Information management software expert IDOX (LSE: IDOX) has been on many a recovery investor’s radar since its share price crashed in late 2017, after the firm’s second profit warning in the space of two months.
Despite full-year results a few months later being met reasonably positively, my colleague Roland Head told us he was “not completely convinced.“
That was a canny analysis, as the shares continued on a lukewarm trajectory, before falling 15% in response to 2019 first-half results on Monday.
The company spoke of a “stable financial performance during a period of significant transformation,” reporting a small fall in revenue from £31.8m in the same period last year to £31.5m this time. A statutory first-half loss of £32.5m reported a year ago was drastically reduced to just £2.2m, but adjusted EBITDA for continuing operations looked less impressive with a drop from £4.6m to £4.4m.
Net debt looks stable at £25.4m, from £26m, and there’s “significant headroom within its existing facilities.”
Turning around
The trouble is, IDOX is still deeply immersed in a massive restructuring, having taken on new management from board level to senior levels throughout the business. There are disposals and refocusing on key assets going on, together with changes in accounting procedures.
That all adds up to… I haven’t the faintest idea what’s going to happen or what the company might be worth if and when it all gets back on track.
And it means that I’m sticking to my new rule of recovery investing — never buy a recovery stock until after it’s recovered. I think it’s particularly appropriate in the current economic climate, when several stocks have been crashing and then going on to do even worse.
REIT crunch
About a year ago, the Capital & Regional (LSE: CAL) real estate investment trust (REIT) was looking positive, as things were progressing well with its development plans at The Mall in Walthamstow.
I generally like REITs as a relatively low-risk way to invest in the property market. If there’s one investment field in which I think it’s wise to go for a collective investment rather than, say, taking on a residential buy-to-let mortgage and shouldering all the risks yourself, this is surely it.
Unfortunately, as I write these words, there’s a major fire at the the Walthamstow mall, and the Capital & Regional share price has so far taken an 8% hit. The company has not been able to say much so far, beyond assuring us that it will provide further information “once the fire has been extinguished and we have fully assessed the situation.”
New strategy
Shares in the trust, which specialises in shopping centres, had already been in a significant slump over the past two years. In full-year results released in March, chief executive Lawrence Hutchings spoke of “the structural changes currently under way in the retail sector,” stressing the apparent success of “the new strategy we launched just over a year ago.”
As REITs go, I thought Capital & Regional was oversold and looked like a potential buy — and it still might be, as the Walthamstow property is just a part of its portfolio.
And it does help stress the added safety of a REIT — imagine the damage a house fire could do to your property investments if you’d, well, bought a house.