IDOX set to return to organic growth

14th Jun 2011 08:04

Government spending cutbacks do not seem to be slowing IDOX, which provides software and services to the public sector, as it reported strong growth in underlying profits.Adjusted pre-tax profits in the six months ended 30 April rose 56% to £4.7m from £3.0m the year before, although reported profit before tax slipped 8% to £2.0m from £2.1m at the interim stage last year due to higher non-cash intangible amortisation and share option charges.Revenues rose 21% to £18.1m from £15.0m the year before, with the proportion of recurring revenues rising to 65% of the total from 61% in the first half of the previous financial year.McLaren Software, acquired in December 2010, delivered a maiden contribution to revenue of £1.5m. The business is now integrated and its cost base refocused, enabling McLaren to deliver a modest earnings before interest, tax, depreciation and amortisation (EBITDA) contribution in the first half with an expectation that this will accelerate further in the second half, IDOX said. New orders in the group's core public sector software business were up 11%, with an increased mix of longer term shared and managed service contracts.The board expects organic growth to return to its businesses over the full year, but maintains a degree of caution in light of macroeconomic uncertainties. "Continued focus on long-term relationships along with products that yield real economic benefits to the customer and bring high recurring revenues, margins and attractive cash generation remain the best defence against such possibilities. The group expects to reinforce this process by securing further acquisitions with similar characteristics in its chosen public sector and corporate markets," said chairman Martin Brooks.Gross margins for the group improved from 81% last year to 86%, reflecting a shifting mix across all divisions toward higher-margin recurring revenues, aided by the four acquisitions the group made last year. Having paid off its loans one year early and with a cash balance of £4.1m, the group was in a position to whack up the interim dividend by 140% to 0.1p to 0.24p. --jh