UPDATE: IDOX 1H Pretax Profit Rises; Upbeat On Spending Cuts

7th Jul 2010 12:18

(Rewrites, adds analyst comments, executive interview.) By Tommy Stubbington Of DOW JONES NEWSWIRES LONDON (Dow Jones)--IDOX PLC (IDOX.LN), a supplier of software and services to the U.K. public sector, Wednesday posted higher first-half pretax profit despite a fall in revenue, and said it doesn't expect planned government spending cuts to significantly harm its business. For the half year ended April 30, pretax profit was GBP2.14 million, up from GBP1.88 million a year earlier, even though revenue fell to GBP15.0 million from GBP15.7 million. An improvement in gross margins to 81% from 76% was responsible for the improved profitability, IDOX said. The company will be protected from the planned drop in government spending because many of its services help local authorities implement cost cuts, Chief Executive Richard Kellett-Clarke told Dow Jones Newswires. Where several district councils are merged into a larger unitary authority, IDOX has expertise in merging services such as land and property databases onto a single system, he said. Kellett-Clarke said he expects cuts in local government won't be as savage as many believe. "Local government was already thinking about cutting costs [before the recent general election]," he said. "There's an awful lot of scaremongering in the press, but it's not as bad as it sounds." However, Investec Securities analyst Gareth Evans reduced his 2011 and 2010 profit forecasts in light of public sector spending pressures. Evans has penciled in pretax profit before exceptional items of GBP8.1 million in fiscal 2011, and GBP8.3 million the following year. Despite these reductions, he maintained his "buy" rating with a target price of 14 pence. The firm expects to make further acquisitions this year, and would consider buying a company with revenue of as much as GBP25 million if the right opportunity presents itself, Kellett-Clarke said. "We are in a position where our relationship with our banks is good, so we have the potential for sizeable acquisitions without equity fundraising," he added. IDOX raised its interim dividend 25% to 0.1 pence. Shares at 1100 GMT flat at 11.75 pence in a 0.5% lower Alternative Investment Market. -By Tommy Stubbington, Dow Jones Newswires; 44-20-7842-9268; [email protected] (END) Dow Jones Newswires July 07, 2010 07:18 ET (11:18 GMT)