Having released interim results showing sales doubled and losses slashed, mail order 'family software' retailer Dream Direct anticipates being cashflow positive in the second half of this year, giving investors further reason to get into the shares.

The results, for the six months to 27 September, actually showed pre-tax losses only slightly reduced at £522,000. But the company and its finance director Mark Pitcher emphasise that a chunk of the costs incurred during the period were related to its flotation and are non-recurring.

Sales increased 96 per cent to £2.4 million and the size of its 'customer database' (the people that it sends mail order catalogues to) increased 107 per cent to 228,000. Repeat business from this database now covers general overheads and 'should start to contribute to customer recuitment costs in the future'.

Most importantly, the company is confident of being cashflow positive in the second half, meaning that it will not need to raise further funds to augment its net cash reserves of £600,000 (as at September).

The second half is crucial though, as it encompasses the all-important Christmas period and the general winter months in which, Pitcher says, 'people are more prepared to sit around reading catalogues'. Two-thirds of company revenue normally comes in between September and March and, encouragingly, the initial pre-Christmas signs are 'very good'.

Because of this, and the fact that the group is slightly ahead of its internal profit and loss forecasts, it has decided to increase annual catalogue distribution by three million to a total of 23 million for the financial year in March. Most of these are, or will be, inserts in the national media.

There are some risks to this. Following a House of Lords decision, VAT is to be charged on postal revenue, which will affect all mail order retailers in the future. Also, a downturn in consumer spending patterns would have an inevitable impact.

But the signs are that Dream Direct is a business that has a lot of mileage. It is the market leader in selling 'non best-sellers', it is moving swiftly towards profitability and it wont need extra cash.

Recommendation: Buy/Hold

Share price: 59.5p

Market cap: £5.1 million