With no acquisitions to boost revenues, computer systems supplier Innovation reported a 3 per cent year-on-year decline in underlying sales at the half-year stage. Moreover, software licensing revenue fell 26 per cent in the period as companies reign-in spending.
Indeed, the slide in software revenue looks particularly acute as this generates the best margins for Innovation. That leaves the company increasingly reliant on its less lucrative outsourcing business - accordingly, group underlying pre-tax profit fell 49 per cent to £2.5m. Innovation did raise £20m via a placing in December; to fund working capital commitments and acquisitions. In particular, that's needed to fund pilot schemes with potential customers that may then sign full service contracts. At least one such scheme, in South Africa, has now been turned into a full contract worth £31m over five years. The group is in discussions with other potential customers over moving towards full service contracts, but it's unclear how quickly that will deliver results.
Innovation will book a £3.6m restructuring charge this year, which should yield cost savings longer-term, but KBC Peel Hunt has cut its forecasts for 2010 by 10 per cent. It now expects adjusted pre-tax profits of £13.5m and EPS of 1.0p (2009:£8.6m/0.6p).
| ORD PRICE: | 11p | MARKET VALUE: | £103m | |
| TOUCH: | 10-11p | 12-MONTH HIGH: | 15p | LOW: 8p |
| DIVIDEND YIELD: | nil | PE RATIO: | NA | |
| NET ASSET VALUE: | 11p* | NET CASH: | £22m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Loss per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2009 | 75.5 | 0.53 | -0.01 | nil |
| 2010 | 76.9 | -1.59 | -0.29 | nil |
| % change | +2 | - | - | - |
Ex-div:- Payment:- *Includes intangible asset of £92.2m, or 10p a share | ||||
