A small operating profit in the second half helped CASE Group Plc reduce its pre-tax losses for the year to March 31 to UKP5.4m from last year’s horrendous UKP14.7m. And, buoyed by the result, which was better than the City was expecting after a half-time loss of UKP4.7m, chief executive Peter Burton yesterday predicted a return to profitability in the current year. Such a sea change can only come about from a further substantial reduction in losses by the US subsidiary. For, while the UK contributed UKP14.9m before research and development and interest charges are taken into account, CASE Communications Inc lost UKP6m. Admittedly, this was half last year’s total, but much work still needs to be done. Burton is hopeful, however, that the recently introduced high-speed modems and digital 1.544 Mbps T-1 equipment will help the US-end improve quite substantially this year. And, he is looking to the new Series 8000 range of packet switches to start boosting UK sales shortly, and continental sales towards the end of this year. Burton believes that the demand for greater transmission capacity, fuelled by the growth of fibre-optic cable, which can handle the increased volumes, and the demand for large amounts of storage – for example, for digitising X-ray pictures, and file transfer between personal computers – will lead to a general growth in long-term demand for CASE’s products. But, he warns that the short to medium term outlook for CASE’s market is still uncertain and not fizzy. However, the short-term news is not all so tentative. Next month, the company expects to complete the sale of surplus land next to its Watford site. The land, which was originally intended for expansion of the premises, will fetch UKP6.5m, with the promise of up to UKP4m more if the developer gains permission for retail development. CASE has also mortgaged the Watford premises for another UKP6.5m with no payments for five years. The land sale, coupled with cash generation of UKP6m throught the last financial year, has helped CASE cut gearing to around 40% – still rather too high for most City analysts bearing in mind the company’s losses over the last two years, but low enough for Burton to talk of putting money into joint ventures and strategic stakes in companies with technology that CASE wants or by setting up joint ventures. CASE will also be attempting to muscle in on the lucrative communications consultancy business that Burton says is currently going the way of software houses. Despite Burton’s optimism, it is difficult to get carried away with CASE’s prospects. As he says himself, and the slight decline in turnover indicates, prospects are uncertain. Following the results announcement, the shares gained 20 pence to 132p. In later trading, after analysts had heard at first hand what the company had to say, they dropped back to 121p, up ninepence on the day.