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Prologic plc

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

Interim Results for the six months ended 30 September 2009

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 2009.

Financial Headlines

• In difficult trading conditions, revenue down 4% to £4.81m (2008: £5.01m)

• Recurring revenue 54% of total revenue (2008: 52%)

• Operating profit £14k (2008: £26k)

• Administrative expenses reduced by 12% to £1.79m (2008: £2.03m)

• EPS 1.5p (2008: 0.6p)

• Cash balance £1.30m (2008: £2.00m)

• Net cash position £1.19m (2008: £1.75m) 

Operational Highlights

• £0.75m contract awarded by the outdoor wear and camping equipment retailer, Go Outdoors, for major enhancements to its supply chain and reporting systems 

• Order received for £0.2m from Dune related to the integration of recently acquired Shoe Studio 

• Ted Baker launched new website based on Prologic's eCommerce solution (since the period end) 

• Completion of fast track roll out of 442 tills into 160 stores for Internacionale Retail 

Sam Jackson, Managing Director, commented:

"The past twelve months have been a testing time for the Company, but with revenue down by just 4% Prologic has shown resilience in the face of unprecedented economic conditions that began in late 2008. Throughout the economic slowdown, Prologic has continued to invest for the future and, in particular, we have made a significant investment in the development of our innovative eCommerce solution. I am pleased to report that Ted Baker's recently launched new website is the first to be based on this solution. 

Our first eCommerce go-live was later than originally anticipated and therefore this is expected to push some business opportunities into the next financial period. This, combined with the lengthening sales cycles resulting from the downturn, is likely to impact revenue for the full year.

We are confident however that the new eCommerce solution will not only be attractive to existing customers, but that it will also help drive new client sales. A recent and substantive survey of the sector undertaken by Martec International shows that for 63% of fashion companies, eCommerce is the top IT investment priority." 

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 2009

Chairman's Statement

Overview

The continuing difficult market conditions resulted in reduced revenue for the first half of this year, however our strong recurring revenue base and the cost reduction measures we implemented last year helped to insulate us from the downturn. Revenue for the period of £4.81m was 4% lower than in the previous half year, while operating profit of £14k was almost the same, and was in line with management expectations. Our period end cash balance was £1.30m, with a net cash position of £1.19m. 

Despite the economic downturn, we have continued to make significant investment in development to ensure that Prologic CIMS remains one of the leading multi-channel solutions available to fashion and lifestyle businesses. In particular, we have invested strongly in our innovative eCommerce solution and Ted Baker have recently launched their new website based on this solution. The eCommerce project has taken longer to develop than intended, however the solution is more functional and capable than was originally planned. It is part of a single comprehensive solution supporting merchandising, stock, warehousing and in-store systems, which we believe has significant advantages over competitive offerings

Although the environment for new client business remains challenging, Prologic has taken advantage of a number of opportunities that have arisen through sector consolidation. During the period we completed a fast track rollout of 442 tills into 160 stores for Internacionale Retail following their acquisition of the high street fashion retailer MK One. We also won a contract worth £0.2m following Dune's purchase of Shoe Studio from the Mosaic Group. Also during the period, we won a £0.75m contract from Go Outdoors, the outdoor wear and camping equipment specialist, to provide software and services to support their rapid growth plans.  

Financial results 

Revenue for the period was £4.81m, a decrease of 4% on the previous first half. Recurring revenue from annual licence fees, support and Unify amounted to 54% of total revenue for the six months (2008: 52%). Gross profit reduced by £0.25m to £1.81m with the gross margin percentage at 38% of revenue (2008: 41%). Administrative expenses decreased by £0.24m to £1.79m as a result of cost reduction measures. Operating profit was £14k (2008: £26k) and earnings per share was 1.50p (2008: 0.59p).

The tax credit of £0.14m principally arose from the effect of capitalising and amortising development expenditure, and the availability of development tax credits.

At 30 September 2009, the Group had net cash of £1.19m, (2008: £1.75m) and the period end cash balance was £1.30m (2008: £2.00m).

Dividend

In line with previous practice, the directors are not proposing an interim dividend. 

Outlook

Our high level of recurring revenue and enviable customer base, including many of the most respected fashion businesses, continue to provide us with a high degree of resilience in tough market conditions. 

The development of our eCommerce solution has taken longer than planned, which means, in the short term, some prospects we had anticipated closing this financial year are now expected to come to fruition in the next financial year. This, however, continues to be a high growth area of the market and we can be confident of the prospects for our eCommerce product in the medium and long term.

 

We believe that the strength of our product and services portfolio and our ability to take advantage of growth areas of the market means that the Company will be well placed as conditions improve.

 

Colin Wells

Chairman

4 December 2009

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 2009 which comprises the Consolidated statement of comprehensive income, Consolidated statement of financial position, Consolidated cash flow statement, Consolidated 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 Highlights 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 2009 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

4 December 2009

Consolidated statement of comprehensive income

		Unaudited		Unaudited	Audited
		six months to		six months to	Year to
		30 September		30 September	31 March
		2009		2008	2009
		£'000		£'000	£'000
Revenue		4,814		5,013	9,709
Cost of sales		(3,008)		(2,956)	(5,565)
Gross profit		1,806		2,057	4,144
Administrative expenses		(1,792)		(2,031)	(4,039)
Operating profit		14		26	105
Financial income		1	32		43
Financial expenses		(7)	(18)		(28)
Profit before tax		8	40		120
Taxation		142	19		127
Profit and total comprehensive income for the period		150	59		247
		Pence	Pence		Pence
Earnings per share - basic and diluted		1.50	0.59		2.47

Consolidated statement of financial position

					Unaudited	Unaudited	Audited
					30 September	30 September	31 March
					2009	2008	2009
					£'000	£'000	£'000
Non-current assets
Goodwill					7,572	7,572	7,572
Development costs					4,261	3,508	3,841
Other intangible assets					243	249	247
Property, plant and equipment					470	499	515
					12,546	11,828	12,175
Current assets
Inventories					63	84	141
Trade and other receivables					2,408	3,179	2,510
Current tax					446	-	227
Cash and cash equivalents					1,299	2,004	1,348
					4,216	5,267	4,226
Total assets					16,762	17,095	16,401
Current liabilities
Trade and other payables					(1,628)	(1,883)	(1,585)
Current tax payable					-	(288)	-
Bank loan					(110)	(257)	(152)
Deferred revenue					(2,562)	(2,659)	(2,392)
					(4,300)	(5,087)	(4,129)
Net current assets					(84)	180	97
Non-current liabilities
Bank loan					-	(8)	(35)
Deferred tax liabilities					(1,015)	(899)	(936)
					(1,015)	(907)	(971)
Total liabilities					(5,315)	(5,994)	(5,100)
Net assets					11,447	11,101	11,301
Equity
Share capital					50	50	50
Share premium account					2,734	2,734	2,734
Merger reserve					3,924	3,924	3,924
Other reserve					64	56	68
Retained earnings					4,675	4,337	4,525
Total equity					11,447	11,101	11,301

Consolidated cash flow statement

		Unaudited	Unaudited	Audited
		six months to	six months to	year to
		30 September	30 September	31 March
		2009	2008	2009
		£'000	£'000	£'000
Cash flows from operating activities
Operating profit		14	26	105
Adjustments for:
Amortisation of development costs		505	398	851
Amortisation of other intangible assets		84	78	157
Depreciation of property, plant and equipment		101	84	180
Share option charges		(4)	(9)	3
Increase in inventories		78	(44)	(101)
Decrease in receivables		102	636	1,305
Decrease in payables		43	(295)	(593)
Increase/(decrease) in deferred income		170	104	(163)
Cash generated by operations		1,093	978	1,744
Interest received		1	32	43
Interest paid			(15)	(21)
Tax paid			-	(370)
Net cash from operating activities		1,094	995	1,396
Cash flows from investing activities
Development expenditure		(925)	(740)	(1,526)
Purchase of other intangible assets		(80)	(59)	(136)
Purchase of property, plant and equipment		(56)	(284)	(396)
Net cash used in investing activities		(1,061)	(1,083)	(2,058)
Net cash outflow before financing		33	(88)	(662)
Cash flows from financing activities
Repayment of bank loan		(82)	(139)	(221)
Dividends paid to shareholders		-	(200)	(200)
Net cash used in financing activities		(82)	(339)	(421)
Net decrease in cash and cash equivalents		(49)	(427)	(1,083)
Cash and cash equivalents at start of the period		1,348	2,431	2,431
Cash and cash equivalents		1,299	2,004	1,348

Consolidated 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)
Dividends	-	-		-	-	(200)	(200)
Profit and total comprehensive income for the period	-	-		-	-	59	59
At 30 September 2008	50	2,734		3,924	56	4,337	11,101
Share option charges	-	-		-	12	-	12
Profit and total comprehensive income for the period	-	-		-	-	188	188
At 31 March 2009	50	2,734		3,924	68	4,525	11,301
Share option charges	-	-		-	(4)	-	(4)
Profit and total comprehensive income for the period	-	-		-	-	150	150
At 30 September 2009	50	2,734		3,924	64	4,675	11,447

 

 

 

Notes to the Financial Statements

1. Basis of preparation 

These interim condensed consolidated financial statements (the statements) are comprised of the unaudited results for the six months to 30 September 2009 together with comparative unaudited results for the six months to 30 September 2008 and audited results for the year ended 31 March 2009. They do not include all of the information required for full annual financial statements.

The financial information included in the statements for the year ended 31 March 2009 does not constitute the statutory accounts (as defined in Section 240 of the Companies Act 1985) for that year. Those accounts have been filed with the Registrar of Companies and include an auditor's report which was unqualified and did not contain a statement under section 237(2) or section 237(3) of the Companies Act 1985

The statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 March 2009 except for the adoption of IAS 1 Presentation of Financial Statements (Revised 2007) and IFRS 8 (Operating Segments). The accounts are prepared under the historical cost convention and are prepared in accordance with the recognition and measurement principles of IFRS.

The adoption of IAS 1 (Revised 2007) has resulted in changes to presentation of primary statements.

2. Segmental Analysis

The business and IT solutions that Prologic provides to its customers are all based around a single software product, Prologic CIMS, and resources across the Group are focussed on developing, implementing and supporting these solutions. The Group is therefore reported as a single operating segment, in accordance with IFRS 8. 

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. Approval

The interim results were approved by the Board on 4 December 2009 and are available on the Company's website (www.prologic.com).

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