Newly diversified software and services firm IDOX has grown nicely in the last six months as it moves to decrease its reliance on the UK public sector - a slew of recent acquisitions has helped (see here for starters), but the organic growth of 10% is also worth celebrating. As presaged in its May trading update (see IDOX looking up following recent M&A), total revenue increased by 58% to £28.6m in the six months to 30 April 2012. EBITDA margins remained steady at 29% (EBITDA increased by 58% to £8.2m) whilst reported pre-tax profit was up 76% to £3.5m.
Thanks to IDOX’s acquisitions, which have seen it diversify geographically and vertically, international revenues are now 31% of the total (H1 2011: 9%) and the revenue mix between public and private sectors is moving towards parity. The downside of all this M&A activity (and a 15% dividend increase) is a substantial increase in net debt, which now stands at £12.1m compared to a net cash position of £4.1m this time last year.
The Public Sector Software division grew by 16% (3% organically) to £14.6m driven by growth from new software and services sales to local government (up 17%) and managed service and hosting opportunities. But sales of its election management software (the Opt2Vote product acquired in March 2012) were just £1.2m, as is to be expected at this point in the election cycle. The Information Solutions division, which supplies decision support content predominantly to the public sector, grew revenue by 44% to £3.6m thanks to the Interactive Dialogues acquisition in November last year.
The Engineering Information Management division, which provides engineering document management and control applications, delivered revenues of £8.9m (H1 2011: £1.5m). Although the acquisition of CTSpace in November last year boosted revenues in the division, we’re pleased to see revenue from the original McLaren Software business (see here) more than doubled on an organic basis to £3.7m.
We can expect more of the same from IDOX over the coming year as it continues to diversify away from its UK local government roots, reducing its reliance on the public sector software market. The management team is also hoping to move the Engineering division beyond its core oil and gas markets into other asset intensive industries such as utilities, construction and nuclear, where it recently won a small contract in China. Whilst some diversification is to be welcomed, we do hope IDOX doesn’t try to stretch itself too far too soon either vertically or geographically.