Wednesday, 8 July 2009

IDOX looks forward with confidence

(By Philip Carnelley, Wed 8 Jul 8.00am) At the interim results analyst briefing (see here for details) IDOX’s chairman uttered words rarely heard today: “market conditions are good.” That was despite a 3% fall in revenues for the half, to £15.7m and a fall in margins, from 21% to 14%. So is the optimism justified?

It would appear so. IDOX closed more business in the first half than ever before (£9.1m) leaving the order book at £6.5m, up from £3.8m six months ago. Most of the orders came in Q2, after a very poor first quarter at the end of last year. The company also turned improved its cash position from £1m to £6m in net cash despite making a small acquisition (J4B). IDOX is so pleased with progress that it declared an interim dividend, for the first time.

While not a large company, IDOX is a prominent player in the local authority (LA) document management market. In planning and building control, albeit a very specialised niche, nearly 60% of LAs have an IDOX solution – including a flagship contract with a group of Scottish LAs won against competition from the likes of IBM and Civica. Management sees growth opportunities in related document management areas – such as estate management, environmental control and general records management – and there’s cash in the bank for more acquisitions.

We think IDOX is in the right place at the right time. Its products address two Local Government strategic thrusts: better online interaction with citizens, and improved process efficiency (through automation). Currently, ICT only accounts for 2% of the £100bn+ LA spend – that proportion will surely rise as cost pressures increase. IDOX could well be a beneficiary.

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