Diversification pays off for IDOX

IDOX, the supplier of document management solutions to the public sector, saw revenues and underlying profits surge ahead in what it described as a transformative year for the company.

Revenue in the year to October 31st jumped 23% to £38.6m from £31.3m the year before, reflecting the full year impact of acquisitions made in 2010 and maiden contributions from acquisitions of McLaren Software and LalPac in 2011.

The Public Sector software business, which accounted for 68% of group turnover, delivered revenues of £26.1m, up from £24.1m the year before. The proportion of recurring revenues from the Public Sector increased to around 66% from 62% last year.

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On a like-for-like basis, excluding acquisitions and revenues from the large one-off Scottish executive contract which was completed in 2010, revenues in the Public Sector software business were marginally higher than in 2010.

Reported profit before tax climbed to £5.6m from £4.9m the previous year. Adjusted pre-tax profit, which strips out amortisation, exceptional restructuring and corporate finance charges and share option costs, was up 36% to £10.9m from £8.0mthe year before.

Adjusted earnings per share (EPS) increased 41% to 2.47p from 1.75p, while basic EPS improved to 1.31p from 1.07p.

After splashing out £4.3m on acquisitions during the year net debt increased to £2.4m at the end of the reporting period from £0.9m a year earlier.

"The acquisition of McLaren Software in December 2010 and CTSpace in November 2011 has enabled us to extend our core technology skills into a number of international highly regulated asset intensive industries," claimed IDOX's chairman, Martin Brooks.

"The acquisitions position us as a key vendor in the engineering document management market, with a global presence and the capability of offering both enterprise wide and Software as a Service (SaaS) to a growing customer base. We now have a second major market focus for the group, which also opens up opportunities in a number of higher growth markets outside the UK and Europe," Brooks added.

The group said trading in its new financial year has started in line with the board's expectations.

The company said it has a very strong order pipeline across all businesses. The shift in focus toward long term relationships and recurring revenues in its Public Sector software market may have a marginal impact on top line revenues in this line of business, the group advised, as the model evolves away from pure licence based sales.

IS Research noted that the market has shown its approval of IDOX's diversification away from the public sector by driving up the shares, but at just 6.3 times projected earnings before interest, tax, depreciation and amortisation for 2012, the share price "continues to undervalue IDOX's achievements and prospects."

House broker finnCap is leaving its 2012 earnings estimates and 34p price target unchanged after the figures, but could not resist noting that with the diversification strategy now successfully executed, "the only surprise remains that the [earnings] multiples are so low."

The company has proposed a final dividend of 0.36p, up from 0.35p last year, taking the full-year pay-out up to 0.60p - a 33% increase on last year's 0.45p full-year divi.

The share price dipped 0.25p to 26.625p on the results.

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