There's a public health warning for the new generation of UK IT entrepreneurs: before you go public, look very carefully at the unholy mess called MDIS Group.
The news last week that the company's chief executive of four years, John Klein, and long-standing chairman, Ian Hay Davison, both walked the plank just hours before the struggling software and services company's worst ever figures came as no surprise to seasoned observers of the Hemel Hempstead-based firm.
After all, this is the company that has seen its share price fall consistently from £2.60 when floated in March 1994 to under 19p last week; the company that has issued eight separate profit warnings in four-and-a-half years as a public company; and which is now smaller in revenue than when it came to the market.
MDIS is also the outfit that has once before seen the ignominious departure of its leader on the eve of some appalling results (Jerry Causley, August 1995); which has had its shares suspended while it desperately sought emergency cash to keep it operating day to day (July 1997); and which has deluded itself that it is a global player, when plainly it is a modest-sized UK services company strong in the public sector, police, and health authorities.
MDIS has lost £8.1 million for the first half of the year, £7.7 million more than the same period in 1998, on sales of £68.6 million (up 11%).The company must now hold a fire sale of its foolish lurch into enterprise resource planning with its Glovia joint venture with Fujitsu, and must offload its ProIV 4GL business to the first bidder.
This is likely to result in 600 of the company's 1,700 staff finding new employers.
As its new chief executive Chris Stone admitted to Computing last week: "MDIS has too small to support these US businesses. The UK has been consistently profitable at £90 million turnover for the past four years, but supporting these acquisitions has used that up. We now have a 1,100-strong company that will focus on opportunities in the UK, especially in the commercial sector."
There is some evidence to support Stone's assertion. Throughout its tribulations, MDIS has always maintained a loyal customer base: it claims 2,400 clients worldwide, up from 800 at flotation.
One is David Shelly, general manager of the irontrade.com ecommerce arm of insurer Iron Trade. Shelly used MDIS to build a motor insurance web site in July, and has nothing but praise.
"MDIS's financial performance would worry anyone. But we've been happy in all contractual aspects. I think concentrating on the core UK business has to be the way forward."
This is a sentiment echoed by Richard Holway, the UK's leading commentator on the software and services sector.
"It would be difficult to write a more depressing story than that of MDIS," he said last week.
In five years which has seen most other firms of this type soar in value, MDIS's market cap is now only £50 million (£260 million at launch). But MDIS is one of those firms that is similar to a diamond mine; some gems you have to dig hard for."
Wannabe UK IT millionaires take care to read some of the past clippings on MDIS (see below). It will help them to understand why the City is so wary of UK IT companies.
Never allow The Times to write of you: 'MDIS shares seem certain to languish under the weight of the company's unfortunate reputation'. Or for it to warn your investors: 'Stay well away.'
WHAT THE WORLD SAID ABOUT MDIS
- 'MDIS is not floating, but drowning' - Computing, 12 June 1995
- "Users were obviously concerned about the financial situation of MDIS," said Richard Medford, chairman of an MDIS user group, in InformationWeek, June 1998. 'The company restructure was very costly, but it has paid off. We are no longer in a situation with broken promises. We have had new releases of software. MDIS really has pulled itself from the brink."
- "I would say as a group it was poorly managed and that would have to go down to the senior managers: the chief executive and the chairman," said Chris Stone, MDIS" new chief executive, in The Evening Standard, 1 November 1999. "I think (Hay Davison) feels that with the share price going from £2.60 to 20p in five years doesn't merit him taking any more of the shareholders' money."
- "MDIS comes about as close to being the definition of a stock-market disaster story as any still-solvent company can be. The British software and services group has always disappointed, but John Klein's era has been particularly depressing" - The Times, 2 November 1999.
New Vikendi map adds snow, snowmobiles and new aural and visual twists
Faults and bad weather ground SpaceX, Blue Origin, Arianespace and United Alliance
New regulation expected to cut greenhouse gas emissions by about 17 million metric tonnes between 2020 and 2050
Molybdenum ditelluride is a two-dimensional material that can be easily stacked into multiple layers to create a memory cell