Investment: JBA ducks the City brickbats

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FOR THREE years after JBA Holdings came to the market in 1994, the business turned in an awesome performance. By late 1997 the shares in the computer systems company had quintupled as it developed in-demand software for business support services.

But since the beginning of this year the City's bouquets have turned to brickbats. A profits warning in January sent the stock plunging from 1,257.5p to 470p. Yesterday, on the back of interim results, it slipped again to 465p.

Behind the reversal of fortune was the spiralling cost of recruiting staff and developing products. But the biggest blow was delays in developing a key program in the right format. Its Enterprise Support System software is a popular product designed to aid efficiency by integrating, say, the sales, manufacturing and accounting systems. But it has still not brought out the Windows NT version the market craves. The company admits it should have introduced this a year ago.

These and other factors combined to push JBA into an operating loss of pounds 3.5m in the first half of this year, against a pounds 0.7m loss in the period in 1997.

However, the pessimism has been such that this was ahead of analysts' forecasts. Indeed, JBA may be turning the corner: group revenues were up by 43 per cent to pounds 126.1m. In spite of a rise in costs, investors can reasonably trust that the company has taken the right action remove excess costs from product development. Anyway, profits are always biased towards the second half of the year in software.

Analysts forecast profits of pounds 12m for the year, giving earnings per share of 21.6p and a forward multiple on yesterday's close of 465p of 21: cheap compared with peers, but not undervalued given its problems. Hold for a possible recovery.