EDP is treading water but there are no signs it will be going anywhere anytime soon. In a trading statement covering the April to August 2011 period, the company (which provides IT hosting and software to the UK wholesale industry) reported recurring revenue of 80%, consistent with H1, and that recurring revenue (a large proportion of which comes from its in-house hosting operation) is now half of overall turnover. There was no word on operating profit, which we noted was down during H1 compared to the previous year (see EDP and the case for in-house hosting).
The company has taken some costs out of the business via its head office relocation (saving £60,000 per year) and by eliminating £10,000 per month temporary office rental costs. It has a debt free balance sheet and cash of £4.6m.
Its strategy of encouraging business activity by lowering upfront licence costs and charging higher ongoing fees is keeping things ticking over but we have to question how sustainable this is in the medium term in an environment where the cloud is putting downward pressure on all areas of pricing.