IT services provider Maxima Holdings has simplified its structure and reduced admin expenses, which has helped to offset a decline in revenues in the year to May 2010 and put it in a stronger position for this year.
The two divisions are business solutions, which includes the Microsoft Dynamics and business intelligence operations, and support enablement services. One year ago there were 11 operating units. Maxima is expanding its Indian operations which is helping reduce costs and add more specialist people.
Part of the fall in revenues from £56.6m to £51m was down to the ending of the QAD partnership. There were still some QAD revenues during the year and there will be some QAD support revenues this year. Recurring revenues account for 60% of the total. Management are keen that recurring revenues do not go significantly above two-thirds of the total because Maxima needs to be winning new product business in order to continue to grow its services revenues.
Stripping out amortisation and exceptionals, Maxima’s underlying profit fell from £7.11m to £4.86m. Probably around one-half of that reduction related to QAD, which did make a contribution last year but won’t make any more profit contribution from now on.
The £1.83m of exceptional charges mainly relate to redundancies, excess property costs and the cost of renegotiating new bank facilities.
Strong cash flow has reduced net debt from £15.5m to £11.8m by the end of May 2010. The new bank facilities total £15m.
Chief executive Graham Kingsmill expects cloud computing to be a significant growth area for Maxima. The link up with IBM is important to its ability to offer these services. Organic growth remains the focus.
Kelvin Harrison is no longer an executive but he remains chairman.
The order book is growing and margins are improving. Equity Development forecasts a modest improvement in underlying profit to £5.07m in the year to May 2011. That excludes £750,000 of further reorganisation costs. The lack of contribution from QAD means that the growth in profit from the rest of the business could be around one-fifth.
At 82p a share, down 6p on the day, Maxima is valued at £20.7m. The shares are trading on a modest prospective multiple of seven for 2010-11.
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