Loss-making contracts signed when the company was desperate for business have left McDonnell Information Systems Ltd, the computers services group, to expect very substantial losses for its last financial year. The company’s shares slumped to a new low of $0.46 on the news – continuing a decline that has dogged the Hemel Hempstead, Hertfordshire company since it was floated on the stock market at $4.30 a share in 1994. MDIS is seeking new finance as a matter of urgency and may go to shareholders or institutions for the extra cash. John Klein, brought in as chief executive at the end of 1995, said it was saddled with delivering on often unprofitable contracts ranging up to $13.2m in value which were signed in 1995. Full provision for these disastrous deals are to be made in the accounts for the years to December 31, 1996. This is an attempt to try and put the difficulties which have plagued this company behind us once and for all, said Klein. He insists that business has been improving this year and it is taking action to cut costs. This leads the board to predict a sustained improvement in performance during this year. The market was less than impressed – given that events usually turn out worse than expected at MDIS and this is the fifth profits warning it has issued since it went public following a management buy-out. Last year, the company reported thumping losses of $64m – compared with profits of $11.4m the previous year – on revenue that dipped 1% to $141m (CI 2,902). And it boasted then of brutal action to cut costs – a policy which is now being repeated. Though Klein was brought in as chief executive to bring new management to a failing company, he has been reduced to repeating the warnings of predecessors. While the market may despair of a turnaround in MDIS fortunes, the company has high hopes of the formation of a joint venture in the US with Fujitsu Ltd to sell ERP Enterprise Resource Centre software. With an eye on a market estimated to be worth $2.6bn in 1996 and growing at 36% a year, Fujitsu is putting $29m in cash and assets for a 36% stake in the Los Angeles-based company called Glovia International Llc. Fujitsu already has an agreement to sell MDIS’s Chess ERP in Asia.
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