Share Name Share Symbol Market Type Share ISIN Share Description
Maxima Holdings LSE:MXM London Ordinary Share GB00B034R743 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 23.75p 0.00p 0.00p - - - 0 06:30:09
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Software & Computer Services 28.2 -6.6 -25.1 - 8.37

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Date Time Title Posts
22/10/201217:44Maxima Holdings666
01/3/201214:14Maxima Holdings - Stabilised1
19/12/201110:53Maxima Holdings - Orderly Disposal-
11/8/201109:00Maxima Holdings - Final Results-
08/2/201012:00Maxima-Focus on Growth4

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rhotoid: Wh1spa Just checked mxc capital. I hadn't realised they'd being involved in the dreaded Redstone... Don't really know their track record so I'm open minded and will see. Results read abit mixed to me ,abit like the disposal rns. They do seem to be making progress in reducing the debt and that in the end is how I can see the share price taking off I'm just abit unconvinced by some of the thought processes - I note at one point they say 'now has time to consider the best options available to it' - they should know that already before they started to do the disposals activity!
wh1spa: The Hewden contract had very little, if any, impact on the share price. Lets hope they do rocket!
sharky4: Having previously worked under Maxima, I have seen the share price dip from £3+ to pennies. I have seen good staff leave, replaced with staff in India. As for the research from Edison, usually these aren't independent.
stevemarkus: es, I thought the results looked OK as well. Streamlining the business should help. Be interesting to see what sort of offer they get - I would imagine that if it is realistic it should be quite some way above the current share price. Having said that, I don't think Maxima have been particularly effective at managing their decline, and that shows in the current share price. Cheers, Steve.
paddyfool: Strategic review is the standard term which means 'for sale' this company is for sale. Its value is not a million miles from the current share price. Its potential with the right management and capital backing is a multiple from here. Hence the need to sell.
glasshalfull: I reckon the outer will be an agreed bid by KBT. I've watched & invested in KBT, SND, MXM and TSE (Touchstone - now delisted) over the past 10-years and only KBT appears to have it's house in order. Reckon they'd be a good fit and I'm sure that MXM will command a sale price significantly higher than today's languishing share price. If the QAD withdrawal hadn't occurred then I'm sure they'd have weathered the decline in legacy far better but that was a real kicker. However, too many uncertainties and debt, so despite the apparent value I won't invest here. Regards, GHF
marben100: The announcement states that he has left for a new job. With any other company, I would be very wary of such an announcement. However, I am in the fortunate position of knowing Kelvin Harrison personally, having worked with him many years ago for about a year. IMO he is utterly trustworthy and prudent and a very capable manager. Therefore, I find it highly unlikely that anything "iffy" is being hidden from shareholders. I have to make a couple of caveats to that statement. Firstly, obviously you do not know me from Adam, so anything I say, as with any other BB poster, must be taken with a large pinch of salt. Secondly, not even Kelvin can know how bad things are going to get in the UK economy over the next couple of years - though I do think Maxima is well placed to weather any storm, with its solid base of recurring revenues (which are pretty non-discretionary for Maxima's clients). Because of my concerns about the UK economy, I am not adding to my holding yet - but if the share price goes much lower, I might. After all, a 2p interim dividend is still being paid & the 2009 & 2010 P/E is STILL under 3 after the recent downgrade. I would really like to see some sign that the economy is turning and IMV we've got quite a way to go yet. Not sure if there'll be anything positive in 2009 at all. Regards, Mark
marben100: Market expectations were as per my post above. Edison have now updated their forecasts to reflect the trading update. See Latest f/c is 19/03/2009 56.0 19.1 4.4 55.0 19.0 4.4 Edison comment: "This week's trading update shows further evidence of the economic slowdown hitting Maxima's markets. Entering Q4, deferral of orders now begins to have an immediate impact. The scale of the impact remains modest against a core of recurring revenues and does not cause us to question the business model. Maxima is a good cash generator and financially sound, though it will have to wait out the economic storm." Very much in line with my own views. However, we still don't know how bad things are going to get, so I'll hold off adding to my holding until there is some sign of the real UK economy bottoming out - I suspect we're not even close. My thinking is also partly driven by the fact that I'm pretty fully invested now (mostly in businesses with overseas earnings, less vulnerable to the UK) and am being very careful with any spare cash. I shan't be selling any Maxima either, though. That yield of 7.6% looks rather tasty while we wait for the turnaround. If the share price is at or below this level when the economy turns (& revenue hasn't been decimated), this stock will be a real bargain, likely to offer excellent returns. I await the next update with interest.
marben100: Hi GHF, I can't see what will give the an uplift in the short term other than a bid - which isn't out the question. "What will give the uplift?" is an argument used by Seymour Pierce too... but there is one thing: if Edison are correct and there is an overhang, we could get a rise once it's cleared. However, I agree that it's hard to see a major one until Maxima prove themselves with results. For anyone that hasn't seen the TMF post, here it is: Since my last post, I have spoken to Kelvin Harrison, Maxima's CEO. Here's the result of my Q&A (please note that answers are paraphrased from my notes and I can't guarantee accuracy): Q1: How is the (possibly) worsening economic climate affecting your acquisition strategy? A1: Maxima's low rating means that acquisitions will largely have to be made from cash rather than shares. 2H cashflow is generally much stronger than 1H (last year was exceptional, due to timing difference in settlement of a payment). This means that we will have to focus on acquisitions below £10m but our cash position will allow us to make several such acquisitions. My interpretation: circumstances will put "a crimp" in the strategy but not halt it altogether. I believe Kelvin will act prudently and not overstretch. The balance sheet should remain sound. Any acquisitions made should be available for good prices: the imminent CGT regime change may encourage business owners to act before there is an adverse CGT impact. Q2: Has there been much unrest from employee option-holders and shareholders from acquired businesses? A2: Most shareholders from previously acquired businesses are no longer with those businesses, so do not impact operations. Whilst such share- and option-holders are "upset" with Maxima's share price fall, they are not "distraught". My interpretation: shouldn't be a major problem but highlights the fact that future acquisitions will largely have to be paid for in cash. Q3: How is Boris Huard getting on (new COO appointed 29 Oct 2007)? A3: Kelvin is very pleased with the appointment. Boris is already "doing some things better than I could have done". Kelvin explained that Boris was dealing mainly with day-to-day operations and line-management, whilst he focussed on major clients/projects and on "relations with the City" etc. Kelvin had attended some 30 meetings in the City since the interims. A couple of further things to note: a) On the day the interims were released (and the closed period ended) reasonable share purchases were made by almost all directors: Of course, directors are not always the best to judge when to make purchases but at least they are putting their money where their mouths are. b) Seymour Pierce have today downgraded Maxima to "sell": : In a research note published this morning, the analyst mentions that the company is likely to post disappointing results for 2H, in the wake of the weakening demand in several of its business segments. Maxima Holdings' highly geared balance sheet is an area of concern, since the company needs to make additional acquisitions, the analyst adds. A few points on this: i) Neither Maxima nor Edison expect "disappointing results" in 2H (other than as previously announced). Of course, we have the old adage that "profit warnings come in threes" but Maxima's high proportion of recurring revenues should provide some insulation. Kelvin mentioned that it was particularly unfortunately that one of Maxima's largest clients had decided to consolidate their IT support business with a single major IT supplier at this particular time and that there were no other clients that we likely to make similar moves that could have an impact on the same scale. My own view, supported by ratios shown in the Edison report is that Maxima are better placed to withstand a general downturn than most of their peers. ii) Maxima's balance sheet is not "highly geared". There is some gearing but it seems perfectly manageable to me, with £11.7m of long term borrowings (and net cash short term) against annual operating profits of around £5m and a total balance sheet of £33.5m (admittedly including substantial intangibles). There was also £10.2m of deferred income (i.e. "guaranteed" future income) on the balance sheet. iii) The company doesn't "need" to make acquisitions but it does wish to do so. The current rating certainly does not reflect growth by acquisition. iv) Elsewhere, I have read that share price also stated they saw no reason for Maxima to be re-rated in the near term. However, if here is a share overhang as Edison have stated then Maxima's share price could well rise once this overhang is cleared. v) I note that MXM changed its NOMAD from Seymour Pierce to Cenkos in December 2006. I have observed that it seems rather common for ex-NOMADs to turn bearish on companies they formerly advised ;0). Cheers, Mark
marben100: Here is info gleaned from an investor presentation that I attended last Thursday. Last Thursday, it was Maxima's turn to offer a Foolish investor presentation. Events on Thursday From my POV the day started well, with the shares opening 8% up on the back of a half-year trading statement released by Maxima that morning: [and, more significantly a new broker note from Edison – available here:]. That puts Maxima's share price 15% up over the last week... so perhaps not the best time to buy for those interested. The recent rise can probably be explained by broker upgrades, issued earlier last week, resulting in a rise in the consensus EPS for this year from 21.6p to 24.1p These upgrades are to take account of Maxima's latest acquisitions (see Thursday's rise was more surprising, as the trading statement was pretty nondescript: The business continues to successfully pursue its acquisitive and organic growth strategy, and will report expected revenues and profits significantly up year on year. I'd be rather surprised and disappointed if the revenues and profits were NOT significantly up, given that Maxima should be enjoying the benefit of a half-year contribution from the four acquisitions made last year (little effect from these in 1H last year). This was queried in the meeting and I got the impression that Kelvin Harrison (CEO) and Linda Andrews (FD) were being cautious before completing the accounts for November... I guess we'll see once the results are released next February. Some Numbers Before moving on to the presentation, let's have a look at the numbers. The last figures that I calculated are presented here: Following recent acquisitions and using the latest Edison forecast, the forward numbers for '06/'07 look like this: SP (p) : 230/236.5/139p (current/1yr high/1yr low) '06/07 Pretax : £6.7m Shares in issue : 18.9m (1) EPS Forecast : 24.7p (2) Forecast P/E : 9.3 PEG : 0.13 (3) Forecast divvy : 5p Forecast yield : 2.2% (1) Includes outstanding options of 0.80m (2) Pre- goodwill amortisation, based on quoted shares in issue figure, rather than weighted average (3) The PEG may be misleading as it is based on the 73% EPS growth forecast between FY06 and FY07. It is questionable whether such rapid growth can be sustained going forward. The Presentation We had the most pleasant venue of any of the company meetings that I have attended so far, on the top floor of the building that Seymour Pierce occupy in the City, with good views of the rest of the City and over the Thames. A pleasant buffet lunch and wine were provided. It is always interesting to see how the players in a business compare with one's expectations. Kelvin came across as soft spoken with a nice smile, definitely not a salesman's salesman, he is confident in his own abilities. Linda is more outgoing, together they seem to make a good team. Key points that I gleaned from the presentation were as follows: The business has developed into two areas: - Managed services. Provision of IT management and support services, targeted at mid-cap businesses, divisions of major corporations [e.g. Mars, Hoover, Vodafone], and the public sector. Maxima provide the same type of service to mid-caps that large IT service companies such as EDS provide to major corporations. KH indicated that demand for outsourced services from midcap enterprises is growing rapidly. - Solutions. This is the more typical bread-and-butter of most IT companies: supplying, supporting and maintaining IT systems. The managed services arm has really developed from the acquisition of Hanston, just over a year ago. Prior to that acquisition Maxima's foundation business, Azur, was more solutions oriented. Kelvin stated that the managed services arm was the more profitable and reliable business. These contracts typically moved into profitability within the first month or two of being initiated, whereas "solutions" contracts were generally not profitable for the first year. This transition illustrates Kelvin's approach to business, which he himself describes as "opportunistic". Rather than simply imposing Maxima's own business methodology on its aquisiitions, Maxima is willing to draw on any new ideas and skills that it gains through those acquisitions and capitalise on them. It is not an "ego driven" business. The acquisitions can open up considerable cross-selling opportunities. E.g. with the recent acquisition of Intertech, Maxima acquires strong credentials in Citrix, a good relationship with that supplier and Intertech's customers. Those Citrix skills and sales opportunities can then be deployed across the much larger customer base of Maxima's existing businesses. Similarly, Maxima's skills in SAP, Oracle etc can be offered to Intertech's customers. Each new acquisition can multiply its effectiveness in this manner, as Maxima broadens both its customer base and skill base. Maxima now has partnerships with the following suppliers (besides Citrix): - Microsoft (Gold certified partner) - IBM (largest U2 managed services practice in EMEA, see - Oracle (largest managed services practice in the UK) - SAP - QAD (largest MFG/PRO distributor) - Progress - Computer Associates Kelvin does, however, have some clear and straightforward views about what will lead to success in Maxima and its acquisitions: a) A strong emphasis on a customer service culture as opposed to a sales led culture. It is much cheaper to retain existing customers, cross-sell to them and be recommended by them, than to spend heavily on sales and marketing to win new ones. b) Firm control of costs. Business costs are constantly and rigorously monitored and any unnecessary costs eliminated. E.g. introduction of strict timesheet reporting/monitoring to ensure that professional time is spent productively: Maxima operates a target of 80% of available hours per fee-earner to be chargeable. The overall IT services market is forecast to grow at little more than the rate of inflation (5-6%). Clearly Maxima aims to grab a larger slice of that market. Kelvin was asked who Maxima's main competitors were. His response was that the marketplace was highly fragmented and that Maxima came up against different competition in each of its market areas. It is this fragmentation that Maxima seeks to exploit: - By beating the competition through better business process and customer service. From personal experience, I do know that Kelvin is very strong on business process. - By growth through acquisitions at good prices. Kelvin described it as a "buyer's market" for acquirers. This seems consistent with the observation of Fools that quoted companies in the smallcap IT services sector are trading on low P/E multiples and it appears that unquoted ones can be bought at even lower multiples, as their owners struggle to grow their businesses in tough market conditions. There appears to be a classic value opportunity. Maxima has the following key acquisition criteria: - Strong recurring revenues - Organic growth opportunity - Potential for rapid cash payback - Good cultural fit. I.E. staff in the acquired business are happy to adapt to Maxima's more rigorous business process. A couple of interesting observations were made on that last point. Firstly, often the original owners/directors of the acquired businesses were looking for an exit and departed once the acquisition was complete. This also means that there is less need for an "earn out" to be included in the deal. Currently MXM has only £0.7m of deferred consideration outstanding from the 6 acquisitions completed so far. Kelvin had found that the second (and lower) tiers of management were often pleased to see the improvements and reduction of waste that occurred with increased rigour. Kelvin stated that there was a plentiful pipeline of further acquisition opportunities. We asked how many had been examined in the last year. We were surprised to hear that it had been some 600 businesses! Most of these were rejected within a few minutes of examining them. As Maxima's reputation spread, Kelvin indicated that Maxima was being approached more and more by potential vendors, rather than needing to seek out opportunities. Whilst it was not stated explicitly, I would expect to see more acquisition announcements this financial year (to 31st May). All acquisitions so far were reported to be performing ahead of expectations. We discussed financing of the acquisitions. Maxima's strong cashflow allows considerable scope for purchasing from Maxima's own resources. Following the most recent acquisitions, the Edison note indicates that they expect net debt to stand at £8m, falling to £5m in the absence of further acquisitions by the financial year end. Kelvin indicated that Maxima's bankers were willing to lend up to 3.5x prospective EBITDA but that the Board was not happy to go above 2.5x EBITDA in borrowings. Kelvin also stated that Maxima intended to implement a progressive dividend policy, with an aim of paying out around 20% of operating profit. It was also stated that the effective corporate tax rate is likely to be higher this year than last, at around 29-30%. It is worth observing that Maxima's track record seems to back up their claims. There is evidence for this in an October note from Seymour Pierce, which is well worth reading. Here is a particularly striking example relating to the Ringwood acquisition: Of the £3.2m revenue that Ringwood reported for the year to March 2005, 65% was derived from recurring support contracts from the installed base. However, the high proportion of recurring revenues, typically a good sign, were also a signal that new business growth had withered at Ringwood. When Maxima bought the company it was perceived from the start as a turnaround situation. Soon after the deal completed, Ringwood's directors left the company, and a new team took control. Some staff were laid off and the company relocated to new offices, which Maxima believes boosted morale. These changes led to an exceptional charge of £130k, principally related to redundancies. These changes achieved the desired result, and the company which had reported a loss of £80k on turnover of £3.2m in the previous year, hit an annualised run rate of £800k operating profit on £2.9m turnover. The business had previously been in decline, having won no new customers for some time. However, in the first year of Maxima's ownership, Ringwood added twelve new customers and we estimate that revenues are now tracking at an annualised £3.5m (representing 20% top line growth yr/yr), with annualised EBITA at c.£1.2m. With Ringwood, Maxima has achieved a fast payback: having acquired a business for a net price of £2.9m which within a year is generating £1.2m of operating profit. Some Further Thoughts Maxima's business strategy seems to me to operate in a virtuous circle at the moment: - Each sensible acquisition MXM makes adds both to Maxima's EPS and cash generation - That, in turn, tends to lead to a rise in MXM's share price - When making further acquisitions there is a) more cash available; and b) MXM's higher share price means that fewer shares have to be issued in cash/share deals resulting in less EPS dilution. - Vendors of companies that MXM buys should be very satisfied with the gains that they are seeing on their MXM shares which should also attract future vendors and strengthen MXM's negotiating hand. The flip-side is that, in time, there will be an overhang of shares that past vendors may wish to sell. It seems to me, however, that there is little risk of the circle turning vicious: if MXM's share price starts to slide it can simply stop making new acquisitions. As long as the 1 year forward P/E and cashflow looks attractive (and they do at the current SP), risks look very reasonable. There is a risk that the share price could rise to speculative levels, where future potential acquisitions start to be priced in. At that point I'd start reducing my stake. Regards, Mark
Maxima Holdings share price data is direct from the London Stock Exchange
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