Small cap education outsourcer Tribal (TRB) is plunging in morning trading, down 36% to 78p, after warning revenue and profit will be shy of expectations.

Relying on only a few large customers for work looks to have backfired as cost overruns and delays to key projects hit second half trading.

‘In light of these trading conditions, we now expect our revenues for the current year to be lower than the prior year, and we expect our operating profits to be significantly below our previous expectations,’ says interim chief executive Rob Garner in a statement.

TRIBAL GROUP - Comparison Line Chart (Rebased to first)

Garner is in interim charge after former chief executive Keith Evans left in June. Disappointing half year results, for the period to 30 June 2015, followed soon after Evans' departure.

Corporate broker N+1 Singer reduced earnings per share (EPS) estimates by 11-13% across 2015 to 2017 following those results.

‘Tribal had a weak first half, reflecting much lower licence and development revenues as sales cycles and the pace of software implementation lengthened,’ wrote N+1 analyst Tintin Stormont in August.

‘Whilst the board retained its full year outlook, we prudently reflect this customer caution in our forecasts.’

More downgrades look likely after Tribal's latest update.

Tribal’s problems may not be entirely of their own making. Its overall software and IT services (SITS) market contracted in 2014, according to TechMarketView’s UK Public Sector SITS Market Trends & Forecasts Report 2015. At the same time competition in the industry increased, the report says.

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Issue Date: 19 Oct 2015