Monday, 29 September 2008

Innovation Group issues profits warning

Shares in the Innovation Group (TIG) have crashed this morning - down 35% at 7.5p at 9.00am) on the back of a significant profits warning. This was occasioned by delayed decisions in a number of major US BPO contracts - caused, in the main my the uncertainty created by the current financial services sector troubles. Also, settlement in the AIG contract termination caused a £2m write off. George O'Connor (Panmure Gordon) translates this into profits reduction of c£4.6m against consensus estimates.

On the positive side though, double-digit organic growth is reported in Europe and Asia together with new contract win announcements with IBM at "a leading UK insurer" (£4.7m over 2 years) and CIS (£7m over 5 years).

Back in May 08, Chairman Geoff Squire bought 10m TiG shares at 21.5p - thus doubling his stake. Since then TiG shares have crashed by 65%. Put another way, Geoff has lost nearly £3m. Mind you, as you can see in the chart above, TiG was trading at around 35p 12 months ago.

TiG could well be suffering the after effects of the dreaded 'Acquisition Indigestion'. It clearly needs to do much to restore investor confidence. We ought to be writing reports that TiG is a company ' in the right place at the right time' - saving insurance and other financial services companies money in these difficult times. But it clearly needs to get its act together - or maybe it would be better as part of another, larger organisation?

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