Print   



PGC.L

 

Prologic plc

('Prologic' or the 'Company' or the 'Group')

Preliminary results for the year ended 31 March 2008

Prologic is one of the leading providers of IT business solutions to fashion and lifestyle retailers and distributors.

Financial Highlights

• Strong results in line with expectations.

• Revenue up 10% to £11.6m (2007: £10.6m).

• Recurring revenues £5.2m, representing 45% of total revenue.

• Operating profit up 15% to £1.7m (2007: £1.5m).
  Profit before tax up 19% to £1.7m (2007: £1.4m).

• Year end cash balance of £2.4m (2007: £1.9m) and a net cash position of £2.0m (2007: £1.2m).

• Earnings per share up 26% to 13.2p (2007:10.5p).

• Proposed dividend 2.0p (2007: 1.5p)

Significant Contract Wins

• Fat Face - existing customer - after being acquired, went through a full system evaluation and competitive tender process. 

• Ted Baker - existing customer - first order for newly launched CIMS eCommerce portal.

• Bamford - new customer win.

• Famous Footwear - new customer win.

New Developments

• CIMS Consumer eCommerce portal launched in March 2008 after 18 months development.

• Software as a Service (SaaS) - underpinned by successful Unify technology.

Sam Jackson, Managing Director, commented:

I am pleased to report a solid set of results. We have a good pipeline of prospective customers and we continue to develop our core business by introducing new developments such as our innovative eCommerce portal (Ted Baker are the first customer). Other initiatives include additional Unify services and our low cost software as a service (SaaS) subscription model. The uncertain economic outlook combined with our strong balance sheet also present the Group with opportunities for infill acquisitions in the medium term. We remain very positive about the long-term prospects for the business.

  For more information, please contact:

Prologic plc	01442 876 277
Sam Jackson, Managing Director	www.prologic.co.uk
David Parry, Finance Director
Arbuthnot Securities Limited	020 7012 2000
Alasdair Younie
Biddicks	020 7448 1000
Shane Dolan

  Chairman's Statement

This has been another year of steady growth for the Company, despite a series of widely reported challenges faced by the UK economy. I am pleased to report that results are in line with expectations with solid organic growth in both revenue, up 10% to £11.6m and operating profit up 15% to £1.7m.These results were underpinned by continuing robust cash generation, which resulted in a strong year end balance sheet with a £2.0m net cash position. Profit before tax grew 19% to £1.7m and earnings per share increased by 26% to 13.2p. 

We secured a number of contract wins during the period with high profile companies including Fat Face, Bamfords and Famous Footwear. It is particularly pleasing that these contracts were awarded following the introduction of our new consultancy-led business strategy announced in June 2007. Although Fat Face had been an existing customer, the win followed the acquisition of the company by Bridgepoint Capital Limited, which resulted in an in-depth review of group-wide IT systems and a fully competitive tendering process. We also saw the successful implementation of a number of key contract wins in the previous period, including Graham Tiso, TM Lewin, and Go Outdoors.

We were also delighted to receive from Ted Baker our first order for the new CIMS eCommerce portal.

Unify, our innovative and highly successful network services solution (which also underpins our shortly to be introduced software as a service model) has continued to grow steadily. This year, less than 4 years since its introduction, it achieved turnover of £1.3m. 

The long-term prospects for the Group are excellent, however we must be cognisant of the current pressures on the retail sector, which will (at least in the short term) make sales cycles more difficult to predict. In particular, smaller players in the value retailer sector face a challenging trading environment. All three Prologic clients operating within the value sector went into a restructuring and administration process with resulting changes in ownership and some reduction in the size of their retail estates. I am however pleased to report that the new owners of all three restructured businesses have signed new contracts with Prologic and are committed to retaining the Group as their IT provider. I also note that the vast majority of Prologic's customers operate in the premium brand multi-channel market, which has proved to be far less susceptible to the recent slowdown in consumer spending.

Financial results

The results are the first the Group has reported under International Financial Reporting Standards (IFRS) and accordingly, the comparative figures in respect of the year ended 31 March 2007 have been restated. The impact of IFRS is explained in the notes to the financial statements.

Revenue increased by 10% to £11.6m and included £5.2m of recurring revenues (45%). Operating profit grew by 15% to £1.7m, whilst cash generated from operations grew by 21% to £2.7m. The year end cash balance was £2.4m, up from £1.9m the previous year and, with borrowings of only £0.4 m, the Group's net cash position was £2.0m (2007: £1.2m). 

Dividend

As a result of another period of strong growth and development for the Group, I am delighted to announce that we are proposing a 33% increase in the dividend to 2.0p per ordinary share (1.5p last year). The Board is pleased to be able to maintain a progressive dividend policy, while retaining sufficient resources to make investments to further enhance shareholder value. Subject to shareholder approval at the AGM, the dividend will be paid on 29 August 2008 to shareholders on the register at the close of business on 8 August 2008.

Sales and Marketing

During the course of the year, Prologic created a dedicated sales team having integrated the previously separate new and existing business teams into a single direct sales group. As a result of this reorganisation, David Little, Sales Director, stepped down from the Board.

We are now delivering our consultancy-led services to prospective clients at a much earlier stage in the sales

cycle and this has proved to be very successful, as contract wins with Bamfords and Fat Face in particular testify.

 

In April 2008, Prologic appointed ITPR, a specialist PR and marketing agency. ITPR will assist Prologic in communicating its business strategy and unique selling proposition to key opinion leaders, analysts and consultants. They will also support Prologic in positioning itself in the market as thought leader in the fashion & lifestyle sector through the production of opinion articles, white papers and market research projects.

Management and staff

Prologic continues to benefit from talented management and a workforce with in-depth knowledge of the Group's chosen market sector. I would like to take this opportunity to thank all of our employees for their hard work and commitment during the year and look forward to them contributing to continued success in the year ahead.

Outlook

The Group is well positioned to benefit from two high growth areas in retail and IT; Consumer eCommerce and software as a service (SaaS). Having made significant and timely investments in developments over the past eighteen months, Prologic is making strategic product launches in these two areas. 

With a strong balance sheet and continuing strong cash flows, the Group is in a position to assess opportunities to make infill acquisitions over the medium term to strengthen its skill set and market penetration and support future planned growth. Arbuthnot Securities, who we recently appointed as our Broker and Nomad, will assist us in this process.

The Board is confident of long-term prospects and we look forward to reporting further progress in due course.

Derek Lewis

Chairman

25 June 2008

  Managing Director's Review

During the period we announced some significant and successful contract wins, many of which resulted from our evolving strategy to develop a consultancy-led approach.

In May we announced that we would be providing a complete enterprise IT solution comprising of both our CIMS software suite and Unify private network to Tiso Group Limited, the outdoor clothing and equipment specialist.  This contract win, which was implemented and live by October, followed a consultancy project undertaken by Prologic's new business consultancy team. 

Also in May, we announced a contract win with TM Lewin, the national multi-channel shirt retailer. TM Lewin operates over 50 stores in major UK cities and last year gained venture capital backing to fund ambitious expansion plans. TM Lewin also operates a very successful eCommerce and mail order business. The contract with Prologic involved the implementation of the CIMS enterprise software suite which was rapidly implemented with a successful go-live in November. 

In December we announced that Fat Face, a leading active-lifestyle clothing brand, had extended its contract with Prologic following an in-depth review of its internal IT systems. This resulted in Fat Face embarking on a programme of upgrades and further additions to the Prologic CIMS software suite, which is ongoing.

Market overview

There is no doubt that downward pressure on the retail sector has impacted upon the value retailers in particular. The current market sale cycle is slightly more difficult to predict but we are exceptionally well positioned to capitalise on opportunities that arise. We believe there are a number of factors that, relative to the sector, leave Prologic particularly well placed during the anticipated consumer slowdown: 

 

 

•   Strong balance sheet 

• Proven low risk supplier (track record of successful 'out-of-the-box' implementations)

• Our focus on customers' multiple sales channels (particularly eCommerce and home shopping)

• Customer cost reductions through business process improvements as well as through implementation of good software 

• Lower cost of ownership (through reduction in internal IT costs and outsourcing of IT services e.g. Unify) 

• Ability to support UK customers' overseas expansion (e.g. Far East franchise operations)

New developments

In order to consolidate our strong market position, the Group continues to invest heavily in development. During the period, two new releases of CIMS (our enterprise application suite) were launched, as were a number of new Unify services. Two new strategic product launches will make significant contributions to Prologic's future growth:

eCommerce Portal

Over the past 18 months, Prologic has developed and now launched an innovative and fully integrated new consumer eCommerce solution. We believe the new solution is well placed to take advantage of the shifting retail environment, which has prompted many fashion and lifestyle retailers to address under performing eCommerce strategies.

  After an initially slow start, the consumer has demonstrated a clear willingness to embrace online purchasing of premium fashion brands; but only if the experience is right and when it replicates the high quality in-store environment. Prologic's new solution allows our customers to have control of web store design whilst benefiting from an enterprise scale content management, order processing and fulfilment solution that is fully integrated with, and embedded within, the CIMS multi-channel application.  

Software as a Service (SaaS)

SaaS is a mechanism for delivering application software to customers as an on demand web-based subscription service. Since the introduction of Unify over three years ago, Prologic has been steadily putting into place the components necessary to deliver CIMS from our data-centres as a web-based service. Now, with most of the components in place, the Company will shortly launch a SaaS model. Initially the service will be offered to smaller customers, however, in the medium term this new approach will allow us to deliver our applications via UK and overseas resellers opening up valuable new markets, and adding a degree of scalability and growth potential not previously achievable.

The Price Waterhouse Coopers 2008 Technology Sector M&A Insights review says 'The trend toward Software as a Service (SaaS) looks set to continue to boom over the next five years' Having already made the necessary investment Prologic is particularly well placed to benefit from this trend.

Outlook

Despite some pressures on the retail environment, Prologic has delivered a solid set of results with strong recurring revenues, underpinned by excellent cash generation and a strong balance sheet. We have secured a portfolio of new clients during the period as well as having made excellent progress with new initiatives such as SaaS and our eCommerce platform.

.

KPMG's retail think tank recently warned the retail industry that 'Complacency is ruinous; there is little loyalty in retailing. If customers don't like what you are selling today and you don't spot it by tomorrow, they'll be voting with their feet the day after'. This reality of today's retailing fully endorses Prologic's proposition of providing intelligent multi-channel IT solutions which enable retailers to 'listen' to their consumers and to respond rapidly to their demands.

In summary, we have exceptionally strong industry experience, a first class software solution for the fashion and lifestyle sector, and a strong financial base. We remain very confident of future prospects over the longer term. 

Sam Jackson

Managing Director

25 June 2008

  CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2008

 

		Note	2008		2007
			£'000		£'000
Revenue			11,641		10,562
Cost of sales			(6,158)		(5,784)
Gross profit			5,483		4,778
Administrative expenses			(3,761)		(3,278)
Operating profit			1,722		1,500
Finance income			53		13
Finance expenses			(53)		(68)
Profit before tax			1,722		1,445
Taxation		3	(398)		(392)
Profit for the period			1,324		1,053
			Pence		Pence
Earnings per share - basic		4	13.24		10.53
Earnings per share - diluted		4	13.05		10.48

 Consolidated Balance Sheet
At 31 March 2008

 

			2008		2007
			£'000		£'000
Non-current assets
Goodwill			7,572		7,572
Development costs			3,166		2,684
Other intangible assets			268		228
Property, plant and equipment			299		302
			11,305		10,786
Current assets
Inventories			40		94
Trade and other receivables			3,815		4,041
Cash and cash equivalents			2,431		1,907
			6,286		6,042
Total assets			17,591		16,828
Current liabilities
Trade and other payables			(2,178)		(2,442)
Current tax payable			(371)		(270)
Bank loan			(269)		(338)
Current provisions			-		(19)
Deferred revenue			(2,555)		(2,493)
			(5,373)		(5,562)
Net current assets			913		480
Non-current liabilities
Bank loan			(132)		(403)
Deferred tax liabilities			(835)		(807)
			(967)		(1,210)
Total liabilities			(6,340)		(6,772)
Net assets			11,251		10,056
Equity
Share capital			50		50
Share premium account			2,734		2,734
Merger reserve			3,924		3,924
Share option reserve			65		44
Retained earnings			4,478		3,304
Total equity			11,251		10,056

 Consolidated Cash Flow Statement
For the year ended 31 March 2008

		Note	2008		2007
			£'000		£'000
Cash flows from operating activities
Operating profit			1,722		1,500
Adjustments for:
Amortisation of development costs			654		519
Amortisation of other intangible assets			137		131
Depreciation of property, plant and equipment			128		114
Share option charges			21		14
Decrease in inventories			54		68
Decrease/(increase) in receivables			226		(316)
(Decrease)/increase in payables			(283)		134
Increase in deferred income			62		81
Cash generated by operations			2,721		2,245
Interest received			53		13
Interest paid			(46)		(59)
Tax paid			(268)		(208)
Net cash from operating activities			2,460		1,991
Cash flows from investing activities
Development expenditure			(1,136)		(807)
Purchase of other intangible assets			(177)		(145)
Purchase of property, plant and equipment			(125)		(257)
Net cash used in investing activities			(1,438)		(1,209)
Cash flows from financing activities
Repayment of bank loan			(348)		(209)
Dividends paid to shareholders		5	(150)		(100)
Net cash used in financing activities			(498)		(309)
Net increase in cash and cash equivalents			524		473
Cash and cash equivalents at 1 April			1,907		1,434
Cash and cash equivalents			2,431		1,907

 

 

  Consolidated Statement of Changes in Equity
For the year ended 31 March 2008

 

		Share		Share
	Share	premium	Merger	option	Retained	Total
	capital	account	reserve	reserve	profit	equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2006	50	2,734	3,924	30	2,351	9,089
Share option charges achargecharge	-	-	-	14	-	14
Retained profit and total recognised income and expense for the period	-	-	-	-	1,053	1,053
Dividends	-	-	-	-	(100)	(100)
At 31 March 2007 and 1 April 2007	50	2,734	3,924	44	3,304	10,056
Share option charges achargecharge	-	-	-	21	-	21
Retained profit and total recognised income and expense for the period	-	-	-	-	1,324	1,324
Dividends	-	-	-	-	(150)	(150)
At 31 March 2008	50	2,734	3,924	65	4,478	11,251

 

NOTES:

1      Group Accounting Policies

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the AIM Rules for Companies. These are the Group's first IFRS consolidated financial statements and the provisions of IFRS1 'First time adoption of International Financial Reporting Standards' have been applied.

The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The date of transition to IFRS was 31 March 2006 and all comparative information included in these financial statements has been restated in accordance with IFRS.

The changes to accounting policies are explained in note 6, together with a reconciliation of the balance sheets at 31 March 2006 and 31 March 2007, and of the profit and loss account for the period to 31 March 2007 as reported under UK GAAP, to the balance sheet and income statement under IFRS, as reported in these financial statements.

The Group has taken advantage of an exemption available under IFRS 1 First-time adoption of International Financial Reporting Standards. and has elected not to apply IFRS 3 to the business combination that took place before the date of transition. As a result, the carrying value of goodwill at 31 March 2006 is frozen, subject to impairment reviews after then in accordance with IFRS 3.

The financial statements have been prepared under the historical cost convention.

Basis of consolidation

The Group financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March 2008. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

  Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

Revenue recognition

Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or transfer of risk to the customer, and when the following conditions have been satisfied:

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Specific revenue streams are recognised as follows:

• hardware and software - recognised either when the equipment is shipped to the customer, or when it has been stored at the customer's request;

• Installation and commissioning services - recognised when the installation is complete;

• consultancy and training services - recognised in accordance with consultant time spent;

• development contributions - 75% of the revenue is recognised when the coding is complete. The remaining 25% is recognised when the development is complete and available for release to customers. This approximates to the usual stage of completion of this revenue stream;

• support and maintenance - recognised in equal instalments over the life of the contract; and

• telecommunication line installation - recognised from the date of installation over the life of the supporting contract. 

Dividends

Dividends are recognised when the shareholders right to receive payment has been established by approval at a General Meeting.

Goodwill

Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses.

Goodwill written off to reserves prior to date of transition to IFRS remains in reserves. There is no reߛinstatement of goodwill that was amortised prior to the transition to IFRS. Goodwill previously written off to reserves is not written back to profit or loss on subsequent disposal.

Intangible assets

Research and development

Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.

Development costs incurred are capitalised when all the following conditions are satisfied:

• completion of the intangible asset is technically feasible so that it will be available for use or sale;
• the group intends to complete the intangible asset and use or sell it;
• the group has the ability to use or sell the intangible asset;
• the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
• there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and
• the expenditure attributable to the intangible asset during its development can be measured reliably.

 

Development costs not meeting the criteria for capitalisation are expensed as incurred.

The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management.

 

Directly attributable costs include employee (other than directors) costs incurred on software development, together with associated overheads

Amortisation commences in the month in which the asset is available for use and the amortisation period is 7 years, which is the estimated useful life of the assets. Amortisation of development costs is included within administrative expenses in the income statement.

Software

Purchased software assets are stated at cost less accumulated amortisation. The amortisation period is 4 years, which is the estimated useful life of the assets. Amortisation of purchased software is included in administrative expenses in the income statement. 

 

Unify line installation costs

The installation costs of telecommunication lines associated with the implementation of Unify projects are stated at cost less accumulated amortisation. The amortisation period is 3 years, which is the estimated useful life of the assets. Amortisation of Unify line installation costs is included in cost of sales in the income statement.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses if applicable.

Depreciation rates have been calculated to write down the cost of the assets to their estimated residual value over their estimated useful economic lives as follows:

Computer and office equipment    3 to 4 years

Office fixtures and fittings               4 to 5 years

Material residual value estimates are updated at least annually.

Impairment of assets

Goodwill, other intangible assets and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. 

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the First In - First Out method.

Taxation

Current tax is the tax currently payable based on taxable profit for the year.

  Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.

Financial assets

Financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in profit or loss. The Group's trade and other receivables fall into this category of financial instruments.

Individual receivables are considered for impairment when they are overdue at the balance sheet date or when objective evidence is received that a specific customer will default.

Financial Liabilities

The Group's financial liabilities include borrowings, trade and other payables, which are measured at amortised cost using the effective interest rate method.

Financial liabilities are recognised at fair value when the Group becomes a party to the contractual agreements of the instrument. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included in the income statement line items 'finance expenses' or 'finance income'.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and on-demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash, and which are subject to an insignificant risk of changes in value.

Foreign currencies

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities are translated at the exchange rate ruling at the balance sheet date. All exchange differences are charged through the income statement.

Leased assets

The Group's leases are regarded as operating leases (as the Group does not bear substantially all the risks and rewards of ownership) and the payments made under them are charged to the income statement on a straight-line basis over the lease term. Lease incentives are spread over the term of the lease.

  Share-based payments

The Group issues equity-settled share-based payments to certain employees and directors. For all share-based payment arrangements granted after 7 November 2002 and vesting on or after 1 January 2006 an expense is recognised on the income statement with a corresponding credit to equity. The fair value of share options is expensed over the vesting period of the options, based on an estimate of the number of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. The corresponding credit is taken to the share option reserve. The fair value is calculated using the Black Scholes Merton pricing model.

Accounting estimates and judgements

In preparing the financial statements, management is required to make estimates and assumptions concerning the future. Such judgements are based on historical experience, management's expectations of future events and other relevant factors. The areas where significant estimates and assumptions have been required and which could result in a material adjustment to the carrying value of assets and liabilities within the next financial year are as follows:

 

Goodwill Impairment Review

The Group tests annually whether goodwill, which has an indefinite life, has suffered any impairment in accordance with the accounting policy stated above. In order to determine the recoverable amount of the goodwill, a 'value in use' calculation is undertaken which estimates the present value of the future cash flows expected to be derived. The directors consider that the Group's activities constitute one class of business, and therefore the Group is assumed to be a single cash-generating unit for this purpose. The value in use calculation requires estimates and assumption regarding the following:

• The future growth of the Group and how such growth will be translated into cash flows.

• The time value of money based on the current market risk-free rate of interest and on the market's estimate of the risk premium associated with the Group.

Development Costs Amortisation

Development costs are capitalised (subject to certain conditions being satisfied) and amortised over 7 years in accordance with the accounting policy stated above. In assessing the most appropriate period to amortise development costs, management have taken account of the following:

• The development costs principally relate to the development of the Prologic CIMS software suite, which is continually being enhanced in terms of its functionality. The enhancements usually augment existing functionality rather than replace it, though occasionally some functionality is re-written to make the software more efficient or to allow it to function on a new hardware platform.

   

• Prologic CIMS is a single technology solution that the Group sells to all its customers. The Group does not therefore develop bespoke solutions for individual customers.

2.     Segmental analysis

In the opinion of the directors the Group's activities constitute one class of business. 

3.     Taxation

	2008	2007
	£'000	£'000
Corporation tax at 30%	371	270
Adjustments in respect of prior years	(1)	26
Total current tax	370	296
Deferred tax - origination of and reversal of temporary differences	28	96
Tax on profit on ordinary activities	398	392

  Factors affecting tax charge for period:

	2008	2007
	£'000	£'000
Profit on ordinary activities multiplied by standard rate of corporation tax	516	225

Effect of:

Expenses not deductible for tax purposes	37	26
Capital allowances for the period in excess of depreciation	(18)	(8)
Development tax credit	(95)	(83)
Capitalised development costs qualifying for development tax relief Disallowable amortisation	(279)	(225)
Disallowable amortisation	216	350
Marginal relief	(6)	(15)
Adjustments in respect of prior years	(1)	26
Tax charge for the period	370	296

There is no un-provided deferred tax

4.    EARNINGS PER SHARE

 

Earnings per share has been calculated by dividing the earnings attributable to shareholders by the average number of shares in issue during the period. The diluted number of shares assumes the dilution effect of converting the share options in issue during the period into ordinary shares.

	2008	2007
	Number	Number
Weighted average number of ordinary shares	10,000,000	10,000,000
Diluted weighted average number of ordinary shares (due to impact of
share options issued)	10,149,439	10,051,026
	2008	2007
	Pence	Pence
Basic earnings per share	13.24	10.53
Diluted earnings per share	13.05	10.48

 

5.     Dividends

 

A dividend of 1.5p per share (2007: 1.0p) was paid during the year. The total amount paid was £150,000 (2007: £100,000). The Board has recommended a dividend of 2.0p per share and, in accordance with IAS 10, this will not be recognised until the period in which it is approved.

6.      First time adoption of International Financial Reporting Standards

As stated in the accounting policies above, these are the first consolidated financial statements the Group has prepared in accordance with International Financial Reporting Standards (IFRS). The following reconciliations and explanations show how the transition from UK GAAP to IFRS has affected the Group's financial performance and state of affairs:

  Consolidated balance sheet UK GAAP to IFRS reconciliation 31 March 2006

 

					IAS 38	IAS 38
	UK GAAP	IFRS 3	IAS 12	IAS 19	Intangible	Intangible
	- (IFRS	Business	Income	Employee	Assets -	Assets -
	Format)	Combinations	Taxes	Benefits	Development	Re-classify	IFRS
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Goodwill	7,572	-	-	-	-	-	7,572
Development costs	-	-	-	-	2,396	-	2,396
Other intangible assets	-	-	-	-	-	214	214
Property, plant and equipment	222	-	-	-	-	(63)	159
Deferred tax assets	7	-	(7)	-	-	-	-
	7,801	-	(7)	-	2,396	151	10,341
Current assets
Inventories	162	-	-	-	-	-	162
Trade and other receivables	3,876	-	-	-	-	(151)	3,725
Cash and cash equivalents	1,434	-	-	-	-	-	1,434
	5,472	-	-	-	-	(151)	5,321
Total assets	13,273	-	(7)	-	2,396	-	15,662
Current liabilities
Trade and other payables	(2,229) 2,276	-	-	(51)	-	-	(2,280) 2,276
Current tax liabilities	(181)	-	-	-	-	-	(181)
Bank loan	(269)	-	-	-	-	-	(269)
Current provisions	(47)	-	-	-	-	-	(47)
	(2,726)	-	-	(51)	-	-	(2,777)
Net current assets	2,746	-	-	(51)	-	(151)	2,544
Non-current liabilities
Bank loan	(672)	-	-	-	-	-	(672)
Deferred tax liabilities	-	-	(712)	-	-	-	(712)
	(672)	-	(712)	-	-	-	(1,384)
Deferred income	(2,412)	-	-	-	-	-	(2,412)
Total liabilities	(5,810)	-	(712)	(51)	-	-	(6,573)
Net assets	7,463	-	(719)	(51)	2,396	-	9,089
Equity
Share capital	50	-	-	-	-	-	50
Share premium account	2,734	-	-	-	-	-	2,734
Merger reserve	3,924	-	-	-	-	-	3,924
Other reserve	30	-	-	-	-	-	30
Retained earnings	725	-	(719)	(51)	2,396	-	2,351
Total equity	7,463	-	(719)	(51)	2,396	-	9,089

 Consolidated balance sheet UK GAAP to IFRS reconciliation 31 March 2007

 

					IAS 38	IAS 38
	UK GAAP	IFRS 3	IAS 12	IAS 19	Intangible	Intangible
	- (IFRS	Business	Income	Employee	Assets -	Assets -
	Format)	Combinations	Taxes	Benefits	Development	Re-classify	IFRS
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Goodwill	7,157	415	-	-	-	-	7,572
Development costs	-	-	-	-	2,684	-	2,684
Other intangible assets	-	-	-	-	-	228	228
Property, plant and equipment	358	-	-	-	-	(56)	302
	7,515	415	-	-	2,684	172	10,786
Current assets
Inventories	94	-	-	-	-	-	94
Trade and other receivables	4,213	-	-	-	-	(172)	4,041
Cash and cash equivalents	1,907	-	-	-	-	-	1,907
	6,214	-	-	-	-	(172)	6,042
Total assets	13,729	415	-	-	2,684	-	16,828
Current liabilities
Trade and other payables	(2,382) 2,276	-	-	(60)	-	-	(2,442) 2,276
Current tax liabilities	(270)	-	-	-	-	-	(270)
Bank loan	(338)	-	-	-	-	-	(338)
Provisions	(19)	-	-	-	-	-	(19)
	(3,009)	-	-	(60)	-	-	(3,069)
Net current assets	3,205	-	-	(60)	-	(172)	2,973
Non-current liabilities
Bank loan	(403)	-	-	-	-	-	(403)
Deferred tax liabilities	(2)	-	(805)	-	-	-	(807)
	(405)	-	(805)	-	-	-	(1210)
Deferred income	(2,493)	-	-	-	-	-	(2,493)
Total liabilities	(5,907)	-	(805)	(60)	-	-	(6,772)
Net assets	7,822	415	(805)	(60)	2,684	-	10,056
Equity
Share capital	50	-	-	-	-	-	50
Share premium account	2,734	-	-	-	-	-	2,734
Merger reserve	3,924	-	-	-	-	-	3,924
Other reserve	44	-	-	-	-	-	44
Retained earnings	1,070	415	(805)	(60)	2,684	-	3,304
Total equity	7,822	415	(805)	(60)	2,684	-	10,056

Consolidated income statement UK GAAP to IFRS reconciliation year ended 31 March 2007

					IAS 38
	UK GAAP	IFRS 3	IAS 12	IAS 19	Intangible
	- (IFRS	Business	Income	Employee	Assets -
	Format)	Combinations	Taxes	Benefits	Development	IFRS
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	10,562	-	-	-	-	10,562
Cost of sales	(5,784)	-	-	-	-	(5,784)
Gross profit	4,778	-	-	-	-	4,778
Administrative expenses	(3,973)	415		(9)	289	(3,278)
Operating profit	805	415	-	(9)	289	1,500
Financial income	13	-	-	-	-	13
Financial expenses	(68)	-	-	-	-	(68)
Profit before tax	750	415	-	(9)	289	1,445
Taxation	(305)	-	(87)	-	-	(392)
Profit for the period	445	415	(87)	(9)	289	1,053

 

					IAS 38
	UK GAAP	IFRS 3	IAS 12	IAS 19	Intangible
	- (IFRS	Business	Income	Employee	Assets -
	Format)	Combinations	Taxes	Benefits	Development	IFRS
	£'000	£'000	£'000	£'000	£'000	£’000
Revenue	10,562	-	-	-	-	10,562
Cost of sales	(5,784)	-	-	-	-	(5,784)
Gross profit	4,778	-	-	-	-	4,778
Administrative expenses	(3,973)	415		(9)	289	(3,278)
Operating profit	805	415	-	(9)	289	1,500
Financial income	13	-	-	-	-	13
Financial expenses	(68)	-	-	-	-	(68)
Profit before tax	750	415	-	(9)	289	1,445
Taxation	(305)	-	(87)	-	-	(392)
Profit for the period	445	415	(87)	(9)	289	1,053

 

 

 

Notes to the reconciliations:

IFRS 3 Business Combinations: Under UK GAAP, goodwill arising on a business combination was amortised over its estimated economic life. Under IFRS, goodwill is not amortised but is tested for impairment at least annually. The adjustments therefore relate to the write back of goodwill amortisation charged from the date of transition to IFRS.

IAS 12 Income Taxes: The adjustments represent deferred tax provided as a result of the impact of conversion to IFRS. They principally result from the difference in treatment of development costs under IFRS in the financial statements with the treatment of development costs in the computation of taxable profits.

IAS 19 Employee Benefits: Under IFRS, an accrual is recognised for employees' annual holiday entitlement accrued, but not taken, at the balance sheet date.

IAS 38 Intangible Assets - Development: Under UK GAAP, all development expenditure was expensed as incurred. Under IFRS, development costs are capitalised (provided certain conditions have been met) and subsequently amortised over their useful lives. The adjustments therefore relate to the capitalisation of development expenditure previously expensed and to the amortisation of development costs

IAS 38 Intangible Assets - Re-classify: Under IFRS, Unify line installation costs are reclassified from prepayments to intangible assets and software is reclassified from tangible to intangible assets.

The transition to IFRS has had no effect on the Group's cash flows.

7.     Status and approval

The financial information in this announcement does not comprise the Company's statutory accounts. The statutory accounts for the financial year ended 31 March 2008 have been audited and the auditor's report was unqualified and did not draw attention by way of emphasis to any matters without qualifying their opinion. The statutory accounts will be delivered to the Registrar of companies following the annual general meeting.

This preliminary announcement was approved by the Board of directors on 25 June 2008 

 

8.     Annual Report

 

Copies of the annual Report will be despatched to shareholders on or around 18 July 2008. Additional copies will also available, free of charge, from the Company's registered office at Redwood House, Rectory Lane, Berkhamsted, Herts, HP4 2DH, or from the Company's website: www.prologic.com.

 

ENDFR ZELFLVQBXBBD