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Clarity Commerce Solutions

  • BY: Andrew Hore |
  • POSTED: 26/06/2009 |

Clarity Commerce Solutions has released full year figures that were ahead of expectations. 

New management has transformed a consistently underperforming software business into a profitable operation. Revenues from continuing businesses grew 15% to £17.7m in the year to March 2009. Contracted support revenues account for one-third of turnover. A loss of £7.1m was turned into a pre-amortisation profit of £1.1m even though there were some one-off stock write-downs. Cash generation and proceeds of disposals helped Clarity move from net debt of £2.2m to net cash of £315,000. 

The retail software division did well in Europe and the cinema ticketing business had a strong year in France. The leisure division is developing new products to tackle issues with payment cards. The hospitality division has won business from hotel chains.

Cash generation and proceeds of disposals helped Clarity move from net debt of £2.2m to net cash of £315,000. A one-off hardware sale flattered the cash position but it has still strengthened significantly. The cash pile should continue to grow from now on. Clarity was under the close scrutiny of its bank for some time but this has ended. Clarity is eliminating the deficit on its distributable reserves which will put it in a position to pay a dividend in the future. 

Management continues to be strengthened with the appointment of a new finance director. Clarity needs to show that it can grow the business through launching new products.

Clarity believes that the sector is undervalued and that there will be consolidation. Clarity could be a consolidator but it is just as likely to be a target.

At 33.5p a share, Clarity is valued at £10.7m.

House broker Arbuthnot expects Clarity to increase its profits to £1.8m in the year to March 2010 and that puts the shares on a prospective multiple of less than eight for 2009-10. Arbuthnot forecasts net cash of £694,000 at the end of March 2010, rising to £2.89m a year later.

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