On 3 September 2001, Guardian iT announced its interim results for the six months ended 30 June 2001 and explained that the first half of 2001 had been one of the most challenging in the Group’s history. This took place against a background where the IT industry as a whole had reported its worst results for many years and where many of the Group’s customers had experienced substantial downturns in their own businesses. As stated at that time, the Group had not been immune to this downturn.
These conditions have worsened in the second half, with customers reducing IT expenditure and deferring purchasing decisions into 2002. This has had an adverse effect on the Group’s business continuity division where the market remains difficult and full-year sales have been impacted. In addition, the renewal rate of existing contracts has declined. Furthermore, performance of the Group’s data management business has weakened in a tougher market place.
The last forecast, based on the September results and which had been made at the end of October, had confirmed to the board that the Group’s results were in the range of market expectations.
On 1 December, Guardian iT’s new Group Finance Director, Neal Roberts, joined the Group and undertook a detailed review of the forecast results to 31 December 2001. The latest forecast, based on the November accounts, shows a substantial deterioration against the previous forecast. This is due principally to an overly optimistic forecast of expected sales, a reduction in achieved sales and the under-forecasting of costs and currency implications.
As a result, sales for the year ending 31 December 2001 are now expected to be between £113m and £115m and EBIT (before goodwill amortisation and exceptional costs) is expected to be between £13m and £14m. Net debt is expected to be around £110m.
The board intends to implement a rigorous review of the Group’s cost base and all planned start-up projects that would have a negative cash or profit effect in their early years, together with the forecasting process. Given the anticipated effect on certain of the Group’s covenants, the Group will also be talking to its banks to request temporary flexibility on these.
Peter MacLean, Chief Executive of Guardian iT, said Conditions have not improved during the second half of the year and the likely timing for the signing of new business contracts across both divisions will remain uncertain for the immediate future. We have no evidence though to suggest that we are losing market share and importantly, our pipeline of new sales prospects is healthy.
