Spending warning knocks ACT shares

ACT shares fell 33p to 136p yesterday despite a 37 per cent rise in profit before tax and exceptionals. The company warned that the current year's results would be affected by its recent reorganisation and by a significant rise in spending on product development.

The software products group spent pounds 18m on development in the year to 31 March and said the figure would rise to pounds 22m this year, with the emphasis on banking software and a new version of Quasar, its investment management software.

Sales by the banking systems division had been above expectations and there had been significant breakthroughs in emerging markets such as Central and South America. Its dealing system, Citydesk, had achieved success in Japan but sales of Quasar had been a disappointment.

Roger Foster, chairman, said ACT's April reorganisation of its three financial software businesses into one would bring advantages in sales and product development. In the short term, though, it had caused some disruption.

Profits before tax and exceptionals rose from pounds 20.4m to pounds 28m. Operating profits rose 78 per cent while profit on continuing businesses rose 5 per cent. Turnover rose 78 per cent to pounds 115.8m, with sales by continuing operations up 9 per cent. ACT ended the year with net cash of pounds 3m. The dividend rose from 5p to 5.25p and earnings per share went from 10.63p to 12.15p.

One analyst said: 'The picture is a bit murky. It was disappointing that the management did not give a gentler warning about the increased development spending.'