Maxima Holdings

IT services provider Maxima Holdings reported a 9.9% decline in revenue to £51m for the year to May, amidst what it describes as a ‘challenging economic environment’.

AIM-quoted Maxima also announced a fall in adjusted pre-tax profits to £4.9m (2009: £7.1m) due to what the board described as the 'perfect storm' that has affected the IT industry over the past two years. In reaction to this, Maxima has cut costs, reducing UK staff numbers by 14% last year, although there was a 48% increase in its Indian workforce. Meanwhile, Maxima reduced the total dividend to 3p (2009: 4.5p).

CEO Graham Kingsmill told Growth Company Investor that last year was 'a time of re-engineering our business’ and represented 'a good spring clean'. As part of its streamlining measures, Maxima’s 11 operating divisions were restructured into only two, with Kingsmill adding 'we have reduced substantially the number of UK and Ireland personnel whilst increasing our resources in India’.

Kingsmill says Maxima’s plan for the future is to take advantage of macro developments in the sector, including ‘cloud computing, eBay and Facebook’, which he argues are increasingly used 'in the business as well as the social world’. However, with a tough environment for the IT industry ahead, Maxima certainly faces challenges and retains a substantial amount of debt at £11.8m (2009: £15.5m).

The shares, originally backed by Growth Company Investor at 160p in 2005 and which have fallen from around £3 in 2007 to only 79p today, may trade on a temptingly low p/e of 5.6. However, now seems too risky a time to stay invested in the shares. Cut your losses.