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By | Mark Ballard 15th June 2006 12:02

BSG prepares for losses

Core strategy late developer

Business Systems Group Holdings PLC predicted choppy waters ahead when it published its annual results today, charting losses after four consecutive years of improving conditions.

Results for the year ended 31 March 2006 showed another good year for the group, with revenue up 17.5 per cent to £34.6m and profit before tax up from £580,000m to £780,000.

It reported its highest services revenues ever, at £9.3m or 27 per cent of all sales. But they weren't the sort of services revenues the firm wanted. It has been trying to secure juicy contracts that can bring in a stable guaranteed income.

It lost one of these in the year, a deal with Mapeley Estates that brought in £2.2m a year. BSG had been axed because the customer had a change of strategy, chairman Roger Keenan said in a statement.

"It is...disappointing to have to report after a record year for services, a material reduction in contractual revenues," he said.

"The reduction in contractual revenues, and the inevitable impact on gross margins, is expected to take the group back into loss in the short term," he added.

As a consolation, new business added another £600,000 to ongoing contract revenues, more than BSG has managed to add to the pot in the last couple of years.

The juicy contracts are meant to guarantee the group a profit before its salesmen even get out of bed. Then, instead of being bread and butter, any other scraps of business they bring in will be honey and jam.

Keenan reckons it's just taking longer than expected for this strategy to mature. So BSG is giving its sales team a kick up the backside, raising their targets. It is also throwing more resources into contact sales. ®

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