What do you do when your profits disappear and your share price tumbles to one third of its value in a single year? Gateshead, Tyne & Wear supplier of financial software applications Quality Software Products Plc has opted for board remotivation which broadly translates into board reorganization. There have been no fewer than six changes at a senior board level since troubles began with a profits warning in January 1996 (CI No 2,841). The company has declared a preliminary net profit of 28,000 pounds for the year to December 31, a 94% plunge from profits of 502,000 pounds last year. Revenue has risen 18.6% to 25.4m pounds. The increase in revenue was betrayed by a fall in operating margins of 2.2% leaving operating profit of 912,000 pounds, only marginally in excess of the interest payable of 883,000 pounds. Chairman Alan Benjamin preferred to focus on the apparent improvement in the second half performance which allowed the company to …recover to a break-even position for the full year. However, Quality Software continues to pursue its policy of capitalizing software development costs, deferring further expenditure of 1.3m pounds in 1996 to future periods. This casts a shadow over the slim net profits reported for the year. But the heavy expenditure on development shows the company’s commitment to improving its core product Universal OLAS – online accounting system – with version 4.5 due for launch later this year. The board’s action plan is to focus hard on controlling costs and to push what it regards as a world-class product into overseas markets. Expansion will require increases in working capital and the board has consequently decided to retain cash by suspending dividend payments for the year. The total dividend in 1995 was 3.0 pence. The shares were up fivepence to 225 pence.
