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Though this was posted on ADVFN, the poster was Leon Boros of Sharesoc who is no moron. It raises some massive red flags about IDOX (IDOX) and having read it this I rather conclude that this is a share one does not have to own.
These are an unimpressive set of numbers. Adjusted pre-tax profits are down for the half year at £6.9m (2016 H1: £7.9m). Free Cashflow in H1 was also down but this time by a whopping 32% at £7.26m (2016 H1: £10.62m). No explanation is given for the deterioration in the trading performance although I note from the segmental breakdown that three divisions are now generating losses.
The highly contentious acquisition 6pm made a loss in the period. Management estimates that had it been owned for the entire half year, losses would have been £1.24m on sales of £4.86m.
Trade and other receivables continue to increase and are now at £52m. This includes recoverable contracts which have not been separately disclosed in the interim statements. Recoverable contracts is for work judged to have been done for local authorities but which has not been invoiced (and which may not be invoiced for up to five years). Recoverable contracts rose from £1.7m to £18.7m between 2011 and 2016 by which time it represented 50% of total receivables.
Idox's estimated debtors days are now a staggering 207 days (based on pro-rate sales not forecast sales and after deducting my estimate of £2m for prepayments etc). This is up from 162 days at the year end.
The new CEO assured me a few months ago that no further deals would be done with local authorities involving deferred invoicing and payment. These figures suggest otherwise.
IDOX also continues to capitalise a hefty chunk of its spending on software at £2.3m in H1 (2016 H1: £1.9m). At the 2016 year end capitalised development spending exceeded the amortisation charge on software by around £2m.
IDOX accounting policies continue to be a cause of concern.
I should cocoa. Profits are a matter of opinion, cash a matter of fact.
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