Maxima

In a year it which it lost £2m of earnings due to the deterioration of its markets and the loss of a major customer, IT software and service consolidator Maxima has still managed to grow impressively.

Selling its wares into over eight different sectors in the mid-market, Maxima partners with software giants Microsoft, SAP, Oracle, Citrix and IBM, which are increasing their market share at the expense of smaller players. Having made 12 acquisitions since floating as a shell in 2004, the company claims its offering is now ‘complete, offering a ‘unique one-stop shop’ for customers with everything from desktop and applications to databases and networks.

But chief executive Kelvin Harrison bristles at a recent slight from venture capitalist John Moulton that Maxima’s is a ‘buy and stack’ strategy, exclaiming that ‘integration is key’. A new sales director and operations director are bringing a ‘more structured and less opportunistic approach’ that has seen cross-selling opportunities increase in the new year.

In the year to May the company completed its 10th and 11th purchases, which contributed partially to revenues rising 47% to £46.7m and profit 24% to £5.2m before tax, 8% of which was organic. Cash conversion improved from 64% to 87% and net debt, after £6.1m was spent on acquisitions, climbed to £8.5m.

Immediately after the year end, Maxima extended its facilities to £17.1m with the acquisition of profitable DXI and retains strong support from Barclays for further deals. Harrison says ‘plenty of further opportunities are out there'.

Recommended here in 2005 at 160p, the shares breached 320p last summer, but have surrendered much ground since. A rating of around five times current year’s earnings suggests little faith exists in the market. This is not entirely warranted and the shares are worth a punt at this price.

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