Idox trading update

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)

 

Idox announced a trading update today following the closing of their year-end.  They state that despite a stronger second half to the year they will fall short of their May 2013 EBITDA guidance for the full year by up to 20%.  So I make that £14.4m compared to £16.7m last year.  To be so far off their £18m guidance in May, the directors should have known well before today that there would be a material change in their trading performance compared to their own guidance, in which case they had a duty to announce immediately and not wait until a regular announcement.  This implies they were not aware of such a material shortfall until after the year-end.

The main cause of the decline, is still the Engineering Information Management division which historically has been 31% of group sales.

The management state they have carried out an internal review to identify areas in need of improvement and are in the process of taking remedial action. They also stated that they will appoint a new Chief Financial Officer shortly, the previous one left at the end of October having resigned in mid-August.

This is an awful outcome from a company that appears to have taken it's "eye off the ball", with EBITDA falling from an expected £21m at the beginning of their financial year to £18m by May and ends the year at an expected £14.4m.  Any new CFO is going to want to make sure that there is no repeat of this and may insist on more radical actions and provisioning.  I will seek to cut my losses on this share over the coming weeks.