If anything, the rise of regulations and compliance rules across various business sectors is providing a real boon for Ideagen (IDEA:AIM). The Midlands-based company provides information management solutions to highly regulated industries, such as healthcare, complex manufacturing, banking/finance, defence and energy.
It's not a glamorous market in the way that cyber security is right now, nor is it a particular 'hot' sector, perhaps like fintech. But it is making the company money, plenty of it and not just from acquisition either, although carefully-vetted purchases are certainly adding value. You can read more on red tape technology here.
Back to Ideagen and today's full year results. The numbers show a 52% jump in revenues to £21.9 million for the year to 30 April, 10% of which was driven from the underlying business, or organic growth in other words. This led to a 57% leap in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to £6.3 million and improved operating cash conversion metrics.
At a pre-tax profit level the figures shot up 58% to £5.7 million, although that's after adjusting for various perceived one-offs, such as share based payments, amortisation of acquisition intangibles and a few other bits and bobs.
'The results highlighted a particularly strong second half performance, driven by the Governance, Risk and Compliance market,' comments Lee Prout today, analyst at IT analysis boutique Megabuyte. That part of the business is worth about 80% of total revenues so by far the most important, so investors can feel rightly chuffed about a 96% client renewals hit rate and 100 new customers won, not to mention the biggest single contract in the company's history secured, worth £4.9 million.
The smaller healthcare unit, which supplies clinical management solutions, primarily to the NHS, is the outstanding sore point. As CEO David Hornsby admits, it 'continues to be impacted by stasis within acute NHS trusts resulting in a decline of 20% in revenues from this market during the year.'
Longer-term Hornsby is convinced of long-run opportunities as the UK healthcare, and the NHS in particular, increasingly embrace the digital age, just don't expect to see to much progress any time soon.
'Policy initiatives and decisions continue to be delayed... the group does not see a strong growth opportunity in the near term,' he points out.
Standing back, the compliance noose is tightening across many industries sparking demand for Ideagen's red tape management software that can automate audit trails and improve accountability across large organisations. That transition is only likely to gather pace down the line and investors have already been well rewarded for backing the company's story even in the face of today's modest 2% share price dip to 54p.
The shares have soared 184% since moving up to AIM from the old Plus market at 19p in late 2012.