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Ovum turnover on the increase

• FROM: July 2006 |
• TAGS: software & computer services, ovum |
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• Ovum turnover on the increase
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Research and consulting group Ovum floated earlier this year and the shares went to good premium in the first few weeks. Since then, though, the shares have slipped below the issue price.

Overall turnover rose by one-quarter to £18.3m in the year to March 2006. Nearly two-thirds of this came from contracted research and the rest from consulting and other one-off projects. In recent years management has deliberately increased the contracted revenues of the group. Renewal rates are 88% and the current annualised contract revenues are £13.3m. This will put Ovum in a better position to weather any downturn in the technology market in particular. There is a good geographic spread of turnover over the
UK, rest of Europe, North America and Asia-Pacific. The latter grew turnover by 51% and it should continue to grow faster than much of the rest of the group.

According to Ovum if amortisation and exceptional items are stripped out profits jumped from £340,000 to £1.2m last year which was slightly ahead of forecasts. A profit of £1.9m is forecast for this year although growth in earnings per share will be held back by the additional shares in issue.

Ovum raised £6.1m net in its March flotation. At the end of March it had net cash of £5.7m - equivalent to more than one-quarter of the company‘s market value. This gives it plenty of scope to make add-on acquisitions of other research outfits. In 2005 it bought telecoms research house Ryan Hankin and Kent for £1.3m. More recently it bought Summit Strategies Inc for $1.2m in shares. Boston-based Summit specialises in the IT market.

The shares are trading on a forecast P/E of 17. Fully listed rival Datamonitor is trading on a multiple in the 20s.