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Prologic plc

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

Preliminary results for the year ended 31 March 2009

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

Financial Highlights

	●	Results in line with market expectations
	●	Revenue £9.7m (2008: £11.6m)
	●	Recurring revenues 53% of total revenue (2008: 45%)
	●	Operating profit £0.1m (2008: £1.7m)
	●	Profit before tax £0.1m (2008: £1.7m)
	●	Cash balance £1.3m (2008: £2.4m)
	●	Net cash balance £1.1m (2008: £2.0m)
	●	Earnings per share 2.5p (2008: 13.2p)

Commercial and Operational Highlights

	●	£1.3m contract award from Internacionale for store system upgrades, including the upgrade of 79 of the stores they acquired from MK One.
	●	Systems upgrade orders for £0.4m received from Liberty.
	●	Launch of CIMS software on a 'Software as a Service' (SaaS) basis.
	●	Successful major store systems roll out for T.M. Lewin.
	●	Successful completion of enterprise system implementations for Famous Footwear and Bamford.
	●	New Board appointments: Colin Wells as non-executive Chairman, Mark Quartermaine and Paul Clifford as non-executive directors.

Sam Jackson, Managing Director, commented:

'Trading for the period, as widely publicised across the sector, was difficult. However, I am pleased to report that since early spring 2009, although still subdued, sentiment is improving with a number of our retail customers expanding both organically and through acquisition due to opportunities presented by market conditions.

We have invested throughout the current slowdown in key product areas in order to develop competitive and stronger solutions and, as a result, we are well placed to benefit as the market improves.

With an exceptional client base, strong balance sheet and robust recurring revenues, I am confident of future prospects.' 

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

Our results for this year reflect the difficult trading conditions we have encountered as a result of the economic downturn. Particularly during the second half of the financial year, our customers became very cautious with their capital spending and consequently began to delay or reduce the value of their IT expenditure. We therefore undertook an early review of our cost base and put in place a number of cost cutting measures, including a 10% reduction in headcount in October 2008. Our year end balance sheet was strong, with significant cash reserves and only a small level of debt.

Although IT spend has in general fallen sharply, the slowdown is presenting new opportunities. Some of our stronger customers are acquiring failing businesses and are able to consolidate the acquisitions rapidly and cost effectively using Prologic software and services, giving us additional business opportunities. For example, following their acquisition of 85 MK One stores, Internacionale awarded Prologic a £1.3m contract for store system upgrades in their newly acquired operation. 

Among many other smaller successful projects, following the implementation of T.M. Lewin's head office systems last year, we successfully completed a fast-track roll out of 140 tills into 68 stores. An enterprise system comprising head office and stores was also implemented at Famous Footwear and at Bamford. 

Financial Results

Revenue for the year to 31 March 2009 decreased by 17% to £9.7m (2008: £11.6m) and included £5.1m of recurring revenues from annual licence fees, support and UNIFY managed services. There was a reduction in operating profit to £0.1m from £1.7m and a tax credit for the year of £0.1m (2008: tax charge £0.4m). Earnings per share decreased to 2.5p from 13.2p.

Cash flow generated from operations was £1.7m (2008: £2.7m) and there was a net cash outflow before financing of £0.7m (2008: inflow £1.0m). The cash balance at 31 March 2009 was £1.3m (2008: £2.4m) and the year end net cash balance was £1.1m (2008: £2.0m). 

Dividend

Although the Company believes that sentiment is improving, we need to ensure that sufficient resources are retained in the Group during the slowdown to continue to make the investments necessary to maintain our competitive lead. The Board have therefore decided not to recommend the payment of a dividend for the year ended 31 March 2009. We look forward to returning to a progressive dividend policy when conditions improve.

Board Changes

During November 2008, I was appointed non-executive Chairman, and Mark Quartermaine and Paul Clifford were appointed non-executive directors. The new skills and experience we have brought to the Board complement those of the executive team and will help in the further development of the business. Derek Lewis and Gareth Chick stepped down from the Board during November 2008 and we would like to thank them for their valuable contributions and service to the Group.

Management and Staff

The Company benefits from having a strong management team and experienced workforce that has been able to meet the challenges brought about by the downturn. I would like to thank all of our employees for their dedication and hard work during the year and look forward to their commitment in the year ahead.

Outlook

Our strong balance sheet and high level of recurring revenues provide us with a sound commercial base. Coupled with this, the significant investment we have made in product development means we are launching new functionality and services into areas of the market that we expect to show high levels of growth. We therefore believe that our business fundamentals remain sound and that we are well placed both to weather further market uncertainty and to take full advantage of an upturn.

We will also continue to watch the market closely to identify any opportunities to make for infill acquisitions to augment the Company's skill set and increase market penetration. 

Colin Wells

Chairman

MANAGING DIRECTOR'S REVIEW

Market Overview

The recent deterioration in our financial performance coincided with, and tracked the wider financial crisis in 2008. Activity fell very sharply as customers became increasingly concerned about the worsening conditions, and several significant prospects that were well advanced were delayed. Since early spring 2009 we have seen sentiment improving. Although activity is subdued it is by no means as low as during the recent unprecedented period. 

During the period, Prologic significantly increased its marketing activity. As a result, coverage in the trade press and at industry functions has greatly increased. Through regular press releases, white papers, opinion pieces and 'thought leadership' initiatives the Company is effectively communicating its key strengths, which include stability and experience, product innovation, reduced cost of ownership and low risk project delivery.

New Developments

Despite tough market conditions we have continued to invest strongly in merchandising functionality, point-of-sale systems, eCommerce and the SaaS delivery model. We believe these initiatives build a firm foundation for a return to growth as the economic situation stabilises. 

Our consumer eCommerce platform is now fully demonstrable to prospective customers, allowing us to benefit from the rapid growth of online fashion sales. Ted Baker has already chosen this solution and, from the interest we have received from existing and prospective customers, we are confident of attracting further premium business in the current year.

During tough economic conditions retailers focus on improving their merchandising practices. As like-for-like sales fall, fashion businesses become more focused on reducing markdown costs and maximising availability across stores. To address this pressing demand Prologic has developed new and innovative merchandising practices and has incorporated these into its products.

This year we launched our 'Software as a Service' model. The attraction of this for new customers is that it offers reduced initial capital outlay and risk. Its introduction may impact our 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, in due course, also enable us to deliver our technology via UK and overseas resellers, opening up potential new markets.

Outlook 

As a result of the underlying economic conditions, we expect our marketplace to continue to be challenging over the next period. However we remain confident of our market position, and we have a number of strong retail customers, some of whom are expanding rapidly as they take advantage of the weakness in the sector. We have invested throughout the slowdown in key product areas resulting in stronger and more competitive offerings to take full advantage of the more stable market conditions we expect to emerge over the coming months.

Sam Jackson

Managing Director

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2009

 

	Note	2,009 £'000	2,008 £’000
Revenue		9,709	11,641
Cost of sales		(5,565)	(6,158)
Gross profit		4,144	5,483
Administrative expenses		(4,039)	(3,761)
Operating profit		105	1,722
Finance income		43	53
Finance expenses		(28)	(53)
Profit before tax		120	1,722
Taxation	2	127	(398)
Profit for the period		247	1,324
		Pence	Pence
Earnings per share - basic	3	2	13
Earnings per share - diluted	3	2	13

 

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CONSOLIDATED BALANCE SHEET

At 31 March 2009

 

 

	2,009 £'000	2,008 £’000
Non-current assets
Goodwill	7,572	7,572
Development costs	3,841	3,166
Other intangible assets	247	268
Property, plant and equipment	515	299
	12,175	11,305
Current assets
Inventories	141	40
Trade and other receivables	2,510	3,815
Current tax	227	-
Cash and cash equivalents	1,348	2,431
	4,226	6,286
Total assets	16,401	17,591
Current liabilities
Trade and other payables	(1,585)	(2,178)
Current tax payable	-	(371)
Bank loan	(152)	(269)
Deferred revenue	(2,392)	(2,555)
	(4,129)	(5,373)
Net current assets	97	913
Non-current liabilities
Bank loan	(35)	(132)
Deferred tax liabilities	(936)	(835)
	(971)	(967)
Total liabilities	(5,100)	(6,340)
Net assets	11,301	11,251
Equity
Share capital	50	50
Share premium account	2,734	2,734
Merger reserve	3,924	3,924
Other reserve	68	65
Retained earnings	4,525	4,478
Total equity	11,301	11,251

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2009

	Note	2,009 £'000	2,008 £’000
Cash flows from operating activities
Operating profit		105	1,722
Adjustments for:
Amortisation of development costs		851	654
Amortisation of other intangible assets		157	137
Depreciation of property, plant and equipment		180	128
Share option charges		3	21
(Increase)/decrease in inventories		(101)	54
Decrease in receivables		1,305	226
Decrease in payables		(593)	(283)
(Decrease)/increase in deferred revenue		(163)	62
Cash generated by operations		1,744	2,721
Interest received		43	53
Interest paid		(21)	(46)
Tax paid		(370)	(268)
Net cash from operating activities		1,396	2,460
Cash flows from investing activities
Development expenditure		(1,526)	(1,136)
Purchase of other intangible assets		(136)	(177)
Purchase of property, plant and equipment		(396)	(125)
Net cash used in investing activities		(2,058)	(1,438)
Net cash (outflow)/inflow before financing		(662)	1,022
Cash flows from financing activities
Repayment of bank loan		(221)	(348)
Dividends paid to shareholders	4	(200)	(150)
Net cash used in financing activities		(421)	(498)
Net (decrease)/ increase in cash and cash equivalents		(1,083)	524
Cash and cash equivalents at 1 April		2,431	1,907
Cash and cash equivalents		1,348	2,431

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2009

 

	Share capital £'000	Share premium account £'000	Merger  reserve £'000	Share option reserve £'000	Retained profit £'000	Total equity £'000
At 1 April 2007	50	2,734	3,924	44	3,304	10,056
Retained profit and total recognised income and expense for the period	-	-	-	-	1,324	1,324
Share option charges	-	-	-	21	-	21
Dividends	-	-	-	-	(150)	(150)
At 31 March 2008 and 1 April 2008	50	2,734	3,924	65	4,478	11,251
Retained profit and total recognised income and expense for the period	-	-	-	-	247	247
Share option charges	-	-	-	3	-	3
Dividends	-	-	-	-	(200)	(200)
At 31 March 2009	50	2,734	3,924	68	4,525	11,301

 

NOTES:

1.    BASIS OF PREPARATION

This preliminary statement has been prepared on the same basis and using the same accounting policies as used in the audited financial statements for the year ended 31 March 2008.

The figures for the year ended 31 March 2008 have been extracted from the statutory financial statements which have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unmodified. 

2.    TAXATION

	2,009 £'000	2,008 £’000
Corporation tax at 28% (2008: 30%)	(227)	371
Adjustments in respect of prior years	(1)	(1)
Total current tax	(228)	370
Deferred tax – origination of and reversal of temporary differences	101	28
Tax on profit on ordinary activities	(127)	398
Factors affecting tax charge for period:
	2,009 £'000	2,008 £’000
Profit on ordinary activities multiplied by standard rate of corporation tax	34	516
Effect of:
Expenses not deductible for tax purposes	28	37
Capital allowances for the period in excess of depreciation	(2)	(18)
Development tax credit	(185)	(95)
Capitalised development costs qualifying for development tax relief	(342)	(279)
Disallowable amortisation	238	216
Increase in unamortised development costs	103	28
Marginal relief	-	(6)
Adjustments in respect of prior years	(1)	(1)
Tax charge for the period	(127)	398

There is no unprovided deferred tax.

3.    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.

	2009 Number	2008 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)	10,000,000	10,149,439

	2009 Pence	2008 Pence
Basic earnings per share	2.47	13.24
Diluted earnings per share	2.47	13.05

The share options for 2009 were all anti-dilutive.

4.    DIVIDENDS

A final dividend of 2.0p per share (2008: 1.5p) was paid for the year ended 31 March 2008. The total amount paid was £200,000 (2008: £150,000). The Board has not recommended the payment of a dividend for the year ended 31 March 2009. 

5.    STATUS AND APPROVAL

This preliminary statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for the financial year ended 31 March 2009 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 5 June 2009.

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6.    ANNUAL REPORT

Copies of the annual Report will be despatched to shareholders on or around 26 June 2009. 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. 

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