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Systems integrator Mandator has reported falling revenue for 2003, and announced plans to turn to the stock market in the hope of raising enough cash to ensure future growth. But the company is not well placed to get more money from the stock market, and may find itself targeted by a larger rival.

For FY2003, Mandator reported a net loss of $14.6m, compared to a $48.3m loss the previous year. This was on revenue that fell 28 per cent to $57.6m over the year. The company's liquid assets stood at $2.1m at the end of the year, down from $3.4m the previous year. The amount that Stockholm-based Mandator expects to raise through a stock market offering will be revealed in an extraordinary general meeting. The company said any money raised should enable savings of at least $2.7m.

However, it is doubtful how much it will realistically be able to get out of the market. With a market capitalisation of around $20m, the company is already grossly undervalued. Given that it raised $5m in August 2003 through a share issue and reduction of shares, the company will have a tough time raising enough to cover its debts and convince shareholders to invest again so soon.

In its favour, Mandator improved profitability throughout the year, and made a profit before interest, tax and amortisation of $136,000 in Q4. The company's stated objectives are to increase its EBITA margin to 10 per cent, but this could be a long time coming given that it only reached 1 per cent in Q4.

With the ongoing consolidation in the Nordic market, it is quite likely that the company will be snapped up by a larger competitor, such as Finland's TietoEnator, Sweden's WM-Data, or Norway's EDB Business Partner, all of which are targeting growth through acquisitions.

TietoEnator is probably the most likely buyer given that it already sources offshore development from Mandator's 100-employee facility in Estonia. WM-Data however, has only just completed its acquisition of the Finnish company Novo Group, and will probably not look for new acquisitions so soon.

Mandator would also be a good buy for a foreign IT services company such as IBM, Hewlett-Packard, or Cap Gemini Ernst & Young, which are established across the Nordic region, but still looking for growth.

Source: ComputerWire/Datamonitor

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