Companies: GLD   

Leisure centre software provider Gladstone is making inroads into the schools market and the cash-rich company plans a European assault before long.

Gladstone has been a quiet AIM resident in the past few years, having upped sticks from techMARK in 2002 as a venture churning through chief executives and with annual losses peaking at £16.3m. Since then it has been stabilised, though growth has not been rapid. However, chief executive Said Ziai, appointed in August 2005, has ambitious plans.

Building on Gladstone's primary position in the leisure centre market, Ziai moved the group into education by acquisition in 2006, reasoning that schools have similar ‘membership’ needs. As part of the Government’s Building Schools for the Future programme, of which £5bn is earmarked for IT, Gladstone recently won a first contract to supply cashless catering and e-registration systems.

The verbose Ziai says these facilities offer attractions for parents, caterers and the schools themselves, and he sees ‘a large number’ of opportunities here for Gladstone: 'We are talking with partners like Northgate and Serco for us to introduce our systems elsewhere and once we advance to that stage we create an order book for many, many years.’

Also underpinning prospects is the development of a new software platform, Orbit. Ziai says the first phase will be available ‘by the middle of 2008’ and will focus on flexibility, to better enable expansion into Europe’s ‘fragmented’ leisure market.

Annual results to August revealed 21% growth in pre-tax profits to £1.7m, though broker KBC Peel Hunt expects development costs to drag this back to £1.2m in the current year. Trading on a forward price-to-earnings ratio of ten, Gladstone is bolstered by £5m of cash and £2m worth of freehold property, which means the main business is valued very modestly indeed. Furthermore, savvy fund manager Giles Hargreaves recently increased his stake to north of 15%. Buy.

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Gladstone	AIM	£9.69m	20.25p	0.25p
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