London-based investment house Goldman Sachs has placed CBT Systems on its recommended list after agreeing with recent growth predictions for the information technology training market.
In its first report on the company, which is based in Clonskeagh and run by the Belfast businessman Bill McCabe, Goldman Sachs says CBT is the market leader in interactive information technology training. It estimates the company has the potential for a further 40 to 50 per cent revenue growth in the next few years.
According to the report the global information technology market was worth $16.9 billion in 1996 and is growing at 15 to 16 per cent annually.
It says CBT is in a strong position to perform well in this market and is capable of expanding its margins by 21 per cent in 1998.
The predictions for growth are supported by three factors, according to the report: at least 80 per cent of CBT contracts are renewable at 140 per cent of the original value and there is a contract backlog as businesses seek to rent new educational titles.
The third factor in favour of CBT's further growth is that new business is being created with increased sales to corporate clients. For example 400 large clients were added in 1996, while 700 medium sized clients were added for the first time.
The report does point out some "key risks" to the future performance of CBT. It says software-based training "has not yet attained the same credibility as classroom-based training" and that the company will find competition difficult if it does not increase its R&D spending.
Despite this the authors say, that in view of the greater availability and use of software, the share of training taken by packaged software will increase substantially, allowing growth of 30 per cent for well placed companies.
"We believe the company's forecasts of its growth prospects remain consistently conservative and that there are no new factors to significantly slow the growth rate," the report concludes.
Last month, CBT signed a $1 million (£680,000), three-year contract with Cisco Systems to provide a library of over 130 of its interactive software titles for Cisco employees worldwide. The agreement was in addition to the deal signed by the two companies last year to develop interactive educational courseware for Cisco's products.
Also in July, CBT released record second-quarter results. The company said turnover for the three months to the end of June had climbed 50 per cent to $25.1 million (£16.5 million), and net profits soared 137 per cent to $4.7 million from $2 million.
