News blog
Prologic
- BY: Andrew Hore |
- POSTED: 26/06/2008 |
Prologic continues to make solid progress while continuing to invest in the future.
The revenues of the IT provider to fashion retailers rose 10% to £11.6m in the year to March 2008. Profits increased from £1.45m to £1.72m and the tax charge remains below the norm because or R&D tax credits. Net cash was £2m at the end of March.
Fat Face, Bamford and Ted Baker are recent customers. Ted Baker acquired the company’s eCommerce portal technology. Consumer websites could be an increasing source of business.
The business remains highly cash generative even though £1.14m of development spending was capitalised. The medium-to-long-term future of the business is seen as Software as a Service. Much of that investment is going in that area. Prologic already has a lot of the infrastructure it needs because its Unify service uses it to deliver value added services. The SaaS product will be launched later this year. This would be a service that would be particularly attractive to smaller retailers.
Prologic is keen to use its cash – but not necessarily its lowly rated shares – to make acquisitions. It wants small competitors which have a retail customer base that would be potential clients for SaaS while also providing continuing revenues from their existing operations. Longer-term, Prologic would also like to acquire service businesses overseas in order to roll-out the SaaS over a wider geographic area.
New house broker Arbuthnot forecasts that profits will hold steady at £1.7m in 2008-09. This should also mark a peak for capitalised development spending. Even so net cash is expected to increase by £300,000 to £2.3m. The dividend is forecast to rise by 25% to 2p a share.
Management hopes that switching brokers to Arbuthnot will help to improve the liquidity of the shares. There are potential sellers among employees and Prologic would like to widen its base of private client shareholders. Liquidity is certainly poor at the moment.
The shares fell 2.5p to 65p on the day, valuing Prologic at £6.5m. They are trading on five times forecast earnings and the forecast yield is 3.8%.
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