Back office vendor Rolfe & Nolan is moving to cut costs and staff following a failure to clinch key sales. The UK-based supplier to the global derivatives markets has warned investors that its final-year results, due in May, will be significantly below expectations.
Rolfe & Nolan insists that prospects for current and new licence sales remain healthy, but says the continuing consolidation of the banking industry and the slowdown in global market conditions has been accompanied by an extension in the time required to conclude licence sale negotiations and to complete sales contracts. As a result, the group says it only expects to break even in the second half and will report full-year result significantly below market expectations.
The group says it has embarked on a redundancy programme which will result in annual savings of around £0.8m, with an exceptional cost of around £0.4m. A further project to examine the potential for lower-cost overseas out-sourcing of certain software projects is also underway.
While the vendor is reporting solid growth in the US, its European operations have gone through a rocky patch, with up to £2 million in license fees in the balance. To improve the situation, R&N has reorganised sales and marketing and named Robert Freeman (currently group commercial director) as European managing director.
Elsewhere, profits at the group's recently-acquired Singaporean subsidiary Contac Software Engineering are expected to be £0.8 million lower than anticipated as a result of uncertainties over the future trading requirements for brokers using the Singapore Exchange. R&N says the position has recently been clarified and Contac has good prospects for the coming year. The core product, CTMS21, is now ready for the Australian market and will be launched in Europe in the coming year.
Additionally, R&N is taking a cautious view of its backing for Equity24 - an Internet start-up which provides portfolio management and share information for the private investor and has recently appointed new management as it searches for news funding. R&N has an option over 40 per cent of the shares in the company in return for guaranteeing a £1.2 million overdraft.
Provisions against Equity24 are likely to be offset by the negotiation of a settlement with IQ Financial Systems which has agreed to accelerate the payment of an outstanding deferred consideration of £1.3m as well as paying £0.7m in lieu of future royalties.
The set-backs have come at a bad time for Rolfe & Nolan, which is currently developing a new component-based system, codenamed Merlin, to replace and move forward the existing R&N systems.