IDOX is in the midst of considerable change, some of it instigated by the company and some as a result of disruption in its target markets. Firstly, it has chosen to diversify its business. Its path to diversification has taken the form of numerous acquisitions over the last couple of years (see HotViews archive for details). Today, the company announces its latest acquisition - of CTSpace, an engineering and construction sector document management and control business, for £11.6 million (from Sword Group). CTSpace, headquartered in London, had revenues of £12.7 million, EBITDA of £1.7 million and pre-tax profits of £1.3 million in the year to 31st December 2010.
Such acquisitions have taken IDOX into adjacent private sector markets (its traditional stomping ground being local government) - namely the "engineering drawings document management market". And so far so good. Indeed McLaren Software - see IDOX takes on challenge with McLaren purchase - is set to deliver its maiden results showing 27% organic revenue growth. But they have also taken them into international markets. Indeed, today's trading update states that for the first time, in the year to 31st October 2011, IDOX will have delivered "significant" international revenues.
If that wasn't enough change to manage, its traditional local government Market customer base is increasingly buying software and services under outsourcing arrangements. That means that, despite a 14% increase in orders in its UK public sector business, top line revenue growth has been constrained as deals now span about five years on average. Within this order growth, managed services new business orders are up tenfold. In December, IDOX signed a "zero infrastructure" contract with the London Borough of Westminster for its planning and building control solution (the council is well know for its zero infrastructure strategy).
Despite all the change, IDOX expects to announce EBITDA and pre-tax profits "well ahead of the 2010 financial year". It is testament to the company's proven ability to make earnings enhancing acquisitions and integrate them successfully (indeed we are increasingly seeing reasons to compare with Capita). McLaren Software, for example, has returned to profitability in the ten months under IDOX's ownership.