Being a training and software business with a bent towards financial services, it is perhaps not surprising that ILX currently struggles to command the highest of stock market ratings. The worry is that when the economy slows, training budgets are cut.

However, reporting no signs of slowdown so far, with acquisitive ‘indigestion’ in the past and with its sights trained on growth, investors prepared to investigate ILX will find an exciting growing company that is substantially undervalued.

Led by energetic chief executive Ken Scott, ILX provides e-learning and traditional classroom training to a diverse range of clients, including a slew of global investment banking heavyweights and even the Home Office. It does this via two divisions with good growth prospects – Best Practice and the banking and finance-focused Corporate Training Group (CTG). Both are seeing a rising proportion of booked revenue and rising levels of earnings visibility.

Buoyed by a full 12 months from star performer CTG, annual numbers to March revealed record sales and profits, with organic growth strong and cash generation bountiful. From revenues increased 29% to £13.3m, pre-tax profits (before non-recurring items) advanced 27% to almost £1.9m. Refinanced and having generated £3.17m (2007: £1.98m) of cash, ILX was able to double the proposed final dividend to 1.5p in a nice sign of confidence.

Analysts are forecasting profits of £1.9m from £14.1m sales this financial year, ahead of £2.2m from £15m turnover for 2010. Estimated earnings of 6.8p and 7.8p, with dividends of 1.5p and 2p, place the shares on prospective multiples of just 5.4 and 4.7, with growing yield appeal. Investors who have seen the shares – originally recommended by Growth Company Investor at 117p – drop dramatically will gain little by crystallising losses. Sit tight and wait for a rerating, or top up holdings while the shares are cheap. Buy/hold.

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ILX Group	AIM	£4.36m	22.50p	0.00p
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