Monday, 24 November 2008

COA benefits from loyal customer base

(By Richard Holway) I reported on COA Solutions annual results in my post of 27th Aug 08. You can reread the COA history and background there.

Today COA has announced their results for the six months to 30th Sept 08 which show topline revenues up 16% at £29.6m. However, COA have been quite acquisitive – the latest was HR specialist ASR Computers in Apr 08. So organic growth is a more modest, but still quite acceptable, 5%. Earnings before all the bad stuff were up 27% at £5.1m.

In these difficult times, COA has some good things going for it. Firstly, it has a quite balanced 50:50 split between public and private sector revenues. Secondly, recurring revenues represent c50% of revenues. Indeed COA gets around 90% of its revenues from its loyal existing customer base. As I have often said, when times are tough, this can benefit companies with established user bases as they tend to delay any thought of installing brand new systems (from brand new suppliers). “Make do and Mend” if you like! But selling more product to your existing clients is a wonderful way to get through these times.

In ‘normal times’ I’d be speculating that COA would IPO. That’s off the agenda. Or I’d speculate that COA would be the subject of a trade bid. Having spoken to Jon Moulton of Alchemy (who effectively own COA) last week, I doubt that will happen either. Indeed, why would Alchemy want to sell a rather good company which was quite capable of getting though the next few years, at today’s depressed prices? I think it is more likely that Moulton would back COA continuing or even accelerating its own well targeted M&A.

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