Cedar shares crash 59% as customers delay IT purchases

Shares in the software business Cedar Group more than halved yesterday after it warned that revenues this year would be "materially below" current market expectations of about £150m.

The company, which is "actively reviewing" its cost base, blamed a combination of factors including the fact its customers were taking longer to make IT-related decisions.

John Stanley, chairman, said: "In common with many other companies in the IT sector, Cedar is experiencing difficult trading conditions in both our main markets of the US and the UK."

Shares in Cedar dropped 58.5 per cent, or 109p, to 77.5p – their lowest point for about a year and a half.

While the company said it still expected current year sales to show "sound growth" over last year's level of £73.3m, it said specific factors combined with the current market environment were "likely to result in revenue for the current year falling materially below current market estimates". Cedar's cost-cutting plan is likely to include sweeping redundancies among its 1,300 strong work-force.

Mike Hosie, finance director, said the company would try to minimise the impact of the cost cutting on its staff, but noted that 70 per cent of its costs were people-related.

Analysts, who had been expecting Cedar to move back into a profit of anything from £15m to £20m this year, were yesterday suggesting Cedar would now do well to break even.

Ian Mitchell, an analyst at Beeson Gregory, said: "The scale of this is something you see very seldom."

He added: "Given the likely shortfall in revenue, it's entirely possible that it [Cedar] will post a loss."

In June, the company reported a pre-tax loss of £20.1m for the year ended 31 March compared with a loss in the previous year of £3.5m.

At that time, Cedar also restated its accounts to bring them into line with US GAAP standards, viewed as more conservative than the UK equivalent. The change lopped £9.3m off sales in the year ended 31 March 2000 and turned an operating profit of £5.6m into a £2.7m loss.