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Summer 1997
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Troubled software company McDonnell Information Systems (MDIS) has been forced to seek a share dealing suspension after failing to raise additional cash.
This comes less than a fortnight after the company issued a profits warning in mid-June, the fifth in 3 years, forecasting "very substantial losses" for 1996. These losses are being attributed to a number of software development contracts the company undertook in 1995 in an effort to increase revenues, which it is obliged to fulfil, but which have become an increasingly onerous burden.
In a statement the company said: "The past operating performance of the group, together with one-off items, has led to a requirement to rebuild the balance sheet and cash position. The board is addressing the issue as a matter of urgency." It went on: "As a consequence, the 1997 results and beyond will more accurately reflect the underlying performance of the group."
Close Brothers bank was appointed in June to lead the refinancing initiative, and the company expected to unveil its plans along with its 1996 accounts, which were predicted to carry certain exceptional charges and make full provision for the loss-making contracts.
According to Stock Exchange rules, the accounts were due within 6 months of the company's financial year end, but MDIS failed to arrange the cash injection and missed the June 30 deadline for its accounts and so was obliged to take the embarrassing step of asking for its shares to be suspended. Advisers to the company said that sometimes refinancing packages came across the odd complication. Shares closed on 1st July at 23.5p.
MDIS was first quoted on the Stock Exchange in 1994, at 260p. Its share price peaked at 264p, but a succession of gloomy trading statements and profits warnings saw them fall steadily. 1995 saw a pre-tax loss of £39.4m, and analysts predicted a similar picture for the following year.
Share prices rallied briefly at the start of 1996, up 9p to 59p following the acquisition by Geac Computer Corporation of a 3.79% interest in the company, but prices continued to fall. Interim results for 1996 showed a first-half loss of £9.2m. The price had reached 34p the day before the profits warning, which cut a further 15% from their value, before closing at 23.5p before the suspension, down to less than 10% of their original value.
Full-year results for 1996 are now expected to be published at the end of July.
MDIS Group plcLast Updated: 30 June 1999