The warning, which sent the shares plunging from 140.5p to 85.5p, was in stark contrast to the optimistic noises the company made in February when it said that first-half losses of pounds 29,000 were likely to be offset by profits in the second six months.
In a statement issued to the Stock Exchange, the company said the full- year results for 1996/97 would reflect a period of very rapid expansion of activities and personnel, a move of the company's premises, and a much greater emphasis on large contracts for corporate customers. "As a result of this, there have been some growing pains."
The company explained that since the flotation it had been successful in winning an increasing proportion of business by way of contracts for larger organisations. "While this strategy is expected to lead to a significantly stronger position in the market place and will enable margins to be maintained in the longer term, the short-term effect has been to considerably extend the lead time from the receipt of an order to delivery and installation," it said.
It has also experienced long delays in obtaining ISDN connections for some of its more complex systems, which have prevented the company from completing contracts within its normal timescale. As a result, at the end of the financial year the group had outstanding orders and commitments in excess of pounds 900,000, in addition to which the value of contracts under negotiation has grown substantially. The outstanding order book in 1996 was negligible.
The group also said that in planning for the future the group moved into new premises in January and recruited new sales and technical staff. The recruitment and training costs involved increased the overhead base and has had a short-term "adverse effect" on profitability.
However, the company said: "Despite the lower-than-expected results, the directors firmly believe that considerable progress has been achieved since flotation which will benefit the group in the current year."Reuse content