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ILX – The Bos is making moves: Upgrade to Speculative Buy

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I noted in an update here yesterday on ILX Group (LSE:ILX), the AIM-listed provider of e-learning software and business training, that new executive chairman/interim CEO, Wayne Bos, had overseen the identification of a small number of acquisition opportunities, with the first of these under consideration. Bos has wasted little time concluding this – with ILX announcing it has acquired Obrar Ltd, a consulting and project management services company. The following takes a look at the details of the acquisition and its likely impact for the ILX share price.

© Tom Winnifrith

To read that update click HERE

The acquisition is for an initial £0.35 million, with a further up to £0.42 million payable on anticipated net assets of £0.48 million as at completion. Earn-out payments of up to £0.3 million and £0.35 million are respectively payable on Obrar reaching a pre-tax profit of £0.6 million for the year ended 31st March 2014 and £0.725 million for the year ended 31st March 2015. The deal sees Obrar Managing Director, David Hopkins, remain in position – with Wayne Bos noting “we know the Obrar Managing Director David Hopkins and his team well, having been in contact and watching their growth and progress over several years”.

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Obrar was only established in 2010 but has quickly built a client list including the likes of T-Mobile, Orange, Barclays and Vodafone for its business improvement (strategy, processes and technology design) services, typically focusing on multi-media contact centres, corporate technology infrastructures and operational change associated with major programme deliveries. For the year ended 31st March 2012, the business generated a pre-tax profit of £0.28 million on revenue of £1.6 million. It thus looks a compelling acquisition at the price ILX is paying – and this is even more so when considering the “major opportunities” seen in Obrar adding the ILX learning solutions and technology platform to its offering and ILX adding the proven consulting and project management skills of Obrar to its own.

Considering that ILX delivered an underlying pre-tax profit for its last full year of £0.968 million and recent interims saw this measure fall from a first half of last year profit of £0.187 million to a £0.262 million loss, Obrar has obvious potential to make a material impact here. With the ILX share price having remained at 10.125p on the announcement – capitalising the company at just over £4 million – I continue to believe there is possibly significant recovery potential here. However, as noted in my detailed update yesterday (to read click here), ILX is “planning a further cash injection to fund additional working capital and ensure the appropriate reorganisation changes are carried out”. I have little doubt in Bos’ ability to inject further capital, but await the terms and scale of potential dilution. I again apologise for what has turned out to be a very disappointing recommendation from my past days at t1ps, though, at current levels, would hold on and give the experienced Bos – who I regard as a sharp cookie – a chance. If he gets this right, it could well prove a strong recovery play. I am warming to Bos: speculative buy.

 Libertarian financial analyst Tom Winnifrith writes for a number of US and UK financial and political websites. Links to all of his content can be found on his own blog www.TomWinnifrith.com – if you would like a twitter alert whenever Tom publishes a new article you can follow him @tomwinnifrith

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Comments

  1. robin Boyd says:

    loving the Shirt, hope we get as good win tomorrow night , SUFTUM ,

    cheers

    robin

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