Troubled software and services group MDIS slid further into hot water last week when its half-year losses hit £8.1m, its share price plummeted below 20p and its chief executive, who was brought in to save the company, quit. MDIS has issued no fewer than eight consecutive profit warnings, but the sheer scale of the six-month loss for the period ended 30 June was astonishing. Pre-tax losses for the group were £8.1m, compared with a £400,000 loss for the same period in 1998. The results were sufficiently bad to drive down MDIS' share price even further. The group floated on the UK stock exchange in 1994 - courtesy of a controversial public offering handled by a pre-crash Barings Bank - with a share price of 260p. Last week, MDIS' share price scraped 18.5p. The group also announced on Monday that chief executive John Klein, and chairman Ian Hay Davison had both fallen on their swords. Klein is replaced by former Andersen Consulting associate partner Chris Stone, who now faces the challenge of convincing the investor community that the troubled firm is still viable. MDIS' own auditors, KPMG, highlighted the uncertainty about the group's future when it noted in the audited financial report: "The receipt of proceeds from the proposed disposal of MDIS product lines is of great significance to the ability of the group to continue as a going concern." While the company was at pains this week to stress that it was too early in the new regime for a detailed strategy to be outlined, it has been reported that Stone's first action as chief executive will be to see through the disposal of MDIS' majority stake in the ProIV development tool and the Glovia ERP business to Fujitsu. Between them, the two businesses had lost MDIS £6.2m by the half-year point. But Stone argued there was nothing inherently wrong with the products themselves. Instead, he claimed that Klein and Hay Davison had taken their eyes off the ball by focusing too much management attention on the California companies and neglecting the UK operation. "It was a wrong decision to acquire those businesses because to support and nurture a global software business, you need to be bigger and stronger than we currently are," he added. Stone's attention will instead focus heavily on boosting the UK bottom line. The UK operation did not suffer as badly as other areas, with operating profit falling from £2.3m in the same period last year to £1.9m. But income is down in most of MDIS' main business sectors. For example, public sector business produced an operating profit of £995,000, down from £2.5m over the comparable six-month period in 1998. Klein and Hay Davison were also slammed by the incoming chief executive for their part in MDIS' misfortunes. "The group was poorly managed and that would have to go down to the senior managers - the chief executive and the chairman," Stone said, adding that Hay Davison would not be paid compensation following "full and frank discussions" with the group's directors. But Klein will reportedly walk away with an estimated £500,000 severance package made up of his basic salary of £280,000, a guaranteed bonus of £140,000 and compensation for his perks of a company car as well as a year's rental on his £1,500-a-week flat in Hampstead. Hay Davison came in for criticism from investors last week for having too many outside interests to properly concentrate on the problems at MDIS.
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