Kofax Plc confirmed its board's decision to prepare the business for an initial public offering (IPO) in the United States, Jefferies said in a note to clients.

The timing of this listing will depend on Kofax's performance and market conditions, with Kofax confirming that it expects to maintain a dual listing in both the U.S. and United Kingdom, said Graeme Clark, an analyst at Jefferies.

Clark sees this as a sensible move for Kofax, with its Senior Management, headquarters, key competitors and much of the business (47 percent of fiscal 2011 revenue in Americas) currently based in the U.S.

Kofax reported results for the fiscal year 2011 to June that were broadly in line with July's disappointing trading update.

Revenues of $243.9 million came in slightly below Jefferies' revised $244.8 million forecast and the $244 million to $246 million range provided by management in July. This represented organic growth of only 10 percent versus management's 14 percent organic growth target at the half-year.

The adjusted EBITA of $40.2 million was around 3 percent below Jefferies' forecast, but a lower-than-expected tax rate (34 percent versus 36 percent forecast), led to adjusted diluted EPS in-line at $0.31 (Jefferies $0.31).

Clark said cash conversion was healthy with Kofax confirming net cash balances of $98.3 million at the end of the year (Jefferies $97.9 million).

Clark said licence revenue growth deteriorated materially in the second half of 2011, as macroeconomic uncertainty caused at least two large deals to slip.

Organic application licence growth declined in the second half of 2011, having grown by 17 percent in the first half, with original equipment manufacturer (OEM) / point of sale (POS) licences also declining in the second half.

As expected, services revenue (maintenance and professional services) held up better, confirming double-digit organic growth for the year after reporting 24 percent growth in the first half, Clark said.

Clark said full-year 2011 results represent a further disappointment, with revenues falling below management's July guidance and the second half of 2011 licence decline being a key focus.

Having seen deals slip in second half of 2011 as macroeconomic uncertainty extended sales cycles, management confirmed that it expects the challenges of sales conversion to continue. That said, Kofax guided towards constant currency growth of 8 percent to 10 percent for fiscal 2012 versus Jefferies 5.6 percent forecast.

As previously stated, with first quarter being a seasonally weaker quarter and with tougher comparisons in the first half, Clark is unlikely to gain confidence in this guidance until the first half of 2012 results in February, at the very earliest.

Management expects economic uncertainty to continue to impact sales conversion, but targets 8 percent to 10 percent constant currency growth for FY12. This appears optimistic at this stage. We target 6 percent growth and reaffirm the view that confidence in management's targets will take time to build, said Clark.

Clark said Kofax currently trades on 13.5 times calendar 2012 earnings, in line with UK Software peers (excluding Autonomy, which remains subject to a bid from HP). He feels that this rating reflects the current more-uncertain outlook, balancing the strategic progress made under CEO Reynolds Bish.

Kofax stock is currently trading down 10.88 percent at 295 pence on the London Stock Exchange.

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