A consequence of an economic downturn is that companies generate fewer documents that require management, which is poor news for document management software specialist Kofax. The company tried to head off the worst of the downturn in western Europe with a reorganisation of its sales and marketing operation there. The remedial work helped protect profits, but strip out the effect of acquisitions, and underlying sales rose by a meagre 1.4 per cent, with the company's hefty exposure to the moribund European market offsetting a better performance in other regions.
Kofax's three operating divisions delivered varying levels of growth. Maintenance services lifted organic revenues by 9.2 per cent to $114m, helped by high levels of contract renewals; professional services division benefited from robust demand in the Americas and underlying sales, after the effects of acquisitions are stripped out, were up nearly 4 per cent to $31.4m. However, the biggest source of income, software licences, posted flat turnover of $117m (£73m) as tough global market conditions dampened demand.
Management expect most growth in the current financial year to come from acquired businesses, so factoring in mid to high single-digit sales growth and flat margins, broker Investec plans to upgrade its adjusted EPS estimate of 33.9¢ by 2-3 per cent (31.4¢ in 2012).
KOFAX (KFX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 275p | MARKET VALUE: | £245m | |
| TOUCH: | 270-280p | 12-MONTH HIGH: | 336p | LOW: 215p |
| DIVIDEND YIELD: | nil | PE RATIO: | 20 | |
| NET ASSET VALUE: | 245¢* | NET CASH: | $81.1m | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 298 | 12.0 | 10.0 | nil |
| 2010 | 342 | 16.3 | 9.3 | nil |
| 2011 | 244 | 26.0 | 21.0 | nil |
| 2012 | 262 | 27.4 | 21.0 | nil |
| % change | +7 | +5 | - | - |
*Includes intangible assets of $179m, or 201¢ a share £1=$1.59 | ||||
