In its historically weaker first half – and despite investing in a nascent education department and a new product platform – software provider Gladstone squeezed out an 11% increase in pre-tax profits.

As has been the case over the past few years, turnover remained relatively flat at £4.4m, with profits of £776,000 before tax and charges relating to a purchase of treasury shares. This purchase, just shy of £1m, contributed to a shrinkage of cash levels from £5m to £4.1m by the period end.

Loquacious chief executive Dr Said Ziai explains the group’s traditional weighting towards the second half is due to its exposure to the public sector – its software is used by health and leisure centres owned by local authorities and private companies – and by new public sector pay procedures. In addition, Gladstone has set up a division to supply the education sector, which also tends to do most of its buying in the latter part of the year. He says the new division’s expertise in cashless catering systems and e-registration is unlikely to bear fruit immediately, but its ‘pipeline of potential wins’ remains strong.

‘In education, relationships with partners is crucial,’ he adds, pointing to preferred supplier status with Capita, previous work with Northgate and ongoing talks with builder Skanska. But until these partners win school-building contracts there’s not much Gladstone can do.

Upgraded full-year forecasts from house broker KBC Peel Hunt of 2.2p earnings from £1.5m profits value the shares at 10.8 times earnings. Further forward, results should be bolstered by the launch of the first phase of a new software platform, Orbit, in September. Taking into account freehold properties worth £2m and £4.1m of cash in the coffers, Gladstone is left looking very cheap indeed.

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Gladstone	AIM	£11.91m	24.50p	0.00p
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