Focused on the lately besieged retail financial services sector, Portrait Software suffered a weak second quarter, losing out on several deals.

Up until the especially turbulent conditions in September, the company had enjoyed a ‘relatively strong start’ to the year, winning some important new clients in the first quarter. First-half sales increased 9% to ‘approximately £6.9m’ – although helped higher by a contribution from recently acquired Norway-based marketing specialist Million Handshakes.

Portrait, whose full-year results back in June showed pre-tax profits falling 23% in ‘tough market conditions’, now recognises that ‘the external environment is very challenging’ and the outlook is uncertain. In response, management is cutting costs and reducing investment in non-core activities.

Independent broker Panmure Gordon had been forecasting 1.14p of earnings for the year to March 2008, but will likely downgrade this soon. This will still leave the shares trading on a rock-bottom forecast price-to-earnings ratio, which might ordinarily entice interest with the company boasting annual recurring revenues greater than its market cap.

The shares, which have slumped dramatically from the 18.5p at which they were backed here in 2007, have been further eroded recently as market-makers are apparently unwinding house-brokers Teathers’ (the former UK operations of Landsbanki, now on the verge of liquidation) large holding.

Assuming investors have adhered to our advice to set a 30% stop-loss on the shares, they should have been sold long ago. But now, in spite of their inexpensiveness, Portrait’s sector focus means they are unlikely to attract many new friends (apart from perhaps an opportunistic bid) in the short to medium term. Avoid.

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Portrait Software	AIM	£6.66m	5.62p	0.00p
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Other company articles:
Portrait Software			15/10/2008
Pick of AIM			31/03/2008
Portrait's emerging profits picture			09/09/2007
Unearthing AIM's technology bargains			03/08/2007
Company Watch News			01/05/2003