Tuesday, 3 February 2009

Maxima – a question of focus

(By Anthony Miller). Now here’s the problem. Mid-market solutions and services player Maxima was created as an acquisition play to become “a focused IT services group”. Yet chairman Michael Brooks refers to its “diversity and spread of (our) offerings and client base” in today’s interim report (see here).

Which is it to be? When you’re a sub-£50m p.a. revenue player I don’t think you can afford the luxury of having a foot in both camps. The numbers reflect this. Much in line with December’s trading update (see Maxima - Cautious but stable), adjusted profits rose in the half-year to 30th Nov. ’08, but ‘true’ operating profit did not, and as a result ‘true’ operating margins fell from 11% to 7%. This was mainly because margins in Maxima Solutions (42% group revenues), its ERP resale and bespoke solutions business, fell from 18% to 12%. Margins at Maxima Managed Services (does what it says on the can) also fell, but from just under 5% to just over 3%.

At least CEO Kelvin Harrison, whom we like and regard, realises that some analyst forecasts for UK software and IT services growth “may prove to be optimistic”, referring to a recently released report suggesting the UK project services market will grow 3% this year. We will be publishing our own market forecasts in just a couple of weeks, and I can tell you this now; that number begins with a minus sign!

Yet for all that, Maxima’s stock is still ‘only’ 10% below its 110p AIM listing price (Nov. ’04), which in today’s markets has to be considered some sort of a result. Just to put this in context, TIG’s share price fell some 80% over the same period; Anite is down about 50%. Nonetheless, I wonder where Maxima's stock might have been with a bit more ‘focus’?

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