News blog
Prologic
- BY: Andrew Hore |
- POSTED: 03/12/2007 |
Retail software systems provider Prologic continues to grow but the share price doesn’t follow suit.
Revenues were 8% higher at £5.3m in the six months to September 2007. Pre-tax profit dipped from £436,000 to £397,000 but that was due to £205,000 of reorganisation costs. The cost savings from the reorganisation will more than cover that cost in the second half. House broker WH Ireland forecasts a rise in full profits from £1.46m to £1.82m even if the reorganisation costs are included. The shares, up 2p to 91p, are trading on less than seven times forecast earnings.
TM Lewin awarded Prologic a £1.68m contract during the period. Leisure retailer Fat Face, an existing client, is upgrading its software and investing in more.
Prologic’s shares are illiquid and that is why they tend to have a sharp movement upwards and then later on fall back. That certainly seems to be the reason for the low rating. It is difficult to change that when less than 7% of the share capital is realistically available to trade. The rest is owned by management and employees or funds that are unlikely to trade the shares.
The dividend – there is only one payment a year - was raised by 50% to 1.5p a share last year and it is expected to rise to 2p a share this year. The shares might attract more attention if the dividend were increased even faster – after all it is seven times covered. There was also net cash of just under £1.4m at the end of September 2007 with more being generated all the time. A higher dividend might at least place more of a floor under the price and if the price is pushed up it may also persuade existing shareholders to sell a few.
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