Tikit

Legal software provider Tikit has been hit by a spending freeze and will fall some way short of forecast profits.

In the second quarter of the year the London-based group suffered more ‘deferrals’ of third party software sales than it was expecting, which in turn led to a drop in levels of consultancy and other associated revenues. This has hit margins and, as such, profits for the first six months to June have been hit hard.
 
The board now says it should report an interim £1.1m (2008: £1.86m) profit before tax and exceptionals on flat sales of around £13.6m. Analyst Ian Mitchell of house broker Charles Stanley had earlier this year been forecasting profits and earnings per share of £4.2m and 20.58p respectively for the full year, but has slashed this to £2.6m and 12.86p.
 
Back in March chairman Mike McGoun had assured that ‘we’re resilient in tough times’ as the company lifted sales and profits to £28.5m and £3.8m in the year to December. But now McGoun and co observe that the continuing redundancies and capital spending freezes among lawyers are liable to make the second half of the year just as difficult.

Their hopes of ‘a stronger performance in the remainder of the year’ therefore seem somewhat unlikely. On the plus side, annual cost savings of around £1m put in place in the first half should enable the debt-free group to retain a relatively strong level of cash generation, with house broker Charles Stanley forecasting a dividend maintained at 6p.
 
Recommended by Growth Company Investor at 80p in 2003, shares in Ticket rose to over £3 in 2007 but have slumped all the way back to the current vicinity since then. With a number of high profile law firms in the UK and around the world announcing falling profits, the medium-term outlook is gloomy, although we remain fans on a long-term view. Sadly, we say sell.