IDOX

SOFTWARE & COMPUTER SERVICES

16 November 2022

IDOX.L

60.7p

Market Cap: £273.8m

SHARE PRICE (p)

80

70

60

50

40

30

12m high/low

72p/57p

Source: LSE Data (priced as at prior close)

KEY DATA

Net (Debt)/Cash

£(6.7)m (at 31/10/22)

Enterprise value

£280.5m

Index/market

AIM

Next news

FY22 results, Jan. '23

Shares in Issue (m)

451.0

Chairman

Chris Stone

Chief Executive

David Meaden

Chief Financial

Anoop Kang

Officer

COMPANY DESCRIPTION

Idox is a software business selling to UK public sector and global engineering clients.

www.idoxplc.com

PERLPARA

IDOX IS A RESEARCH CLIENT OF PROGRESSIVE

ANALYSTS

Ian Robertson

+44 (0) 20 7781 5318 irobertson@progressive-research.com

Gareth Evans

+44 (0) 20 7781 5301 gevans@progressive-research.com

www.progressive-research.com

Trading update shows strategy driving results

Idox has today released a trading update for the year ended 31 October 2022. The statement reports a strong performance, with particularly encouraging news on order flow and sales of Idox Cloud. We have adjusted our forecasts for FY23 and FY24 to reflect new assumptions around cash payments and working capital. Management expectations for FY23 are maintained and the year has started well. The update reflects the progress over recent years and the strong position Idox holds, which should allow further organic and acquisition-driven growth.

  • Robust and confident trading update. Revenue at £66m is slightly below our expectations (£70.2m) but the £22.5m adjusted EBITDA is broadly in line with our estimate (£22.8m). Given wider economic issues, we expect the revenue softness to be in large part a result of general economic exposure at EIM. The record order intake 'in excess of c.£74m' is very impressive, as are the 15 new sales for Idox Cloud in the period.
  • Cash flow still good but revised down. Year-endnet debt of £6.7m compares with our expectation of £1.9m, but still represents a reduction across the year of some £1.4m. The figure was impacted by the end of Covid VAT deferrals, higher-than-usuallevels of tax payments on account (five payments vs four) and payments for acquisitions.
  • Strong start to FY23; forecast adjustments. FY23 has started well with good recurring revenues and contract renewals along with a solid order book and healthy pipeline. Management's expectations for FY23 remain unchanged. We are adjusting our forecasts to reflect the statement, mainly adjusting the cash figures. We leave our FY23 revenue estimate unchanged and have edged down our FY23 adjusted EBITDA to £24.7m from £25.0m, with approximately 93% conversion for adjusted EBITDA to operating free cash flow. Changes to key estimates are shown overleaf.
  • Well placed for acquisitions. The net debt of £6.7m set against £45m of additional loan facilities places Idox strongly for further acquisitions; in a market that should provide a flow of opportunities for Idox's disciplined and focused approach to deals.
  • Strategy shows through in strong results. Idox has delivered a strong performance in FY22 despite the challenging economic backdrop. We see the modest top-linepressure as a reflection of wider economic issues, but believe that the strong order book, delivery on adjusted EBITDA and positive trading outlook reflect management's strategy and execution.

FYE OCT (£M)

2020

2021

2022E

2023E

2024E

Revenue

68.0

62.2

66.0

74.0

77.7

Adj EBITDA

19.6

19.5

22.5

24.7

26.1

Fully Adj PBT

10.5

12.4

13.8

15.8

17.3

Fully Adj EPS (p)

1.8

2.4

2.5

2.7

2.9

EV/Sales (x)

4.1x

4.5x

4.2x

3.8x

3.6x

EV/EBITDA (x)

14.3x

14.4x

12.4x

11.4x

10.7x

PER (x)

34.0x

25.5x

23.8x

22.5x

21.1x

Source: Company Information and Progressive Equity Research estimates.

This publication should not be seen as an inducement under MiFID II regulations.

Please refer to important disclosures at the end of the document.

16 November 2022

We make adjustments to our estimates as shown below, to reflect the detail in today's update for FY22 and revised assumptions around the cash profile over FY23 and FY24.

Changes to key estimates

FY22E

FY22E

FY23E

FY23E

FY24E

FY24E

New

Old

New

Old

New

Old

£m

£m

£m

£m

£m

£m

Revenue

66.0

70.2

74.0

74.0

77.7

77.7

Adj. EBITDA

22.5

22.8

24.7

25.0

26.1

26.5

Adj. EPS

2.5

2.6

2.7

2.8

2.9

3.0

Net (debt)/cash

(6.7)

(1.9)

0.2

6.4

10.9

15.4

Source: Progressive Equity Research estimates

2

Idox

16 November 2022

Financial Summary: Idox

Year end: October (£m unless shown)

PROFIT & LOSS

2020

2021

2022E

2023E

2024E

Revenue

68.0

62.2

66.0

74.0

77.7

Adj EBITDA

19.6

19.5

22.5

24.7

26.1

Adj EBIT

12.7

12.7

15.3

17.0

18.2

Reported PBT

2.7

7.3

8.3

10.0

10.9

Fully Adj PBT

10.5

12.4

13.8

15.8

17.3

NOPAT

10.3

10.3

12.7

13.1

13.6

Reported EPS (p)

0.1

1.3

1.5

1.8

1.9

Fully Adj EPS (p)

1.8

2.4

2.5

2.7

2.9

Dividend per share (p)

0.3

0.4

0.5

0.6

0.7

CASH FLOW & BALANCE SHEET

2020

2021

2022E

2023E

2024E

Operating cash flow

22.0

10.0

16.9

22.9

25.9

Free Cash flow

11.5

(4.4)

5.2

11.1

14.3

FCF per share (p)

2.6

(1.0)

1.1

2.5

3.2

Acquisitions

(0.6)

(10.5)

(2.5)

(2.7)

(1.5)

Disposals

(0.3)

10.7

0.0

0.0

0.0

Shares issued

(0.1)

0.1

0.8

0.8

0.8

Net cash flow

10.3

(11.3)

1.4

6.9

10.6

Overdrafts / borrowings/bonds

(46.9)

(26.4)

(26.4)

(26.4)

(26.4)

Cash & equivalents

30.8

18.3

19.7

26.6

37.2

Net (Debt)/Cash

(16.1)

(8.1)

(6.7)

0.2

10.9

NAV AND RETURNS

2020

2021

2022E

2023E

2024E

Net asset value

47.0

60.8

65.9

71.9

77.8

NAV/share (p)

10.6

13.6

14.6

15.9

17.2

Net Tangible Asset Value

(34.7)

(31.2)

(19.0)

(13.5)

(7.6)

NTAV/share (p)

(7.8)

(7.0)

(4.2)

(3.0)

(1.7)

Average equity

45.8

53.9

63.3

68.9

74.8

Post-tax ROE (%)

23.0%

22.9%

21.9%

22.9%

23.1%

METRICS

2020

2021

2022E

2023E

2024E

Revenue growth

N/A

(8.6%)

6.2%

12.1%

5.0%

Adj EBITDA growth

(0.3%)

15.5%

9.6%

5.8%

Adj EBIT growth

0.2%

20.5%

10.8%

6.9%

Adj PBT growth

17.4%

12.0%

14.1%

9.3%

Adj EPS growth

32.9%

7.2%

5.8%

6.4%

Dividend growth

N/A

33.3%

25.0%

20.0%

16.7%

Adj EBIT margins

18.7%

20.5%

23.2%

23.0%

23.4%

VALUATION

2020

2021

2022E

2023E

2024E

EV/Sales (x)

4.1

4.5

4.2

3.8

3.6

EV/EBITDA (x)

14.3

14.4

12.4

11.4

10.7

EV/NOPAT (x)

27.3

27.2

22.0

21.4

20.6

PER (x)

34.0

25.5

23.8

22.5

21.1

Dividend yield

0.5%

0.7%

0.8%

1.0%

1.2%

FCF yield

4.3%

(1.7%)

1.9%

4.1%

5.2%

Source: Company information and Progressive Equity Research estimates

3

Idox

16 November 2022

Disclaimers and Disclosures

Copyright 2022 Progressive Equity Research Limited ("PERL"). All rights reserved. Progressive's research is commissioned by the subject company under contract and is freely available to the public and all institutional investors. Progressive does not offer investors the ability to trade securities. Our publications should not, therefore, be considered an inducement under MiFID II regulations. PERL provides professional equity research services, and the companies researched pay a fee in order for this research to be made available. This report has been commissioned by the subject company and prepared and issued by PERL for publication in the United Kingdom only. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however, PERL does not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of PERL at the time of publication, and any estimates are those of PERL and not of the companies concerned unless specifically sourced otherwise. PERL is authorised and regulated by the Financial Conduct Authority (FCA) of the United Kingdom (registration number 697355).

This document is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. PERL does not make investment recommendations. Any valuation given in a research note is the theoretical result of a study of a range of possible outcomes, and not a forecast of a likely share price. PERL does not undertake to provide updates to any opinions or views expressed in this document.

This document has not been approved for the purposes of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom. It has not been prepared in accordance with the legal requirements designed to promote the independence of investment research. It is not subject to any prohibition on dealing ahead of the dissemination of investment research.

PERL does not hold any positions in the securities mentioned in this report. However, PERL's directors, officers, employees and contractors may have a position in any or related securities mentioned in this report. PERL or its affiliates may perform services or solicit business from any of the companies mentioned in this report.

The value of securities mentioned in this report can fall as well as rise and may be subject to large and sudden swings. In addition, the level of marketability of the shares mentioned in this report may result in significant trading spreads and sometimes may lead to difficulties in opening and/or closing positions. It may be difficult to obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance.

To arrange a meeting with the management team, or for further information about Progressive, please contact us at: +44 (0) 20 7781 5300

info@progressive-research.com

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IDOX plc published this content on 16 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2022 08:08:18 UTC.