Idox trading statement

The Company is engaged in the development and supply of software solutions and services to the United Kingdom public sector and asset intensive industries worldwide. It operates in four segments: Public Sector Software, which delivers software service solutions to mainly local government customers across a broad range of departments; Engineering Information Management, which delivers engineering document management and control solutions to asset intensive industry sectors; Information Solutions, which delivers both an information service and consultancy services to a diverse range of customers across both private and public sectors and Recruitment, engaged in providing personnel with information, knowledge, records and content management to a diverse range of customers. It also provides information management, Web development, online publishing and training services. I have a holding in my growth portfolio (epic code: IDOX)

 

On 1st May I wrote "...The slower start from the EIM division has concerned some and depressed the SP, so many may be waiting for the trading statement in late May before making decisions on investing or increasing their holding. If IDOX can achieve these growth numbers then a 2014 P/E of 11 looks cheap, there is obvious risk here, but this level could be a speculative buying opportunity..."

Today they released their expected trading statement and the concern that was being expressed by the market was realised in a profit warning.  They stated that in light of a slower than expected first half of the year, they now anticipate that full year EBITDA is likely to be no less than £18 million, this compares to last year's £16.7m, but market expectations of £21m.  Hence a 20% decline in the SP today.

The main cause of the decline, is the Engineering Information Management division (31% of group sales) seeing a delay in new licence sales.

If as they describe in the trading statement that the shortfall this year is due to delays, rather than lost sales, then this may be one to watch.  See my earlier post on Anite on 22 May for a company that announced a warning and then has subsequently recovered some lost ground in trading and a little of its SP, although the SP will lag the trading recovery as confidence needs to be rebuilt.