After a spell of improving margins in the wake of the last recession, Tikit, the information technology solutions provider focused on the legal and accountancy professions, is ready to use its balance sheet strength to chase top line growth on the back of three recently released products.
The firm saw revenue ease by 2% in 2011 to £26.4m from £26.9m the year before, but Chairman Mike McGoun assured Sharecast that was a good result "given that we had to replace £1.6m of business lost as a result of LexisNexis cancelling its partnership agreement" relating to the sale and support of LexisNexis's customer relationship management (CRM) product, Interaction.
Even that setback was turned into a positive by McGoun, who trumpeted the firm's own CRM software, Tikit Client Connect, which was released last year but, like the firm's two other major software releases, too late to make a significant contribution to the 2011 results.
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"We took the best functionality from [LexisNexis's] Interaction, stripped out a lot of the complexity that was only really of use to the larger firms, and developed our own product which is proving very popular with the small to medium sized players. It's going like a train," McGoun avowed.
McGoun expects Tikit Client Connect, and its two other major releases of 2011 - its cloud-based subscription product Tikit Legal Office and the revamped Carpe Diem - to hit their stride this year, growing revenues and profits.
Not that growth of the latter is particularly shabby. In 2011, profit before tax was up by a fifth to £3.5m from £3.0m the year before. Underlying earnings per share advanced 29% to 25.2p from 19.6p in 2010.
"We've never made a loss in 18 years," McGoun proudly stated, and it does not look like the company is in danger of doing so in the immediate future.
The company remains extremely cash generative, having produced £5.2m of the green and folding stuff in 2011, barely changed from the £5.3m generated in 2010. As a result, the company finds itself sitting on a pile of cash, £5.5m at the end of 2011, up £2.6m on the year.
The board generally pays out one third of its bottom line earnings in dividends, and it has also earmarked money for a big sales and marketing push, but with untapped banking facilities as well, McGoun said the company has a lot of firepower to deploy should the right company come up for sale.
"The cash is not burning a hole in our pocket but neither is it earning much sitting in the bank" McGoun noted, so there is a decent chance that the company will add to what McGoun called Tikit's "immaculate record on acquisitions."
The priority, however, is to plough the cash back into the business, with the aim of establishing its new products.
"We had a great 2010, but that was mainly as a result of taking costs out of the business. 2011 was a better performance than the figures show, considering the loss of LexisNexis revenue, but we are really excited about the prospects for 2011. We've got the three new products - the development costs have already been written off on these - plus one released late in 2010 which is beginning to pick-up. It's called Template Management Systems and you are going to hear a lot about this. It enables law firms to store and manage their templates centrally, thereby making Office [e.g. Microsoft Office, Libre Office] upgrades much easier," McGoun said.
The US sales office has been beefed up, and is going great guns, while Tikit has also signed deals with two re-sellers in the Asia-Pacific region. "Partnering with re-sellers is a great way for us to sell into new markets without having to make too much of a commitment," McGoun explained.
The Tikit chairman seemed especially pleased and even surprised at the success of its Carpe Diem acquisition, which it bought from accountancy software giant Sage back in late 2010.
"The product was neglected at Sage, who ran it for cash and did not develop it. Customers saw it was in decline and were abandoning the product. We thought we could reduce the rate of decline when we bought it but it is actually going up, with customers returning to the product after our upgrade," McGoun said.
"Interest expressed from our customers in the improvements to Carpe Diem Classic and the launch of Carpe Diem Mobile and Carpe Diem Enterprise supports our view that this product suite will be an important contributor to the group's success in 2012 and beyond," the company statement said.
The only cloud on the horizon for Tikit appear to be on the European mainland, where the Spanish office did well to maintain revenues at 2010 levels.
"To be honest, we only maintain overseas offices [in Paris and Madrid] to support the European branches of our UK and US customers," McGoun said.
Notwithstanding the above, since the year end the group has continued to win new software sales contracts with new and existing clients, in both Europe and North America.
"Overall, the board is pleased with the progress that has been made in the past year and, whilst the UK professional services markets remain cautious, business activity levels are improving," said Chief Executive David Lumsden.
"The high level of contracted support revenues, combined with anticipated sales of Tikit-developed software, lead us to expect that 2012 will deliver further growth. We believe that the fundamentals of our business are strong and we look towards the future with optimism," Lumsden added.
The shares were trading at 336.5p in the lunch-time trading session, down 2p, having been in positive territory in the morning.
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