Directors dip into own pockets to bail out AIT

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Shares in the software specialist AIT Group collapsed yesterday after the company issued a shock profits warning and said its directors have had to loan the business £700,000 to keep it going.

AIT shares fell 80 per cent to 96.5p compared to a high point of £18.80 in March 2000 when the hi-tech boom was at its peak.

The warning came just four weeks after an upbeat trading statement from AIT on 2 May. That statement said the business had seen a satisfactory end to the financial year to 31 March and that profits were in line with market expectations.

Yesterday AIT said a key contract had not yet been confirmed and that there would now be a £1.1m shortfall in both profits and revenue.

In addition, the company said it had become aware that its short-term cash requirements would not be covered by its borrowing facilities. As a result, four of the directors have lent the group £700,000 to tied it over. Debts are also higher than expected at £10.5m. Its main bankers are Royal Bank of Scotland.

AIT's obligations are believed to include deferred payment on last year's £9m acquisition of IMA, a rival software group.

The warning came just two days after Dresdner Kleinwort Benson initiated coverage of AIT, with a "buy" note and a 12-month price target of 645p. Three weeks ago AIT's house broker, UBS Warburg, issued a "buy" note with a share price target of 950p.

Cameron Butt, the DKW analyst who produced his research on 29 May, said: "I am very disappointed. We always liase with the company when we produce a note. We feel very let down."

Mr Butt had forecast debt of £1m to £2m compared to the £10.5m the company announced yesterday.

Another analyst said: "It is nothing short of astonishing. What we are looking at here is complete loss of faith in the management."

AIT is led by Carl Rigby, the chief executive, and finance director, Gareth Bailey. They said they had been repeatedly assured the key contract would be signed and had even started some of the work. However, they said other licensing deals had also been delayed.

The company said it is "actively exploring the options available to it for improving its balance sheet position and an announcement will be made in due course". Mr Rigby said AIT was trading within its banking covenants and that he remained "optimistic about the business going forward".

AIT specialises in computer software with special focus on customer realtionship management software for the financial services industry. Founded 16 years ago its clients include Nationwide, Marks & Spencer and Alliance & Leicester.

The group was expected to make pre-tax profits of £6.7m for the year to 31 March, before exceptional items. Revenues were due to be £427m.

Investors are likely to seek changes to the boardroom structure at AIT. Mr Rigby is chairman and chief executive and there are only three executive directors. The board control 18 per cent of the shares, though Mr Rigby only owns just over 1 per cent of the equity.