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February 28, 1994

CHASTENED PURE SOFTWARE PLAY PEGASUS ADMITS TO POOR DIVERSIFICATION, ACQUISITION PROGRAMME, VOWS TO DO BETTER

By CBR Staff Writer

Pegasus Group Plc is attempting to pull away from the problems that have dogged it over the past few years resulting in part from a self-confessed poor diversification and acquisition programme, imprudent cash flow expenditure and a product range that has not been maintained. Signs of hope are reflected in its pre-tax profits for the year ended December 31 of UKP6.9m compared to profits of UKP620,000 for the seventeen months ended December 31 1992. Profits after tax were UKP4.8m compared to UKP495,000 for the period before. However, turnover fell 27% to UKP7.5m. During the year it sold its remaining share of the Forms business to Deluxe Corp for UKP8.7m and will continue to get a 12% share of the revenues over the next five years. Despite the Forms business being profitable, Pegasus anticipated immense competition and reduced margins in the area and lacked the expertese to compete with the major players. In the past the firm has relied on revenue from Forms and software sales. Now the company plans to become a software-only business, with cash from the sale of Forms helping to fund its new product strategy. During the year it will develop a Windows version of its Opera product, planned for release by the end of the third quarter. It also plans to complete application modules for Opera by year-end, and to add complementary products based around the Opera accounting software product such as manufacturing and sales and marketing tools, thus moving into more general business areas. A Unix version is another area the company will be looking at during the year. The software activities for the year to December 31 incurred an operating loss of UKP319,000, a reduction on the loss of UKP1.0m for the 17 months to December 31 1992. Pegasus plans to increase recurrent revenues by bringing in annual licence fees on a per site basis, projecting 15% of revenue from these by 1995 and 33% by 1997 and is bringing in support charges. The main focus for the year was reorganisation and the company plans to sell its office in Kettering to purchase a larger site. Pegasus was wary about forecasting a profit for the current full-year, but said it would be comfortable with a break-even out-turn for 1994.

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