Tuesday, 4 March 2008

Axon exceeds expectations

When Mark Hunter’s departure from Axon – which had been long trailed – was finally announced Oct 07, the share price went into a tail-spin. Indeed it halved over a three month period. Mark is an old friend (not sure if I can really apply the term ‘old’ to a youngster like Mark though!) When I went to lunch with him in January he told me that he knew of no trading reason for the share price fall – indeed he expected Axon not only to meet expectations but probably “marginally exceed them as we always do”.

The share price had by then fallen to 450p

Today Axon has announced its results for the year to 31st Dec 07 and everything Mark said came to pass. Indeed, these were a pretty excellent set of results. How many readers would not be pretty pleased to report:

- Revenues up 49% at £204.5m
- Operating profit up 69% at £30.6m
- PBT up 67% at £29.5m
- Diluted EPS up 56% at 31.7p

ChairmanRoy Merritt, paid tribute to Mark and thanked him “for leaving Axon in such good shape”.

Steve Cardell has been CEO since Mar 07 – ie much of the period in question. Steve has been responsible for building Axon’s US operations ‘from scratch”. If you remember Mark told me that he had visited the US only three times in the last two years. Axon’s US operations have more than doubled from £32m to £74m and now represent 36% of total revenues (2006 = 23%) Although half of this growth is due to the two US acquisitions Axon made in 2007, organic growth in the US was 41% or 52% in constant currency. Now that is pretty exceptional for a UK company!

But Axon is now setting its sights on being a global player. Asia Pac revenues also grew c50% to £10.8m. They acquired JSPC, a Malaysian SAP service provider in Oct 2007.

Nearer to home, Axon points out that, although it is “the dominant player” in the UK SAP market, the European SAP market is six-times larger and SAP is pretty unrepresented. Clearly some ‘corporate activity’ planned there.

The outlook also looks good. Indeed they join the long list of companies that tell me that although they recognise the “increased macroeconomic uncertainties, we have yet to see any consequence of this in our own orderbook and pipeline”.

So how was Axon rewarded for these exceptional results?

You guessed it. Currently (9.00am) share price down 63p/11% at 499p. Perhaps someone can tell me why?

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