Trading Statement

RNS Number : 6918W

IDOX PLC

24 November 2010

 



24 November 2010

IDOX plc

2010 financial year ends ahead of market expectations; enhanced prospects for the new year

IDOX plc (AIM: IDOX, 'the Group', 'IDOX'), the supplier of software and services to the UK public sector, has published a trading update for the year to 31 October 2010. 

The Group finished the year strongly and now expects to report EBITDA and normalised pretax profit ahead of market expectations and well ahead of the 2009 financial year.  Normalised pre-tax profits exclude amortisation, exceptional items and share based payments. 

Higher profitability was achieved despite revenue being slightly down on 2009, reflecting a managed reduction in the low-margin contract recruitment business and the benefit of a large, one-off project in the previous financial year, offset by some acquisitive growth.

During 2010 the Group made three individually earnings-enhancing acquisitions which, together with the continuing strength in the core business and effective cost control, are expected to deliver revenue and normalised pre-tax profits in the year to October 2011 materially ahead of current market expectations. 

With strong cash generation and good visibility within the underlying business, the Board intends to accelerate its progressive dividend policy.

Martin Brooks, Chairman, commented:

"Despite the considerable uncertainty prevalent throughout the year as a result of the election, emergency budget and subsequently the Comprehensive Spending Review (CSR), we expect to produce strong earnings figures.

"We have extended our market leading position - some 90% of local government buys one or more of our products - completed three acquisitions to widen our product range whilst materially reducing our underlying cost base.

"Local government has been anticipating for some time the challenges placed on them by the CSR and appears well placed to cope with them.  We are working with our customers to deliver shared service initiatives and outsourced solutions to help them meet these challenges whilst still maintaining and improving front line services.

"Our prospects for 2011 and beyond are enhanced, with some 60% of our revenue now recurring we expect to continue to take advantage of our strong local government customer base and reputation to cross sell our full range of software and services as well as continuing to widen our product range and broaden our sector coverage with further selective earnings enhancing acquisitions."

Markets and CSR

The impact on local government expenditure of the CSR, published on 20 October, was as the Group anticipated and our view remains that there will be no major impact on software and services expenditure where it supports efficiencies in areas like planning. Since the announcement of the CSR,   the independent market research company Kable has reiterated its forecast of modest growth in the local government software and services market for the next three years.

The local government market has responded positively and innovatively to the challenges imposed by the macroeconomic environment and is well advanced in its planning and implementation of cost reductions.  The government's announcement to remove restrictions on how total monies are spent will assist councils, allowing them greater flexibility to maintain citizen services through improved efficiency and technology.

In the current financial year, IDOX has already helped councils achieve these savings through facilitating innovative shared-services, such as the Kent Licensing Partnership and delivering efficiencies through the provision of managed services to key customers including Westminster and Leeds City Councils.

Operational highlights

In the Software division, which makes up some 77% of Group revenues, the last quarter of the financial year saw the highest order book in the Group's history.  It included the closure of two further Local Government Review ("LGR") sales where councils have reorganised into larger unitary authorities. The mix of sales highlighted the trend to more public access based web solutions, shared services, managed services and hosted solutions.

The Group's Solutions business was impacted by cut backs in central government which depressed project revenues, but this was made up by increases in subscription and advertising revenues. The division also closed its first order for a hosted grants solution in Spain.

The contract recruitment business has, as anticipated, reported depressed revenues.  However, a strong recovery from permanent specialist appointments, which were double compared to 2009 levels, resulted in a virtually unchanged contribution. 

With organic growth and acquisitions, the Group has increased its penetration of the local government market to over 90%.   The evolution of the structure, systems and personnel and investment in resilient hosted services now makes it possible for IDOX to provide fully managed services in its vertical market sector.

The Group has continued to reduce costs through a continuing focus on operational efficiencies and quality of service. Across the Group, revenue and profit per head rose for the fourth successive year.

As a result of acquisitions made during the year amortisation of intangible assets will be higher than market expectations as will exceptional costs related to the integration of those acquisitions.

Acquisitions

During the year IDOX completed and fully integrated two acquisitions within the Software Solutions business as part of its strategy to widen its product range market leadership and extend its capability in managed services. 

A third acquisition, Grantfinder, has provided further scale for the growing Information Solutions business which provides complementary content to the software business on planning and grants, together with associated websites and decision support software.  The Information Solutions business is now a significant provider of profits, with a growing international business resulting from IDOX's operations in the Netherlands. Further opportunities to create a world class content business complementary to the software business are being pursued.

IDOX will continue to seek appropriate earnings enhancing acquisitions in both the public and private sectors which leverage its infrastructure, technology and market position.

Outlook

The Group has started the current financial year serving over 90% of UK local authorities (2009: 75%), with 60% recurring revenues (2009: 55 %).  The Group's land and property software solutions business comprises over 60% of installed UK local government planning solutions.

With its other products and acquisitions, IDOX has a major opportunity for cross selling in addition to the improving business prospects as uncertainty diminishes in the specialist public sector software and services market.

IDOX is also now working with a number of local authorities to improve their efficiency through new shared services and managed service programmes which further embed the Group within its customer base.

IDOX plc will announce its audited final results for the year to 31 October 2010 on Tuesday 11^th January 2011

Enquiries:

IDOX	020 7332 6000
Martin Brooks, Chairman
Richard Kellett-Clarke, Chief Executive
William Edmondson, Chief Financial Officer
Investec	020 7597 4000
Andrew Pinder Patrick Robb Dominic Emery
College Hill	020 7457 2020
Adrian Duffield / Carl Franklin

About IDOX plc

IDOX plc is a supplier of software solutions and services principally to the UK public sector and the leading applications provider to local government for core functions relating to land, people and property through its UNI-form, Plantech and IDOX product range.

The acquisition of Strand Electoral Management Services Limited in 2010 has extended this capability into the complementary market for election software. In addition the acquisition of 11 long-term managed-service contracts for the provision of land and property information solutions to UK Local Authorities has strengthened IDOX's managed service business. Over 90% of UK local authorities are now customers.

The Group gives public-sector organisations the tools to manage information and knowledge, documents and content, business processes and workflow as well as connecting directly with the citizen via the web.

It also supplies decision support content and additional specialist services via the IDOX Information Solutions business which was strengthened by the acquisition of Grantfinder in 2010, as well as transforming approaches to knowledge and content management via consultancy and training. In addition it provides these specialist skills to customers through its TFPL branded recruitment division.

For more information see www.idoxplc.com

 

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