Diary: IDOX, TCG

IDOX - IDOX

Nice finals from IDOX today. Nothing particularly unexpected. The market has been surprisingly restrained in its reaction. Revenues up 23%, adjusted EPS up 41% to 2.47p. Forecasts were for 2.11p according to Sharelock.

Looking at the debt situation:

• EBITDA is £11.6m. Net debt is £2.4m. Looks fine
• Operating profit is £5.8m. Net interest is £154m. Well covered.

Report on outlook:

The Group has started the current financial year with a very strong order pipeline across all businesses. The shift in focus toward long term relationships and recurring revenues in its Public Sector software market may marginally impact top line revenues in this business with a move away from pure licence based sales. The acquisition of McLaren Software and CTSpace has enabled the Group to extend its core technology skills into the private sector on a global scale, providing access to verticals including pharmaceuticals and oil and gas. In 2012, IDOX will streamline its development activities to ensure that each initiative has broad applicability across all divisions. This strategic initiative in development may result in a small increase in capitalised development costs in the year. Whilst the economic climate remains challenging, the Group continues to reinforce its position as the centre of excellence in its chosen domains. The Board is confident that its strategy of diversification of revenue streams both operationally and geographically will enhance the Group's resilience to current macroeconomic challenges and enable it to report good organic growth this year.  Trading in the current year has started in line with the Board's expectations.

 PER is around 12.8. Share price has barely moved on the announcement.

TCG - Thomas Cook Group

Finals released by TCG today has turned out to be another stomach-twister. TCG down 7% at time of writing, and not surprising. A slow motion train wreck. TCG splits its P&L summary in two: "underlying", which is presumably "what we want you to focus on", and "statutory", which is presumably "what it actually is". Looking at underlying, operating profit margins are down from 4.1% last year to 3.1% this year. Ouch. Looking at statutory, there's a loss of before tax of 398m, compared with a profit last year of 42m. Bumper writedowns will account for a big chunk of that.

Net debt is £891m, compared to £804m last year. That's going the wrong way! True, they are making asset disposals which will produce an esitmated net debt reduction of £81m. BUT, look at it this way, even if we lopped off the £81m, debt has still increased.

Here's an interesting bit: "free cash inflow improved by £50m to £18m despite the fall in profits". Hmmm, but let's look at that, shall we? Cash flow from operating activities actually decreased from 299m in 2010 to 288m in 2011. It is only because there was less net capex that we see such an improvement. What's worse, though, is that interest payments increased from 65m to 98m. Getting harder to breathe.

Well, that's about all I can be bothered with on TCG, as it's a pretty uninvestable company, so I don't want to dig too deeply. Maybe it can pull itself out of the mire, I dunno. But it looks like it might be in some kind of death spiral, disposing of assets at unfavourable prices. The outlook is none too frisky:

The first half of the current financial year and in particular the first quarter, is expected to be adversely impacted by the uncertain economic environment across Europe, input cost inflation and the ongoing disruption in MENA. In addition, the acquisition of the Co-op and Intourist will add to seasonal losses in the first half given that these businesses earn all their profit over the summer months.

Grim reading. They continue:

In the second half results should begin to see the benefits of the UK turnaround plan.

Frankly, I think that's just wishful thinking. A miracle could happen, but this is a very high risk share. Strong sell.