IT consultancy services venture Beaufort saw its sales plunge in the year to March as losses mounted to £1 million. But chief executive Harry Cowan remains cautiously optimistic as the firm continues to win sizeable contracts. Leslie Copeland reports.

During the period, sales of consultancy services slumped from £6.2 million to £4.4 million, largely due to the downturn in European IT and telecoms markets. Beaufort was also badly affected by the poor performance of its Swedish and French operations. However in this case the rot seems to have been stopped, because both of these loss-making arms have been liquidated (the closures actually led to an exceptional gain of £168,000).

Cowan claims the reduction in the company's European reach will enable him and the rest of the board to focus most of their energy on the two UK operations, where business continues to be brisk.

At the enterprise solutions division, profits doubled during the year to £483,000, as sales leapt 76 per cent to £2.1 million. Clients at this arm include Telewest, The Ministry of Defence and Barclays. Cowan added the Financial Services Authority to this impressive list in September 2001 after the division pitched for a three-year contract.

In June Beaufort augmented its growing position in this space when it confirmed that the UK Listing Authority had enlisted its help in redesigning and reviewing its IT system and processing activities. The exact value of this contract has not been revealed, but it is likely to have a significant impact on Beaufort in the next few years.

The UK-based business intelligence arm also enjoyed a good year, boosting operating profits by 121 per cent to £342,000 on increased sales of £953,000. Contracts were signed with cable operators NTL and Telewest.

The healthcare and pharmaceutical sectors meanwhile provided a happy hunting ground for business, with the likes of Bioglan, Pfizer and Aventis all employing Beaufort's services. A £500,000 contract was recently secured with Inpharmatica.

The group's other interests include a sports-orientated marketing and communications outfit (which continues to struggle) and two small operations in Luxembourg and Scandinavia.

In an upbeat exchange with Growth Company Investor, Cowan said that, despite the poor figures, and the fact that cashflow remains 'tight', Beaufort investors have good grounds for optimism this year.

He says that contract pitches 'require much more management energy' before they are secured, but that 'all existing operations are heading towards cashflow positive'.

If this is true, the depressed 0.5p shares (market cap £2.8 million) should show signs of life in the short term. The risks, however, remain.