Shares in the group plunged 18 per cent to 28p. The group, which has had a string of profit warnings and management oustings in the past year, was floated at 260p in March 1994.
John Klein, chief executive, said it would take 12 to 18 months to turn around. "I clearly understand the responsibility rests with me, but the past is behind us," he said.
The group will make a provision to cover creditors, redundancy costs and old contracts drawn up in the early 1990s in its next set of figures.
MDIS expects "a sustained improvement in operating performance" this year. A source close to MDIS said former management had taken on contracts which they were not qualified to service, but which they booked as profit.
"As they struggled to service them, costs started soaring. MDIS has minimal cash outflow because of it," the source said.
Mr Klein said the contract announced yesterday with IT giant Fujitsu, which is buying a 36 per cent interest in MDIS's software Chess for $25m, showed the fundamentals of the group were sound. "It is a major transaction," he said.