Good evening/morning, it's Paul here.

Let's start off with a couple of stragglers left over from Monday's RNS.


Share price: 29.4p (down c.14% yesterday, at market close)
No. shares: 415.5m
Market cap: £122.2m

Half year report

IDOX plc (AIM: IDOX, "Idox", "the Company" or "the Group"), a leadingsupplier of specialist information management solutions and services, today announces its unaudited half year results for the six months ended 30 April 2019.

This software group seems to be permanently restructuring. The heavily loss-making digital division is now gone.

Forecast reductions - there's not a lot of point in analysing the interim results, as there seems to be an H2-weighting. So we cannot just double the interim profits, to arrive at an estimate for the full year. In this case it's easiest to rely on the house broker's forecast, updated today on Research Tree. This shows EBITDA reduced by 10%, and EPS by 20%, for the full year ending 10/2019.

The company likes to talk about EBITDA, but in my view that number is not reliable for valuation purposes, because the company looks set to capitalise costs of over £4m into intangibles (£2.2m in H1), which note 8 shows is mostly development costs - which in my view is ongoing payroll costs, which is part of running the business, so it cannot be ignored for valuation purposes. This is mitigated by a useful £832k tax credit last year.

Also, as it has material borrowings, we cannot ignore the interest charges either, another reason why EBITDA is not a good measure here.

There are lots of other things I don't like about these figures, so I'll keep this brief & move on;

Balance sheet - is too weak, making this share high risk, in my opinion.

Net debt - looks uncomfortably high to me, at £25.4m - bank facility expires in Feb 2020, so is classified as a current liability - which makes the current ratio look very bad. That won't be a problem if the bank facility is renewed, but it does reinforce the reality that this group is heavily dependent on the confidence of its lenders.

Going concern note - reinforces this point by emphasising that the group is reliant on renewal of its bank facilities, in 7 months' time.

Dividends - not being resumed at…

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