Shares in UK financial software house Marlborough Stirling have nosedived after the company issued a profits warning and reported technical problems in implementing a major outsourcing deal with Sun Life.
In a trading update that took the City by surprise, Marlborough Stirling says its interim results for 2002 will show total turnover seven per cent below market estimates at £60 million, with an adjusted operating profit of £8 million.
The company says that delays in migrating Sun Life Financial policies to the new outsourced system will push up costs by about £3 million in this year and the next. The company says that the migration of policies will now take six months longer than envisaged and will not be completed until late in 2003.
The contract with Sun Life is Marlborough Stirling's biggest ever. The City took a dim view of the news, wiping almost two thirds off the value of the company's shares in early morning trading. By mid-morning the shares had recovered slightly to 25 pence, a 52% drop. More selling appears inevitable if, as expected, the stock is demoted from the FTSE250 when the index is reviewed next week.
Graham Coxell, chief executive of Marlborough Stirling, says the firm will shed staff in a bid to reduce annualised costs by £6 million from beginning of 2003. As a result, the company will incur an additional charge of £2.5 million in the second half of 2002.
He says that turnover visibility for 2003 is already over £65 million but tough trading outlook and conclusion of existing contracts suggest significant growth in turnover unlikely relative to 2002. On a brighter note the company announced a five-year outsourcing deal with GE Life, valued at £11 million.