Print   



 

Prologic plc

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

Prologic is a specialist provider of software, services and consultancy to the Fashion & Lifestyle sector.

Trading update and Board changes

The Company is today announcing a trading update prior to the release of its interim results in December 2008 for the six months ended 30 September 2008.

Consumer confidence has recently been eroded by the widely reported financial crisis. Prologic's customers have suffered significant falls in trading volumes in September, which the Company understands have continued in October. This, in combination with their concerns about their future access to adequate funding, has led to defensive action by a number of the Group's clients.

Prologic's trading through to August 2008 remained in line with management's expectations. However, certain business that Prologic had expected to secure in the weeks prior to 30 September 2008 has been delayed or reduced in value. As a result, first half revenues are expected to be 5% lower than the same period last year, resulting in a break-even operating profit for the period.

The outlook for the full year remains uncertain, nevertheless, Prologic is well insulated against current market volatility. The majority of the Company's client base, which includes many high profile names such as Ted Baker, T.M. Lewin and Paul Smith, remains solid. With over £2m of cash at the half year, and with over 50% of revenues being contracted and annually recurring, the Company is confident that it has the necessary resilience to weather even a prolonged slowdown. 

Software as a Service ('SaaS')

For some time, the Company has been technically capable of delivering CIMS software as a service from our data centres in Docklands and Coventry. Given the current climate, management believes that now is the time to exploit this advantage. Therefore, with immediate effect, all of the CIMS portfolio will be made available on a SaaS basis. 

Management believe that this earlier than planned move to a rental model will have a positive effect on recurring revenues. The short-term effect of these changes will, however, be to reduce reported operating profits. Management believe that current defensive thinking in the marketplace will make the Company's SaaS model more appealing to prospective customers who will want to reduce cost and risk. The Directors believe that the Company's move to a SaaS model will lead to a greater market share in the medium-term and substantial increases in year-on-year recurring revenues.

As the exclusive owner of its web-based IP, and with significant cash balances, Prologic is in an unusually strong position to be in the vanguard of the transformation that will, over time, replace traditional software sales with the SaaS business model.

Internet shopping

The slowdown in store sales is in sharp contrast to the continuing growth of on-line sales. As High Street sales decline, many UK fashion retailers urgently need to develop a comprehensive web presence to compete effectively with specialist fashion web firms such as ASOS plc, and Net-A-porter. Early systems adopted by many of the established mid-tier fashion retailers do not provide the customer experience or the back-end integration necessary to compete effectively with these specialist web companies. Prologic has invested steadily over two years in building innovative consumer web solutions that can be delivered and implemented at a fraction of the costs normally associated with other systems.

Despite the slowdown, or perhaps because of it, fashion retailers are continuing to invest in the consumer web channel, often redirecting funds that were previously earmarked for High Street store expansion. With Ted Baker about to switch to the solution, the Company is confident that it will attract several premium customers during 2009, and continue to gain sales momentum thereafter. The eCommerce solution is to be offered as a SaaS rental model.

Outlook

Due to the Company's immediate adoption of the SaaS model, and the uncertainty about Christmas consumer trading, it is anticipated that profit for the full financial year will be substantially below market expectations. To ensure continuing profitability throughout this difficult period, the Company has conducted a cost review, which has resulted in a 10% reduction in head count. The cost reductions do not affect the Company's front-line customer services, or Prologic's ability to deliver against its medium and long-term strategy.

When sentiment begins to improve, and as the cumulative effect of recurring SaaS and new eCommerce revenues become increasingly significant, the Board anticipates a return to historic levels of profitability with an accelerated growth curve thereafter.

Board Changes

To assist Prologic in its transition to the SaaS model, and to steer the business through the current downturn and toward higher growth and profitability, the Company is delighted to announce the appointment of Colin Wells as non-executive Chairman and Mark Quartermaine as a non-executive Director, replacing Derek Lewis and Gareth Chick respectively, who have stepped down from the Board.

Colin Kenelm Wells' (60) early career was with Burroughs and IBM. He has held several senior positions in the ICT sector, including board roles at JBS Computer Services (a SaaS company), JBA plc (an ERP provider competing with Prologic prior to its takeover by Geac) and at CSG plc. Colin has high-level software sales and marketing experience with a track record of successfully growing and selling a SaaS company, building effective international sales teams, and driving business turnaround strategies.

Mark Richard Quartermaine (45), has highly relevant experience, and brings with him a strong network within the ICT and tier one retail sector. Mark is currently managing director of the BT public sector division having most recently been the director of the retail division of BT. He has held several other senior management positions including executive director at NSB Retail Solutions, worldwide director of retail marketing at IBM as well as running the IBM European point-of-sale business. Mark brings an in-depth knowledge of managing complex client sales in addition to extensive knowledge of different go-to-market models, including direct, reseller and wholesale channel experience.

Sam Jackson, Prologic's CEO commented:-

'As widely reported, trading conditions are difficult for companies across all sectors and we are not immune. However, I believe we are well insulated during these volatile times by our strong balance sheet, solid customer base, good cash generation and high recurring revenues. During a slowdown, our new eCommerce and SaaS strategies offer a strong return-on-investment proposition which we believe will increase our market share and allow the Company to further capitalise on its already strong position in the sector.

I am delighted to welcome Colin Wells and Mark Quartermaine to the board. Together they bring a wealth of highly relevant and complimentary experience, which will significantly extend the Company's expertise. I am confident they will accelerate Prologic toward its full potential.

Finally, I would like to take this opportunity to offer our thanks to retiring non-executive directors Derek Lewis and Gareth Chick for their diligent and valuable service to the Company. Not only have they made important contributions to the development of the business, but their leadership and mentoring skills have contributed greatly to the personal development of the management team. We wish them both the very best for the future'.  

Colin Wells holds or has held the following directorships or been a partner in the following partnerships within five years prior to this appointment:

Current directorships/partnerships	Previous directorships/partnerships
Alveley Recreation Association	Jubliee Arts
Multistory	The Public Limited
	The Royal Shakespeare Company

Colin was a director of The Public Limited, between February 2002 and August 2006. On 15 March 2006, The Public Limited was placed in administration. 

There are no further disclosures to be made in accordance with Schedule 2(g) of the AIM Rules.

Enquiries:

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

.

ENDMSCILFLRLDLRIIT