"Flat is the new growth," says Tikit's chairman Mike McGoun - and it may apply to a growing number of companies over the next few months. Indeed, Tikit has reported four years of static revenues, although there are good reasons for that.
The company started out as a reseller of information technology (IT). Now it's steadily increasing sales of higher-margin own-brand software which is pushing up profits. In the latest half year, sales of its software rose 19 per cent to £1m, while recurring support income for its own software edged up 3 per cent to £3.3m. Own-brand income is expected to continue to grow while a new revenue stream emerges: legal and accounting firms are starting to outsource IT work. In June, Tikit signed a major multi-year contract with lawyers Clarke Willmott.
Half-year profits would have been higher, but for a drop in consultancy income and higher marketing costs in the US, which accounts for 15 per cent of sales. Tikit also pays RBS a 1 per cent fee for an unused £5m acquisition credit facility. Still, the company is highly cash generative with net cash balances up by £2.5m in the last 12 months.
For the full year, house broker Investec Securities forecasts normalised pre-tax profits of £5.2m and EPS of 25.5p (from £4.8m and 23.6p in 2011).
TIKIT (TIK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 325.5p | MARKET VALUE: | £47.9m | |
| TOUCH: | 321-330p | 12-MONTH HIGH: | 349p | LOW: 255p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 127p* | NET CASH: | £6.60m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 13.3 | 1.57 | 8.20 | 2.50 |
| 2012 | 13.4 | 1.70 | 9.50 | 3.00 |
| % change | +1 | +8 | +16 | +20 |
Ex-div: 19 Sep Payment: 12 Oct *Includes intangible assets of £18.9m, or 128p a share | ||||
