McDonnell Information Systems, the computer-services company, has decided to part with both its chief executive and its banking advisers, Barings, following the third profits warning since it was floated last March.
Shares in MDIS fell in value yesterday from 90p to 62.5p as chairman Ian Hay Davison warned that results for the full year were likely to be substantially below market expectations. NatWest Securities' analyst Paul Morland, in common with other watchers of the company, immediately reduced his full-year profits forecast from pounds 13m to pounds 2m.
He said that although he was recommending clients to buy the shares at their current level, he realised that "some people will never trust the company again".
MDIS said that Jerry Causley, who led the team that bought the firm in a pounds 100m management buyout from US aerospace company McDonnell Douglas, was leaving the group with compensation for his pounds 150,000-a-year two-year contract as chief executive.
"He is a visionary," Mr Hay Davison said yesterday, "but I am confident that we can run the company without him. We have to concentrate more on the delivery of the vision now."
Mr Causley still holds more than 2.39m shares in the company. At the time of the flotation, he said that he thought a stock-market listing would benefit the company's credibility in expanding its public-sector customer base. He said then that some potential customers had been put off by the large borrowings the group had taken on after its buyout from McDonnell Douglas.
Morgan Grenfell will replace Barings as MDIS's merchant-banking advisers, Mr Davison said. He said he thought that it was "appropriate" to make a fresh start with new advisers now that the company had also put a new management team in place.
During the first half of the year three new executive directors and three senior managers were appointed. The company says the new management team believes MDIS's core businesses can deliver substantial profits, provided they are not held back by underperforming sectors.
Some investors who bought shares when the company was floated have noted that Barings' venture-capital arm was among the largest institutional sellers of MDIS stock at the time of the flotation. Barings is believed to have netted around pounds 50m from the sale of two-thirds of its holding when the company was launched.
Yesterday's interim statement said that MDIS had lost pounds 1.7m in the first half of the year, although turnover increased 16% to pounds 79.1m. The interim dividend has been reduced from 2.3p to 1.2p.
The company said that a number of factors adversely affected its results, including an exceptional charge of pounds 1.1m, disappointing results in several of its international businesses, and losses in the health business arising from costs associated with the completion of two major contracts.
Last year the group made a full-year profit of pounds 9.1m, well below estimates that had ranged up to pounds 26m when the company came to the market. Then, the shortfall was blamed on a slippage in orders, together with an increase in research and development costs.