Financial Objects is to make a £1.7 million provision in its year-end accounts after discovering significant cost-overruns in two major contracts at its troubled ActiveBank division.
The London-based banking systems vendor says results for the full year to 31 December 2003 will be significantly below current market expectations, due largely to these cost overruns but also due to adverse trading conditions for ActiveBank. The latest set of problems emerged during a project-by-project analysis at ActiveBank, initiated following a slump in sales for the component-based system.
The firm says its Ibis division, which represents over 50% of group revenues, continues to improve and is trading profitably.
The group's cash position remains strong, with balances of £7.1m at 31 October 2003, but as a consequence of the overall trading position and the subsequent shortfall in distributable reserves, there will be no final dividend payment for 2003.
Roger Foster, chairman, Financial Objects, says the board remains committed to its strategy for ActiveBank but is disappointed by the impact that the contract overruns will have on results.
"The directors are focused on successfully completing these contracts and believe that they will provide important reference sites for the future. We envisage that the short term financial impact of these contracts will be compensated for by the long term benefit of opening two major new markets for our products," says Foster.
He says the firm is making progress in its turnaround plans for the business. The company has now established an Indian development subsidiary in Bangalore with 18 employees, and signed a Scandinavian reseller agreement, the first in its budding partner programme.