Holway blasts Azlan in industry report

Services Analyst releases his annual round-up. David Fisher reports.

Azlan has been singled out and labelled 'disgraceful' over itsports. alleged deception and mismanagement by the annual Holway Report, which comments on the software and computing services industry.

Analyst Richard Holway's report on Azlan, exclusive to PC Dealer, stated there were 'depressing tales within our industry' but few were as bad as Azlan's. Concerning the disgraced distributor, Holway wrote: 'There are no excuses. This was totally avoidable and all directors - executive and non executive - should accept full responsibility.

'As well as damaging individual reputations, it has also damaged investor faith in our industry. People's pension funds have lost out, as have a lot of small investors who were naive enough to believe what the directors told them,' he said.

Holway awarded the prize for disgraceful performance to Azlan, but pointed out that the distributor would break even for the financial year ended 3 April and is due to make a profit of #8 million next year. He claimed Azlan needed to exploit the higher margin business of training and services while controlling the products side to stabilise profits.

He commented that Azlan may be in for a major and rapid recovery, but the blow to investor confidence was likely to be its 'lasting, infamous legacy'. Holway blamed the collapse on 'a catalogue of mismanagement, inadequate control and possibly serious deception'.

He said managers had grossly over-ordered stock to receive discounts, failed to return out-of-date stock within agreed time limits and taken marketing incentives but not claimed from suppliers.

Holway said the most 'damning allegation', by KPMG, was that controls in place were being overridden by senior management. 'Basically it looks as if the frantic wish to meet City targets led to some pretty disturbing practices.'

Azlan was unavailable to comment as it was in its close period.

REPORT SUMMARY

- UK overtakes France to become the second largest market in Europe

- At current forecasts, with a strong pound, the UK market will overtake Germany

- The market was valued at #14.8 billion in 1997, including hardware maintenance and systems software Profit growth was at 37 per cent, up on 28 per cent last year

- Staff agencies and bespoke development led the market

- Outsourcing continued at above the average growth rate

- Staff agencies will be very badly hit when supply exceeds demand in the early part of the millennium

- Revenue of #16 billion is forecast for year 2000 work. This will tail off and could hurt 'quite a few companies'

- Average staff costs remained the same even though 44,000 new staff were employed. These junior or non-IT staff earned less than average while experienced IT contractors earned a lot more

- Services companies share prices increased by 90 per cent in 12 months to April

- Services companies are now valued more highly here than in the US

- Azlan has been singled out as the most 'disgraceful' performer of the year

- Hardware maintenance and system software markets continue to decline

- Heavy weighting of the FTSE IT Index towards five stocks means a minor 20 per cent correction would create shockwaves that could cause fund raising and new issues to halt.