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Spring 2000
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MDIS Group plc have recently published interim financial results for the six months ended 30 June 1999 and accompanied it with news of a shake-up in the senior management team.
Group turnover over the six months to 30 June 1999 shows an increase of 11.5% at £68.6m, with turnover on UK operations increasing by 8% at £45.5m, compared to £42m in the same period last year. Losses, however, stand at £8.1m, up sharply from £0.4m last year, and operating profit on the UK operations was down to £1.9m, a drop of 17.4% over last year’s £2.3m.
A significant contributor to these poor results is MDIS’ involvement in the Glovia enterprise resource planning (ERP) and PRO IV businesses. The worldwide ERP market suffered a severe downturn during the last quarter of 1998 and into 1999, which resulted in an eightfold increase in losses: £4.2m from £0.5m in 1998, and had a knock-on effect on royalty income for PRO IV. The merger between Mercedes Benz and Chrysler Corporation brought a significant reduction in PRO IV’s contract with Mercedes, which also contributed to PRO IV’s operating loss of £2m for the first half of 1999, compared to 1998’s modest £38,000 profit.
It is unsurprising, therefore, that MDIS has chosen to insulate itself from further losses in these areas by selling off its controlling interest in both companies. Negotiations are already in hand with Fujitsu, MDIS’ Glovia partner.
Accompanying the interim statement was an announcement that there would be changes to the board of directors. John Klein, in the carefully-chosen words of the chairman’s statement, is retiring from the board with immediate effect, although it was reported in the mainstream press (The Times, 2nd November 1999) that he had in fact been sacked, blamed for poor sales and spiralling losses. He is replaced as Chief Executive by Chris Stone, formerly an associate partner in managed services practice at Andersen Consulting. Also leaving the board is Ian Hay-Davison, stepping down as Chairman and resigning as a director. His role is to be temporarily filled by Philip Ralph, one of the non-executive directors, until a permanent replacement is found.
The new management is expected to pursue a strategy which focuses on MDIS’ core UK markets, which is where its strength has always been greatest. UK Public Sector operations showed revenues for the first half of 1999 slightly up at £20.2m (£20m in 1998) with operating profits of £1m (£2.5m in 1998), with continued investment in managed services and several new contracts signed with healthcare customers and the highly successful Vehicle Procedures/Fixed Penalty application rolling out to a further seven police forces, making a total of 33.
The corporate sector showed a rise in revenues from £17.7m to £19.8m, but operating profits down from £0.7m to just £0.2m. The brightest news came from the Human Resources sector: revenues up 25% from £4.3m to £5.5m, and operating profits of £0.8m compared to a loss of £0.9m over the same period in 1998. Orders and revenues were also above directors’ expectations.
Although the statement was generally upbeat, it seems clear that problems persist at MDIS, and that the board has concluded that only radical action will bright about the turnaround the company needs.
MDIS Group plcLast Updated: 05 May 2000