18 May 2011 – interim results

In the six months to 31 March, the software and IT services group has continued its recovery with pre-tax profits before exceptionals increasing to £1.08m (2010: £0.75m) with earnings per share on the same basis moving up to 2.3p (2010: 1.7p).  The interim dividend was raised to 0.30p (2010: 0.25p).  During the six month period, gross margins increased and there was a reduction in finance costs as borrowings fell yet again with net debt down to £7.2m (2010: £9.0m) for gearing of 39%.  The group has continued to introduce new products and thanks to an increase in the sales and marketing budget it has also won a number of new clients.  The group started the second half with a strong order book, 10% higher than the previous year, and this helps to provide some visibility of revenues as does the fact that recurring revenues now account for 54% of the total.  Full year pre-tax profits before exceptionals are forecast to be £2.4m for earnings per share of 5.2p.  We believe that given the growth prospects, a prospective p/e ratio of 10x current year earnings can be justified, giving us a medium-term share price target of 52p.  The shares are a BUY.