UK reacts to JBA profits slump

UK reacts to JBA profits slump

By Cath Everett, VNU Newswire.

UK applications supplier JBA last week sparked a mini-slump in IT share prices when it issued a warning that its pre-tax profits for 1997 would be two-thirds lower than expected.

JBA’s shares slumped to 632.5p from 1257.5p in just 30 minutes on Wednesday 11 February, after JBA announced it would turn in profits of #5m compared with the #16.6m expected by analysts.

By Thursday, the share price had recovered to 807.5p. The slump wiped #164m off the value of the firm and triggered a fall in other IT share prices on the London exchange.

JBA blamed the shortfall on the loss of three contracts, reportedly to SAP. The deals with companies in the clothing, automotive components and drinks industries were said to be outside JBA’s main markets.

JBA executive chairman Alan Vickery said he had increased his original sales forecasts for the year by #10m because of strong product sales in the middle of last year.

His confidence in the market had led him to argue for an extra #6.7m for research and development. The conversion of its System 21 applications for Windows NT helped to push R&D and amortisation up to #36m from #23m.

‘I have to say mea culpa,’ said Vickery. ‘With 20/20 hindsight, it was a complete misjudgement on my part.

I’ve been made to look a complete fool. But, it’s not like I’ve spent the money and had nothing to show for it. I’ve used more money than we should have done in 1997, but it will pay dividends in 1998 and 1999.’

He added that he did not think he needed to resign. ‘The mistake is a 12-month blip. But, if a significant number of institutional investors ask me to, it would be the only proper thing to do,’ he explained.

Profits will also be hit by a further #3m due to the cost of contracting out some of the firm’s support services.

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