News blog
Tikit
- BY: Andrew Hore |
- POSTED: 09/09/2010 |
- COMMENTS: Add yours
IT and software services provider Tikit is confident that trading conditions are starting to improve.
Tikit supplies software and services to legal and accountancy firms. The improvement should start to show through in the second half. Tikit has a strong base because it has a better than 95% retention rate of its customers.
Revenues edged up from £13.1m to £13.2m in the six months to June 2010, while cost cutting helped underlying profit jump from £1.16m to £1.65m.
Recurring revenues are 53% of total revenues and Tikit has been selling more of its own software. Consultancy revenues were lower but staff numbers were cut.
Management says that the North American market is optimistic so there could be further recovery there.
Longer-term, Tikit Legal Office, an outsourced package of different types of software, could become significant for the company. It is a subscription-based model and it will take time for revenues to build up.
House broker Charles Stanley forecasts a rise in full year revenues from £25.2m to £26.6m and a bigger recovery in profits from £2.8m to £3.3m.Tikit is already half way there to that profit and a strong second half could help it to beat the forecast.
At 163p a share, Tikit is valued at £24m. The shares are trading on little more than nine times forecast 2010 earnings.
The interim dividend, which was maintained last year, has been pushed up from 1.9p a share to 2p a share. The prospective yield is approaching 4%. The long-term plan is to pay a dividend covered around three times by earnings.
Net cash was £2.085m at the end of June 2010. The business is cash generative and there are also bank facilities of £3.5m. This provides plenty of potential cash for acquisitions. Tikit is keen to make sure that what it buys will fit in with the business and it is looking at a number of opportunities. Valuations have become more realistic.
Download the September edition of AIM Journal at http://www.hubinvest.com/AIMPDFSeptember2010_12.pdf
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