The year-on-year fall-off in return on shareholders' funds among IT companies was about the same as ROCE, falling from 38.60% in QI 2000 to 33.71% in Q4 and 30.76% in QI 2001, the lowest yet recorded by the sector. This represents a decline on shareholder returns of a fifth in one year and 31% over three years. ROSF among companies in the IT sector is still well ahead of the industrial average and the sector remains in 4th place in the industrial ranking. Debt gearing in the if sector continued to fall in the first quarter of 2001, from 27.43% in Q4 2000 to 25.12%, just over half the industrial average. However, as debt gearing rose sharply during 1999, the current level is still high by historical standards. Sharply lower profitability has more than offset any reduction in debt gearing. with the result that the if sector's interest cover has continued to drop back and, at 7.30 times (down from 7.79 times in Q4 2000 and 8.76 times in QI 2000) is at its lowest ever. On the positive side, the if sector still has the fourth highest level of interest cover (down from second last quarter) and is 2.25 the industrial average of 3.28 times. Average liquidity among companies in the IT sector was unchanged at 1.36 times in QI 2001. This comes after nine quarters when it stuck at around 1.31/1.32 times. This compares well against the industrial average of 1.14 times. Long term productivity growth among companies in the if industry has only been half the rate of the industrial average (7.2% growth compared with 15.4% over three years). Even though asset utilisation in the IT sector has improved from 10.04 times to 10.21 times over the last year, and is more than four times the industrial average of 2.40 times, this is also a far lower rate of increase than the industrial average. www.uk.experian.com [GRAPH graph, figure that shows relationships between quantities. The graph of a function y=f (x) is the set of points with coordinates [x, f (x)] in the xy-plane, when x and y are numbers. OMITTED]
Comparative Summary in Q3,Q4 2000 & Q1 2001
Key Ratio Information Technology
Q3 2000 Q4 2000 Q1 2001
Return on Capital (%) 24.58 22.76 20.81
Return on Assets (%) 10.11 9.86 9.27
Pre-Tax Margin (%) 5.18 5.15 5.04
Return on Shareh. Funds (%) 36.48 71.00 30.76
Borrowing Ratio (%) 113.26 105.64 99.98
Equity Gearing (%) 27.86 30.87 34.21
Debt Gearing (%) 27.41 27.43 25.12
Interest Cover (times) 8.37 7.79 7.30
Current Ratio (times) 1.32 1.36 1.36
Asset Utilisation (times) 10.08 10.16 10.21
Key Ratio Great Britain
Q3 2000 Q4 2000 Q1 2001
Return on Capital (%) 11.84 11.18 10.84
Return on Assets (%) 7.37 6.94 6.52
Pre-Tax Margin (%) 7.39 7.17 7.14
Return on Shareh. Funds (%) 19.53 18.60 17.85
Borrowing Ratio (%) 91.44 89.12 83.21
Equity Gearing (%) 36.42 37.46 38.12
Debt Gearing (%) 53.34 51.75 49.78
Interest Cover (times) 3.47 3.34 3.28
Current Ratio (times) 1.14 1.14 1.14
Asset Utilisation (times) 2.37 2.39 2.40
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