Innovise increases interim turnover 75% on acquisitions

BLACK Country-based software firm Innovise increased turnover £7.9m during the six months to March 31, a 75% increase on the same period last year.

A strong programme of acquisitions and improving sales boosted the performance.

Nevertheless, operating pre-tax profit fell to £574,000 in the interim period, which compares to £677,000 in the first half of last year.

The Brierley Hill company said all three of the businesses it acquired during 2009 were now fully integrated within two realigned operating divisions.

In addition, it said the purchase of Identifile Systems had been completed after the period end in April.

In its interim statement the firm said trading conditions had improved steadily during the six-months to the end of March, although the general business environment remained challenging.

Vin Murria, chairman, said: “I am pleased that Innovise delivered solid results for the period by maintaining a sharp focus on disciplined financial management and optimisation of its growing business streams.

“Our turnover increased by more than 75% compared with HI of 2009, reflecting the three strategic acquisitions we made during calendar year 2009.

“The restructuring of our enlarged business into two distinct and aligned operating divisions – Innovise Enterprise Service Management (ESM) and Innovise Software & Solutions – has now been successfully completed.”

He said that while the operating pre-tax profit had fallen during the period, the board nevertheless considered the results to be “very competitive” and encouraging in view of the difficult market conditions.

“I believe our results for the period demonstrate both the ability of the Innovise leadership team to deliver sustainable profitable growth through its focused strategy of targeted acquisitions, business integration and rigorous cost control, and also the commitment of the entire Innovise team to deliver quality solutions and highly dependable services to all our customers,” added Mr Murria.

During the second half of the year, he said the company would continue to place great emphasis on maintaining and optimising near-term profitability, while the company positioned itself for long-term growth within its niche markets.

Mike Taylor, group chief executive, said the restructuring of the firm following its acquisitions meant it was well placed to take advantage of additional growth opportunities in the future.

The restructuring has seen the Innovise Enterprise Service Management (ESM) division incorporate the former Abilitec, Infrasolve and Harbrook businesses, while the Innovise Software & Solutions division includes RapidHost as well as the firm’s established software and managed services business segments.

Identifile Systems, a small Hertfordshire-based company that designs and supplies identity card systems and visitor management software, was acquired after the period end.

At the time of acquisition, the business had an annual turnover in the region of £550,000 and Mr Taylor said Innovise was confident it could grow this.

“While it is one of our smaller acquisitions, it will add further value to our total customer offering. Identifile’s software solutions fit neatly into our existing sales activity within the global facilities management marketplace,” he said.

Mr Taylor said the increase in turnover had been fuelled by a combination of acquisitive growth and some sizeable ESM software licence re-sale activity in the H1 period.

Operating profitability was affected by the recession and reduced utilisation levels, particularly in Q1, he added, while operating margins were affected by the sizeable contribution of licence re-sale activity within the ESM division, where gross margin is lower than for consulting and support.

Cash generation has been poor compared with other years due to a number of factors including the fit-out of a new office in Slough; high levels of growth in the more capital intensive ESM division; and a general deterioration in payment terms as customers reacted to the recession.

Mr Taylor said this was likely to be a short-term situation and the firm was hoping to return to the status quo as soon as possible.

Recurring sales during the period increased from £1.7m to £1.9m.

In outlook, he said that while the economy generally and the market for IT services specifically had been improving in recent months, trading conditions remained challenging.

Due to this, short-term profit is likely to be restrained.