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Surprise profit warning sends MDIS skidding

MDIS - the former McDonnell Information Systems - threatened yesterday to return to its former accident-prone form after a surprise profits warning sent its shares skidding 12 per cent before they recovered to close 3.5p lower at 42p.

The software group, which has returned to both profitability and the dividend list under the former IBM executive John Klein, blamed unexpected losses at Glovia, its joint venture with Fujitsu of Japan. Glovia has been hit by the slump in demand for business planning software.

The group also announced plans to enter into a complex sale-and-leaseback agreement which will cut the rental costs of its headquarters by pounds 2m a year, but which will require a one-off exceptional write-off of pounds 2m against last-year accounts.

Following yesterday's statement, Collins Stewart, the house broker, cut its profits forecast before tax and exceptionals from pounds 7m to pounds 2.7m, although windfall gains from a settlement with the Inland Revenue could take that up to pounds 8m in headline terms.

The group is also planning to make up the shortfall by recognising pounds 4m of the exceptional gain from the joint venture with Fujitsu announced in June 1997.

The MDIS board said that the public and corporate sectors and human resources systems, both problem areas in the past, had increased their order intake by 25 per cent .

Similar problems, which are a result of the collapse in Asian markets, have also hit Glovia's larger rivals such SAP and Baan, both of which have experienced a dramatic fall from grace over recent months.

John Morely at Collins Stewart said that the shortfall was disappointing, but he insisted that there were good reasons to believe this was a temporary setback. The 40 per cent growth in revenue at Glovia contrasts favourably with the 15 per cent rise SAP, the market leader, could muster in the current climate, he said.

"It is not too bad a message. This company has come from huge losses to profit and back on to the dividend list. They are doing a good job. I wish there were not this shortfall this year, but the positives are good," he said.

MDIS has yet to live down the poor reputation it gained in the City when it plunged from a high of 234p shortly after flotation in 1994 after a spate of profits warnings.