TIDM: PGC
15 December 2008
Prologic plc
("Prologic", the "Company" or the "Group")
Interim Results for the six months ended 30 September 2008
Prologic plc, a specialist provider of software, services and consultancy to the fashion & lifestyle sector,
announces its interim results for the six months ended 30 September 2008.
Financial Headlines
* Revenue of £5.01m (2007: £5.27m).
* Recurring revenues 52% of total revenue (2007: 51%).
* Operating profit of £0.03m (2007: £0.41m).
* EPS 0.6p (2007: 3.6p).
* Period end net cash position £1.74m (30 September 2007: £1.39m) and cash balance of £2.00m
(30 September 2007: £2.00m).
Operational Highlights
* CIMS software made available to customers on a "Software as a Service" (SaaS) basis.
* Successful completion of a major store-systems roll out for T M Lewin.
* Successful implementation of new systems at Liberty of Regent Street
* Post period end, new Board appointments: Colin Wells as non-executive Chairman, Mark Quartermaine
and Paul Clifford as non-executive directors.
Sam Jackson, Managing Director, commented:
We announced recently that our trading for the first six months of this financial year was down on the same period
last year. However, with our strong cash generation and balance sheet, solid customer base and high recurring
revenues we believe we are well placed to ride out the downturn. We also believe that the significant investment
we have made in recent developments to our products and service portfolio will support the business through the
slowdown, and leave it well placed to take full advantage of the upturn.
Market research* shows that retailers are seeking to offset reduced spending on the high street by developing or
upgrading their on-line sales channel. Our new low-cost eCommerce portal delivers functionality and a user
experience that was previously only available to specialist on-line fashion web sites and tier-one retailers.
Furthermore, our SaaS model will now allow customers to gain all the benefits of using our software with reduced
capital outlay. We consider that the compelling business benefits presented by these offerings will enable us to
increase our market share and extend our already strong market position.
We recently announced the appointment of Colin Wells as non-executive Chairman and Mark Quartermaine as a non-
executive director. More recently we have completed the recomposition of the board by appointing Paul Clifford as
a non-executive director. Together, the new team bring a wealth of highly relevant and complementary experience,
which will help guide Prologic through the slowdown and on to its next stage of development.
* The Prologic Report. A survey of Fashion Retailers sponsored by Prologic and Oracle, and conducted by
Martec International Limited.
Further information:
Prologic plc 01442 876 277
Sam Jackson, Managing Director
David Parry, Finance Director
Arbuthnot Securities Limited 020 7012 2000
Alasdair Younie
Biddicks 020 7448 1000
Shane Dolan
Prologic plc
Interim Results 2008
Chairman's Statement
Overview
As we recently announced, Prologic has been impacted by the difficult trading conditions resulting from the harsh
economic environment. From September, customers started to become very cautious and consequently began to delay or
reduce the value of their IT expenditure. This caution, we believe, will continue at least until they have
evaluated their Christmas trading, so we have taken a very conservative view when assessing our own trading
prospects for the remainder of this year and into next year. We therefore conducted a cost review, including a 10%
reduction in headcount, which has resulted in annualised savings of approximately £500,000. The cost reductions do
not affect Prologic's front-line customer services, or the Company's ability to deliver its medium- and long-term
strategy.
As well as the cost savings, a number of other factors will help to insulate us from the downturn and put us in a
strong position when the market recovers. We have good cash generation and cash reserves, as well as only a small
level of debt. Our customer base is solid, including many of the UK's most recognised fashion retailers, and over
50% of our revenues from them are recurring. Also, our eCommerce portal and SaaS model offer significant business
benefits to customers in the current market conditions.
Despite the slowdown, growth of online fashion sales (led by companies such as ASOS) is continuing. The
traditional high street fashion retailers are therefore seeking to develop or upgrade their own home shopping
channels. Our eCommerce solution allows 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 the
CIMS multi-channel application. Ted Baker has already chosen this solution and we are confident it will attract
further premium customers in 2009.
Due to the current business climate we decided to bring forward the release of our "Software as a Service" (SaaS)
model. Given their current caution, we believe this will be attractive to customers as it offers reduced initial
capital outlay and risk. Its introduction may impact our reported operating profits in the short term but we
consider that the benefits derived from increased market share and recurring revenues will outweigh this. It will
also enable us to deliver our technology via UK and overseas resellers, opening up potential new markets.
Following the implementation of TM Lewin's head office systems last year, we successfully completed during the
period a fast-track roll out of 140 tills into 68 stores. Enterprise system roll outs were also completed for
Famous Footwear and Bamford.
Financial results
Revenue for the six-months was £5.01m, a decrease of 5% on 2007. Recurring revenues from annual licence fees,
support and Unify represented 52% of the total revenue generated in the period. Gross profit reduced by £0.20m to
£2.06m with the gross margin percentage at 41% of revenues (2007: 43%). Administrative expenses rose by £0.18m to
£2.03m, primarily due to increased amortised development costs and marketing expenditure. Operating profit was
£0.03m (2007: £0.41m) and earnings per share was 0.6p (2007: 3.6p).
The tax credit of £0.19m principally resulted from the impact of capitalising and amortising development
expenditure, and the availability of development tax credits.
At 30 September 2008 the Group had net cash of £1.74m, an increase of £0.35m on the 2007 position. The cash
balance at the period end was £2.00m (2007: £2.00m).
Dividend
In line with previous practice, the directors have not proposed an interim dividend but will consider proposing a
final dividend at the financial year end.
Board Changes
On 6 November, I was appointed non-executive Chairman and Mark Quartermaine joined the Board as a non-executive
director. On 24 November, we appointed Paul Clifford as a non-executive director. Mark, Paul and I look forward to
working with the executive team to help further develop the business and to enable it to reach its full potential.
Derek Lewis and Gareth Chick stepped down from the Board on 6 November and we would like to thank them for their
valuable contributions and service to the Company.
Outlook
It is widely reported that consumer confidence has been eroded by the financial crisis, with consequent reductions
in trading volumes for retailers and wholesalers, including our own customers. With most commentators not
forecasting an improvement until the end of 2009 at the earliest, we are taking a very conservative view when
making plans for the business.
We do however believe that the breadth of our products and services means that even during the downturn we can
offer customers functionality and options that will be attractive to them, as they look to optimise the
performance of their businesses to help offset the negative affects of the market slowdown.
Our business fundamentals are very sound and accordingly we consider that we are in a good position to weather the
economic storm, and to benefit from the upturn when it comes.
Colin Wells
Chairman
Prologic plc
12 December 2008
Registered Office:
Redwood House
Berkhamsted
Herts. HP4 2DH
Registered Number: 05031466
Independent review report to Prologic plc
Introduction
We have been engaged by the company to review the financial information in the Interim Results Report for the six
months ended 30 September 2008 which comprises the Consolidated income statement, Consolidated balance sheet,
Consolidated cash flow statement, Statement of changes in equity and the related explanatory notes 1 to 4. We have
read the other information contained in the Interim Results Report which comprises only the Financial Headlines,
Operational Headlines and the Chairman's Statement and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on
Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent
Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we
are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company, for our review work, for this report,
or for the conclusion we have formed.
Directors' responsibilities
The Interim Results Report is the responsibility of, and has been approved by, the directors. The AIM rules of the
London Stock Exchange require that the accounting policies and presentation applied to the interim figures are
consistent with those which will be adopted in the annual accounts having regard to the accounting standards
applicable for such accounts.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with the basis of
preparation.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the Interim Results
Report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,
'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures. A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in
the Interim Results Report for the six months ended 30 September 2008 is not prepared, in all material respects,
in accordance with the basis of accounting described in Note 1.
Grant Thornton UK LLP
Chartered accountants
London Thames Valley
Slough
12 December 2008
Prologic plc
Interim Results 2008
Consolidated income statement
Unaudited Unaudited
six months to six months to
30 September 30 September
2008 2007
£'000 £'000
-----------------------------------------------------------------------------------------------------
Revenue 5,013 5,267
Cost of sales (2,956) (3,009)
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Gross profit 2,057 2,258
Administrative expenses (2,031) (1,648)
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Operating profit before exceptional expenses 26 610
Exceptional expenses - (205)
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Operating profit 26 405
Financial income 32 20
Financial expenses (18) (28)
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Profit before tax 40 397
Taxation 19 (33)
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Profit for the period 59 364
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Pence Pence
Earnings per share - basic 0.59 3.64
Earnings per share - diluted 0.59 3.60
Prologic plc
Interim Results 2008
Consolidated balance sheet
Unaudited Unaudited
30 September 30 September
2008 2007
£'000 £'000
-----------------------------------------------------------------------------------------------------
Non-current assets
Goodwill 7,572 7,572
Development costs 3,508 2,876
Other intangible assets 249 189
Property, plant and equipment 499 268
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11,828 10,905
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Current assets
Inventories 84 135
Trade and other receivables 3,179 3,465
Cash and cash equivalents 2,004 1,996
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5,267 5,596
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Total assets 17,095 16,501
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Current liabilities
Trade and other payables (1,883) (2,242)
Current tax payable (288) (296)
Bank loan (257) (336)
Deferred revenue (2,659) (2,262)
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(5,087) (5,136)
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Net current assets 180 460
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Non-current liabilities
Bank loan (8) (270)
Deferred tax liabilities (899) (814)
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(907) (1,084)
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Total liabilities (5,994) (6,220)
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Net assets 11,101 10,281
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Equity
Share capital 50 50
Share premium account 2,734 2,734
Merger reserve 3,924 3,924
Other reserve 56 55
Retained earnings 4,337 3,518
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Total equity 11,101 10,281
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Prologic plc
Interim Results 2008
Consolidated cash flow statement
Unaudited Unaudited
six months to six months to
30 September 30 September
2008 2007
£'000 £'000
-----------------------------------------------------------------------------------------------------
Cash flows from operating activities
Operating profit 26 405
Adjustments for:
Amortisation of development costs 398 306
Amortisation of other intangible assets 78 68
Depreciation of property, plant and equipment 84 65
Share option charges (9) 11
(Increase)/decrease in inventories (44) (41)
Decrease in receivables 636 576
(Decrease) in payables (295) (219)
Increase/(decrease) in deferred income 104 (231)
-----------------------------------------------------------------------------------------------------
Cash generated by operations 978 940
Interest received 32 20
Interest paid (15) (24)
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Net cash from operating activities 995 936
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Cash flows from investing activities
Development expenditure (740) (498)
Purchase of other intangible assets (59) (29)
Purchase of property, plant and equipment (284) (31)
-----------------------------------------------------------------------------------------------------
Net cash used in investing activities (1083) (558)
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Cash flows from financing activities
Repayment of bank loan (139) (139)
Dividends paid to shareholders (200) (150)
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Net cash used in financing activities (339) (289)
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Net (decrease)/increase in cash and cash equivalents (427) 89
Cash and cash equivalents at 1 April 2,431 1,907
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Cash and cash equivalents 2,004 1,996
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Prologic plc
Interim Results 2008
Statement of changes in equity
Share
Share premium Merger Other Retained Total
capital account reserve reserve profit equity
£'000 £'000 £'000 £'000 £'000 £'000
-----------------------------------------------------------------------------------------------------
At 1 April 2008 50 2,734 3,924 65 4,478 11,251
Share option charges - - - (9) - (9)
Retained profit and total recognised - - - - 59 59
income and expense for the period
Dividends - - - - (200) (200)
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At 30 September 2008 50 2,734 3,924 56 4,337 11,101
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Notes to the Financial Statements
1. Group Accounting Policies
Basis of preparation
The consolidated financial statements have been prepared in accordance with the recognition and measurement
principles of applicable International Financial Reporting Standards as adopted by the EU and International
Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS) and the AIM Rules
for Companies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31
March 2008, and therefore the interim financial statements should be read in conjunction with the annual report
for that year.
2. Segmental Analysis
In the opinion of the directors the Group's activities constitute one class of business.
3. Earnings per share
Earnings per share is calculated by dividing the earnings attributable to shareholders by the number of shares in
issue during the period.
The weighted average number of shares in issue during the period was 10,000,000 (basic and diluted).
4. Status and approval
The interim results for the 6 month periods to 30 September 2008 and 2007 are unaudited and do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act.
The interim results were approved by the Board on 12 December 2008.
Prologic plc