TIDMPGC

RNS Number : 6203L

Prologic plc

03 August 2011

PGC.L

Prologic plc

("Prologic" or the "Company")

Preliminary results for the year ended 31 March 2011

Prologic is one of the leading providers of IT business solutions to fashion and lifestyle retailers and distributors.

Financial Highlights

-- Revenue up 1% to GBP9.86m (2010: GBP9.75m)

-- Recurring revenues up 4% to GBP5.33m (2010: GBP5.13m), representing 54% of total revenue

-- Gross profit up 12% to GBP4.48m (2010: GBP4.01m); gross margin 45% (2010: 41%)

-- Adjusted operating profit* GBP21,000 (2010: GBP82,000)

-- Operating loss GBP7.78m (2010: profit GBP82,000)

-- Year end net cash position GBP1.23m (2010: net cash GBP1.41m)

-- Remaining loan cleared during the year

Operational Highlights

-- Tom Fischer appointed CEO, Sam Jackson assumed CTO role

-- Secured first SaaS based contract with Pretty Green

-- First customer go-live on new Fashion Line Merchandising product

-- Major new versions of head office and point of sale products released

- CIMS Enterprise Version 8

- CIMS PoS Series 8

(first customer implementations for both new products underway)

Post Period End

-- Restructuring implemented reducing the cost base by GBP1.12m annualised

-- New customer contract award from Heidi Klein

* Calculated before the impairment and de-recognition of intangible assets of GBP7.80m (2010: GBPnil), which had no impact on cash.

Tom Fischer, Chief Executive Officer, commented:

"Since my appointment as Chief Executive, I have been encouraged by the continuing support of our customer base, and their ongoing investment in our products and services. We have recently released two new major software versions, CIMS Enterprise Version 8 and CIMS PoS Series 8, both of which deliver increased functionality and performance to our customers, while bringing significant cost savings.

With these developments now complete, and recognising the challenging market conditions, we have restructured the business and expect to benefit from an annualised reduction in the cost base of over GBP1 million.

The fashion industry continues to attract new entrants, many of whom have multiple sales channels from their inception. Our strategy, therefore, has been to widen our market by targeting early-stage fashion businesses and our recent wins at Pretty Green and Heidi Klein have validated our belief that our solutions are attractive to this sector. In our traditional market, we believe that established retailers will come under increasing pressure to replace inadequate and inefficient operational systems in order to meet the consumer demand for properly integrated, multi-channel retailing.

As a result of our product strategy and the actions we have taken, we believe Prologic is well positioned to take advantage of the market opportunity."

For more information, please contact:

 
 Prologic plc                                                        01442 876 
                                                                           277 
 Tom Fischer, Chief                                                  www.prolo 
  Executive                                                            gic.com 
  Officer 
 David Parry, 
  Finance Director 
 
 Arbuthnot                                                            020 7012 
  Securities                                                              2000 
  Limited 
 Hugh Field/Ed 
  Groome 
 
 Biddicks                                                             020 3178 
                                                                          6378 
 Zoe Biddick 
 

Chairman's Statement

While some improvement in trading conditions was discernible in the early part of the year, sustained economic uncertainty led to increased customer caution as the year progressed. In many cases, this has manifested itself in a lengthening of the sales cycle.

A high proportion of our revenues continue to be derived from recurring revenues and sales to our customer base. Despite the challenging conditions, during the year our customers continued to invest in our products and services, resulting in revenues slightly ahead of last year.

We have continued, throughout the economic downturn, to invest in product development and have recently launched two major new releases of our CIMS head office and point of sale solutions. The functional enhancements and operational efficiencies offered by these new products have made them very attractive to both existing and prospective customers.

During the year we were delighted to secure the business of the Pretty Green clothing label, which represents our first Software as a Service (SaaS) based contract. The commercial benefits of this model are particularly attractive for younger businesses and have broadened our market reach.

Board Changes

We were delighted to welcome Tom Fischer to the Board on 1 November 2010 as Chief Executive Officer. Tom has considerable experience in the retail software market and his strong sales and general management background complements the existing strengths of the Board. Sam Jackson, under whose stewardship Prologic developed its market-leading suite of solutions for the fashion and lifestyle industry, has assumed the role of Chief Technology Officer.

Under Tom's leadership, the directors have undertaken a comprehensive review of the Company's operations. Significant overhead savings have been identified and operational improvements implemented, resulting in a streamlining of the business while maintaining the high levels of service our customers expect.

Financial Results

Revenue for the year was GBP9.86m (2010: GBP9.75m) and included GBP5.33m of recurring revenues (2010: GBP5.13m), which represented 54% of total revenues (2010: 53%). The adjusted operating profit was GBP21,000 (2010: GBP82,000), which was calculated before the impairment and de-recognition of intangible assets, and there was an unadjusted operating loss of GBP7.78m (2010: profit GBP82,000). The year end cash balance and net cash position stood at GBP1.23m (2010: cash balance GBP1.45m, net cash GBP1.41m), with the Company's remaining loan having been cleared during the year.

The Board has decided not to recommend the payment of a dividend for the year ended 31 March 2011.

Management and Staff

On behalf of the Board, I would like to thank all our employees for their hard work and dedication and look forward to their continuing support in the coming year.

Colin Wells

Chairman

Chief Executive's Review

Operational Review

Against a backdrop of ongoing economic uncertainty, it is encouraging to report that our customers continued to invest in Prologic solutions throughout last year. During the period we had our first customer go-live on our new Fashion Line Merchandising (FLM) product, which helps retailers to increase sales and profitability at individual stores through merchandise optimisation techniques. I am also pleased to report that we secured our first SaaS based contract with Pretty Green.

While the majority of our revenues came from existing customers, we have continued to engage in new business opportunities. In a market that remains cautious, we are seeing a lengthening of sales cycles as noted in the Chairman's statement. I am, however, pleased to confirm that we have now secured the luxury swimwear brand, Heidi Klein, as our latest customer (post period end). This, together with Pretty Green, demonstrates that Prologic's solutions are applicable and attractive to early stage fashion companies, broadening our target market within the sector.

Throughout the economic downturn, Prologic has continued to invest in product development culminating in two major new software releases in the year:

-- CIMS Enterprise Version 8 is the latest generation of our multi-channel trading platform, optimised to meet the demands of modern fashion and lifestyle businesses. This new release has also been designed to run on a cost effective Linux/Intel platform, significantly improving cost performance. Fat Face has become the first customer to deploy this new version, with many of our other customers planning to upgrade during the coming year.

-- CIMS PoS Series 8 is our new point of sale solution, designed to deliver an enhanced multi-channel experience in store while running in a lower-cost operating environment. The new Java user interface makes for a faster and simpler sales transaction and has been well received by staff at EAST, the first of our customers to adopt this solution. Other customers are scheduled to deploy this version over the summer.

Having completed these important developments and recognising the continued uncertainty in the market, the directors have recently undertaken a comprehensive review of the business. As a result, operations have been restructured in order to increase operational efficiency, and clearer executive reporting lines have been established. At the same time, the review identified cost savings of GBP1.12m on an annualised basis, which have been implemented since the year end. We have been able to achieve these savings without reducing headcount in our Customer Support department or our strong Professional Services team, which we feel is essential to maintaining a high quality of service to our customers going forward.

Financial Review

Operating Results

Revenue for the year increased slightly to GBP9.86m from GBP9.75m the previous year and recurring revenue (which includes annual licence fees, support and managed services) was 54% of total revenue in 2011, up from 53% in 2010.

Gross profit in 2011 was GBP4.48m, an increase of GBP0.48m from 2010, and the gross margin percentage rose by 4% to 45% of revenue. This was the result of a relative increase in (high margin) software sales.

The operating loss for 2011 was GBP7.78m (2010: profit GBP82,000) and there was a loss per share of 70.01p (2010: earnings per share 1.45p). The adjusted operating profit, before the impairment and de-recognition of intangible assets (detailed below), was GBP21,000 (2010: GBP82,000).

Development expenditure increased to GBP2.32m in 2011 from GBP1.99m the previous year, reflecting the substantial investment made in developing the new versions of the Company's head office and point of sale products. Following completion of these developments, the directors undertook a review of previously capitalised development costs, and identified GBP2.72m of net development costs where no future economic benefits were expected to be returned from their use. Accordingly, these were de-recognised in accordance with IAS 38 Intangible Assets.

At the end of the year, the directors agreed to simplify the group structure and now consider the subsidiaries not to be material. Accordingly, group accounts have not been prepared this year.

The reduced levels of profitability reported by the Company and the continued caution in the market have indicated that the intangible assets may be impaired. As detailed in note 6, an impairment review was undertaken, and an impairment charge of GBP5.09m was recognised against the value of goodwill and development costs of GBP2.72m were de-recognised.

The adjustments to the carrying value of intangible assets noted above had no impact on the Company's cash.

Taxation

There was a current tax credit in the year of GBP0.32m, which was primarily due to the availability of development tax credits. There was also a GBP0.47m deferred tax credit, which arose from the de-recognition of capitalised development costs.

Financial Position

Net assets at 31 March 2011 amounted to GBP4.44m, which was GBP7.00m lower than in 2010, primarily due to the impairment and de-recognition of intangible assets. At the year end, the net value of goodwill was GBP2.48m (2010: GBP7.57m) and net capitalised development costs were GBP3.08m (2010: GBP4.77m).

The cash balance at 31 March 2011 was GBP1.23m (2010: GBP1.45m) and there was no outstanding debt (2010: GBP39,000 debt). At the year end, there were net current liabilities of GBP0.32m (2010: current assets GBP0.60m) and, therefore, since the year end, the Company has secured short-term funding arrangements and the directors also have a number of additional funding avenues at their disposal should the need arise.

There was GBP2.35m of current deferred income at the year end (2010: GBP2.12m) and GBP0.76m of non-current deferred income (2010: GBP1.08m), which is the income received on multi-year support contracts that will not have been recognised as revenue by the end of the next financial year.

As part of the group restructure undertaken at the end of the year, the directors instigated a process to dissolve the dormant subsidiary Pitcomp 192 Ltd, and thus released the GBP3.92m merger reserve at the year end. At 31 March 2011, retained earnings were GBP1.59m (2010: GBP4.67m).

Market Overview and Outlook

We are working with our customers to develop long-term plans as they execute their strategies for growth. Meanwhile, the acceleration of non-store retailing is continued evidence of a significant change in consumer behaviour. During the economic downturn, many fashion businesses have deferred investing in their operational systems leaving them poorly equipped to meet the increasingly sophisticated expectations of their customers. Across the sector, many retailers continue to operate with older legacy systems that we believe are unable to support the tight sales channel integration necessary to deliver a cohesive multi-channel consumer experience. Consequently, it is our view that there is a growing need to replace these older systems in order to operate efficiently in the modern retail environment.

Prologic was early to recognise the operational advantages of an integrated multi-channel solution and many of our customers have exploited the advanced capabilities of our software to deliver strong results despite a generally weak market. As a proven provider of solutions to the fashion and lifestyle sector, we believe we are well placed to benefit as the need for many retailers to replace legacy systems becomes more acute.

Despite uncertainty in the market, the fashion sector continues to attract new entrants, many of whom have multiple sales channels from their inception. Our new software releases, delivered through our SaaS deployment model, are well suited to early stage companies and our successes with Pretty Green and Heidi Klein have validated our belief that this represents an opportunity to extend our target market. We are continuing to focus on this as a growth area and expect to see further momentum over the course of the year.

Tom Fischer

Chief Executive Officer

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2011

 
                                                Note      2011     2010 
                                                       GBP'000  GBP'000 
----------------------------------------------  ----  --------  ------- 
Revenue                                                  9,859    9,748 
 
Cost of sales                                          (5,376)  (5,741) 
 
Gross profit                                             4,483    4,007 
 
Administrative expenses                               (12,266)  (3,925) 
 
Operating profit before impairment and 
 de-recognition of intangible assets                        21       82 
 
Impairment and de-recognition of intangible 
 assets                                                (7,804)        - 
----------------------------------------------  ----  --------  ------- 
 
Operating (loss)/profit                                (7,783)       82 
 
Finance income                                               3        1 
Finance expenses                                           (8)     (22) 
 
(Loss)/profit before tax                               (7,788)       61 
 
Taxation                                           2       787       84 
 
(Loss)/profit for the period and total 
 comprehensive (expense)/income for the 
 period                                                (7,001)      145 
----------------------------------------------  ----  --------  ------- 
 
 
                                                         Pence    Pence 
 
(Loss)/earnings per share - basic and diluted      3   (70.01)     1.45 
 

STATEMENT OF FINANCIAL POSITION

At 31 March 2011

 
                                   Note     2011     2010 
                                         GBP'000  GBP'000 
---------------------------------  ----  -------  ------- 
Non-current assets 
Goodwill                              6    2,483    7,572 
Development costs                     6    3,084    4,768 
Other intangible assets               6      114      184 
Property, plant and equipment                412      447 
                                           6,093   12,971 
---------------------------------  ----  -------  ------- 
 
Current assets 
Inventories                                  120      116 
Trade and other receivables                2,638    3,725 
Current tax                                  320      151 
Cash and cash equivalents                  1,232    1,451 
---------------------------------  ----  -------  ------- 
                                           4,310    5,443 
---------------------------------  ----  -------  ------- 
 
Total assets                              10,403   18,414 
---------------------------------  ----  -------  ------- 
 
Current liabilities 
Trade and other payables                 (2,288)  (2,687) 
Bank loan                                      -     (39) 
Deferred revenue                         (2,345)  (2,122) 
---------------------------------  ----  -------  ------- 
                                         (4,633)  (4,848) 
---------------------------------  ----  -------  ------- 
 
Net current (liabilities)/assets           (323)      595 
---------------------------------  ----  -------  ------- 
 
Non-current liabilities 
Deferred revenue                           (758)  (1,083) 
Deferred tax liabilities                   (569)  (1,037) 
---------------------------------  ----  -------  ------- 
                                         (1,327)  (2,120) 
---------------------------------  ----  -------  ------- 
 
Total liabilities                        (5,960)  (6,968) 
---------------------------------  ----  -------  ------- 
 
Net assets                                 4,443   11,446 
---------------------------------  ----  -------  ------- 
 
Equity 
Share capital                                 50       50 
Share premium account                      2,734    2,734 
Merger reserve                                 -    3,924 
Other reserve                                 66       68 
Retained earnings                          1,593    4,670 
---------------------------------  ----  -------  ------- 
Total equity                               4,443   11,446 
---------------------------------  ----  -------  ------- 
 

CASH FLOW STATEMENT

For the year ended 31 March 2011

 
                                                 Note     2011     2010 
                                                       GBP'000  GBP'000 
----------------------------------------------  -----  -------  ------- 
Cash flows from operating activities 
Operating (loss)/profit                                (7,783)       82 
Adjustments for: 
Amortisation of intangible assets                        1,401    1,204 
Impairment and de-recognition of intangible 
 assets                                                  7,804        - 
Depreciation of property, plant and equipment              194      205 
Share option credit                                        (2)        - 
(Increase)/decrease in inventories                         (4)       25 
Decrease/(increase) in receivables                       1,084  (1,215) 
(Decrease)/increase in payables                          (399)    1,102 
(Decrease)/increase in deferred revenue                  (102)      813 
-----------------------------------------------------  -------  ------- 
Cash generated by operations                             2,193    2,216 
 
Interest received                                            3        1 
Interest paid                                              (2)      (5) 
Tax repaid                                                 149      260 
-----------------------------------------------------  -------  ------- 
Net cash from operating activities                       2,343    2,472 
-----------------------------------------------------  -------  ------- 
 
Cash flows from investing activities 
Development expenditure                                (2,318)  (1,994) 
Purchase of other intangible assets                       (44)     (74) 
Purchase of property, plant and equipment                (159)    (137) 
-----------------------------------------------------  -------  ------- 
Net cash used in investing activities                  (2,521)  (2,205) 
-----------------------------------------------------  -------  ------- 
 
Net cash (outflow)/inflow before financing               (178)      267 
-----------------------------------------------------  -------  ------- 
 
Cash flows from financing activities 
Repayment of bank loan                                    (41)    (164) 
-----------------------------------------------------  -------  ------- 
Net cash used in financing activities                     (41)    (164) 
-----------------------------------------------------  -------  ------- 
 
Net increase/(decrease) in cash and cash 
 equivalents                                             (219)      103 
Cash and cash equivalents at 1 April                     1,451    1,348 
-----------------------------------------------------  ------- 
Cash and cash equivalents                                1,232    1,451 
-----------------------------------------------------  -------  ------- 
 

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2011

 
                                    Share             Share 
                           Share  premium   Merger   option  Retained    Total 
                   Note  capital  account  reserve  reserve    profit   equity 
                         GBP'000  GBP'000  GBP'000  GBP'000   GBP'000  GBP'000 
-----------------  ----  -------  -------  -------  -------  --------  ------- 
At 1 April 2009               50    2,734    3,924       68     4,525   11,301 
Profit and total 
 comprehensive 
 income for the 
 period                        -        -        -        -       145      145 
-----------------  ----  -------  -------  -------  -------  --------  ------- 
At 31 March 2010 
 and 1 April 
 2010                         50    2,734    3,924       68     4,670   11,446 
Loss and total 
 comprehensive 
 expense for the 
 period                        -        -        -        -   (7,001)  (7,001) 
Transactions with 
 owners: 
Share option 
 credit                        -        -        -      (2)         -      (2) 
Release of merger 
 reserve           5           -        -  (3,924)        -     3,924        - 
At 31 March 2011              50    2,734        -       66     1,593    4,443 
-----------------  ----  -------  -------  -------  -------  --------  ------- 
 

NOTES:

1. BASIS OF PREPARATION

This preliminary statement has been prepared on the basis of accounting policies consistent with the audited financial statements for the year ended 31 March 2010.

The figures for the year ended 31 March 2010 have been extracted from the statutory financial statements, which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unmodified.

In previous years, group accounts have been prepared, but the directors no longer consider the subsidiaries to be material and, therefore, company only accounts have been prepared.

During the downturn, the Company has continued to make a significant investment in product development to maintain its competitiveness, and this has culminated in two major new software releases in the year. This level of development expenditure, however, depleted the level of working capital to a net current liability position of GBP0.32m at the year end. Having completed the new software releases, the directors instigated a restructuring, which will reduce the Company's cost base by GBP1.12m on an annualised basis. Since the year end, the Company has secured short-term funding arrangements and the directors also have a number of additional funding avenues at their disposal should the need arise.

More than 50% of the Company's revenues are derived from annually renewable or multi-year contracts, which help to provide forward visibility of revenues, profits and cash flows. The Company also has multi-year contracts with its major suppliers providing comfort in terms of continuing supply and pricing.

Based on the above, the directors have modelled a number of scenarios, which give a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2. TAXATION

 
                                                 2011     2010 
                                              GBP'000  GBP'000 
--------------------------------------------  -------  ------- 
Corporation tax at 28%                          (498)    (274) 
Adjustments in respect of prior years               1     (35) 
Restricted development tax relief                 179      123 
--------------------------------------------  -------  ------- 
Total current tax                               (318)    (186) 
Deferred tax - origination of and reversal 
 of temporary differences                       (469)      102 
--------------------------------------------  -------  ------- 
Tax on (loss)/profit on ordinary activities     (787)     (84) 
--------------------------------------------  -------  ------- 
 

Factors affecting the tax charge for the period:

 
                                                     2011     2010 
                                                  GBP'000  GBP'000 
------------------------------------------------  -------  ------- 
(Loss)/profit on ordinary activities multiplied 
 by standard rate of corporation tax              (2,181)       17 
------------------------------------------------  -------  ------- 
 
Effect of: 
 
Expenses not deductible for tax purposes               17       16 
Capital allowances for the period in excess 
 of depreciation                                     (15)      (3) 
Capitalised development costs qualifying for 
 development tax relief                             (358)    (371) 
Development tax credit                              (192)    (220) 
Restricted development tax relief                     179      123 
Disallowable amortisation                           2,231      282 
(Decrease)/increase in unamortised development 
 costs                                              (469)      107 
Adjustments in respect of prior years                   1     (35) 
------------------------------------------------  -------  ------- 
Tax credit for the period                           (787)     (84) 
------------------------------------------------  -------  ------- 
 

There is no unprovided deferred tax.

3. LOSS PER SHARE

The loss per share has been calculated by dividing the loss attributable to shareholders by the average number of shares in issue during the period. The diluted number of shares assumes the dilution effect of converting the share options in issue during the period into ordinary shares.

 
                                                     2011        2010 
                                                    Number      Number 
------------------------------------------------  ----------  ---------- 
Weighted average number of ordinary shares        10,000,000  10,000,000 
Diluted weighted average number of ordinary 
 shares (due to impact of share options issued)   10,000,000  10,000,000 
 
 
                            2011   2010 
                           Pence  Pence 
-----------------------  -------  ----- 
Basic loss per share     (70.01)   1.45 
-----------------------  -------  ----- 
Diluted loss per share   (70.01)   1.45 
-----------------------  -------  ----- 
 

4. DIVIDENDS

No dividend was paid in 2011 for the year ended 31 March 2010. The Board has not recommended the payment of a dividend in respect of the year ended 31 March 2011.

5. GROUP STRUCTURE

At 31 March 2011, the subsidiaries of Prologic plc were as follows:

 
                                Class of share capital 
Subsidiary undertaking                    held           Proportion held 
 
Pitcomp 192 Limited                 Ordinary shares           100% 
Prologic Computer Consultants 
 Limited                            Ordinary shares           100% 
 

Pitcomp 192 Limited was an intermediate holding company for Prologic Computer Consultants Limited, which operated in the development, supply and support of specialist software and computer systems to the fashion and lifestyle industry, prior to the transfer of its trade and assets to Prologic plc on 5 July 2004. Both companies are registered in England and Wales and have been dormant in the year to 31 March 2011.

During the year, the directors agreed a reorganisation and simplification of the Company, which included:

-- the waiver of the inter-company balances held by Prologic plc and its two subsidiaries; and

-- the transfer of shares held in Prologic Computer Consultants Limited by Pitcomp

192 Limited to Prologic plc.

Pitcomp 192 Limited was identified as having no continuing relevance to the Company and it was agreed that it should be dissolved (which was in process at 31 March 2011). The agreement to dissolve Pitcomp 192 Limited led to the release of the GBP3,924,000 merger reserve.

6. INTANGIBLE ASSETS

 
                                                           Other 
                                         Development  intangible 
                               Goodwill        costs      assets    Total 
                                GBP'000      GBP'000     GBP'000  GBP'000 
-----------------------------  --------  -----------  ----------  ------- 
Cost 
At 1 April 2009                   7,572        6,665         754   14,991 
Additions                             -        1,994          74    2,068 
-----------------------------  --------  -----------  ----------  ------- 
At 31 March 2010 and 1 April 
 2010                             7,572        8,659         828   17,059 
Additions                             -        2,318          44    2,362 
De-recognition                               (4,267)           -  (4,267) 
Disposals                             -            -        (97)     (97) 
-----------------------------  --------  -----------  ----------  ------- 
At 31 March 2011                  7,572        6,710         775   15,057 
-----------------------------  --------  -----------  ----------  ------- 
Amortisation 
At 1 April 2009                       -        2,824         507    3,331 
Provided in the year                  -        1,067         137    1,204 
-----------------------------  --------  -----------  ----------  ------- 
At 31 March 2010 and 1 April 
 2010                                 -        3,891         644    4,535 
Provided in the year                  -        1,287         114    1,401 
Impairment charge                 5,089            -           -    5,089 
De-recognition                        -      (1,552)           -  (1,552) 
Disposals                             -            -        (97)     (97) 
-----------------------------  --------  -----------  ----------  ------- 
At 31 March 2011                  5,089        3,626         661    9,376 
-----------------------------  --------  -----------  ----------  ------- 
 
Net book value at 31 March 
 2011                             2,483        3,084         114    5,681 
-----------------------------  --------  -----------  ----------  ------- 
Net book value at 31 March 
 2010                             7,572        4,768         184   12,524 
-----------------------------  --------  -----------  ----------  ------- 
 

Following completion of the development of new versions of the Company's head office and point of sale products, the directors undertook a review of previously capitalised development costs and GBP2,715,000 of net costs were identified as having no future economic benefits expected from their use. These costs were de-recognised in accordance with IAS 38 Intangible Assets.

Intangible assets are subject to an annual impairment review and the recoverable amount is determined from a "value in use" calculation, which estimates the present value of the future cash flows expected to be derived. The directors consider that the Company's activities constitute one class of business and similarly regard the Company as a single cash-generating unit for this purpose as this is the lowest level at which goodwill is monitored internally. The ten-year cash flow projection used is based on past performance, customer longevity and contracts in place.

The key assumptions on which management has based its cash flow projections for the period covered by the most recent budget, and thereafter, are that all key customers are retained (unless the directors are already aware of a change) and there are new customer sales. When considering the growth rate in operating profit over the next five years, the directors took into account the relative impact of new customer sales on the historical operating profits of the Company and the impact of the cost base reduction implemented after the year end. Operating profit has been projected to grow at 2% per annum after 5 years. The discount rate applied in the impairment review was 7.6%.

The evaluation indicated that the intangible assets were impaired and accordingly a GBP5,089,000 charge was made against goodwill. If it were assumed that the Company lost a key existing customer or that new customer sales were not achieved as quickly as projected, there could be a further impairment of intangible assets.

The goodwill arose in relation to the hive up of the trade and assets of Pitcomp 192 Limited and Prologic Computer Consultants Limited.

7. STATUS AND APPROVAL

The financial information set out above, which was approved by the Board on 2 August 2011, is derived from the full accounts for the year ended 31 March 2011 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2011, will be delivered to the Registrar of Companies in due course.

8. ANNUAL REPORT

Copies of the Annual Report will be despatched to shareholders on or around 26 August 2011. Additional copies will also available, free of charge, from the Company's registered office at Redwood House, Rectory Lane, Berkhamsted, Herts, HP4 2DH, or from the Company's website: www.prologic.com.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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