The shares are in free-fall again as cloud-based IT and communications supplier Outsourcery (OUT:AIM) warns on revenues. Clearly the company needed to get the bad news out before meeting analysts and investors at its capital markets day scheduled for Monday (30 June). The company, founded and co-run by BBC 'Dragon' Piers Linney, has also admitted that it may well need fresh funding, reflecting on-going delays in major strategic partners signing up customers.
'The board believes that the group has sufficient cash resources for its immediate needs.' Yet management is also 'is prudently reviewing a number of options that may improve the group's cash resources over the medium term.'
This is another big blow despite progress being made in signing up some pretty blue-chip partners, including Hewlett Packard (HPQ:NYSE), BT (BT.A), Logica/CGI plus Vodafone (VOD) and Virgin Media. Investors were happy to back the promise of the company for the best part of a year, since joining Aim in May 2013 at a 110p share price. But the wheels have really fallen off since April this year, crashing 15% today to 31.5p, about a third of the IPO price. Shares was also clearly too optimistic, having flagged the seemingly lowly price/earnings multiple last month.
'The Outsourcery model of selling unified communications and other Microsoft (MSFT:NDQ) applications on a cloud platform has its undoubted attractions,' says Philip Carse, analyst at IT consultancy Megabuyte. However, relying on partners to sell services always present its own challenges, particularly into large organisations, and especially for cloud-based services, where evolution rather than revolution is the order of the day, Carse continues.
'Strategic partners need educating, and they then need to educate customers as to the benefits of cloud services,' the analyst concludes.
House broker Investec says: 'It is disappointing that revenue progress has been slower than we anticipated and that we are materially reducing our sales forecasts.' That means a near one-third slashed off revenue for this year and next, to £8.5 million from £12.7 million this year, from £24.2 million to £15.3 million in 2015.
'Strategic progress is progressing positively and we will look for a fuller update at the capital markets day,' Investec concludes ratherly hopefully.
Tech companies often hit speed bumps when a business is growing rapidly but sentiment towards management and the company has been smashed to pieces. 'We admit to being unsure about Outsourcery and the remedial actions suggest that the company is unsure about its way forward,' says Panmure analyst George O'Connor. 'Investors are likely to steer away for the time being given that the risks on management's ability to execute are now heightened.'