Tikit Group’s July trading update primed the market for an unexciting set of half-year results and today came the confirmation. At £13.4m revenue was essentially flat on the year ago period (£13.3m) and trading is in line with expectations. Other performance metrics headed in the right direction however, continuing a pattern that has been emerging over the past year - profit before tax was up (5.5% to £2.4m) as was the operating margin (up from 17.1% to 17.9%).
The improvements are down to Tikit’s strategy of focusing on sales of its own software, which bring higher margins. Previously, we have been concerned that the increase in the proportion of sales of its own software was due to decreasing sales of third party software (see Early days for Tikit’s cloud solution), but it has been ramping sales of its own goods. Revenue from Tikit-owned software increased 7.5% to £4.3m in H2 2012 and now represents 32.2% of total revenue (vs. 30% in H1 2011). This should rise in H2 because management says it expects sales and marketing efforts made in H1 to deliver higher sales levels in H2. Despite the margin and profit improvements, Tikit, who provides software and services legal and accounting firms, really needs to boost revenue levels because there is a limit to how much it can sweat existing assets.