Guardian iT forecast 'overstated'

COMPUTER disaster recovery specialist Guardian iT was facing a financial catastrophe of its own after admitting that it had overstated sales forecasts. Guardian iT shares slumped 265p, to 173p, wiping £186m from the group's valuation.

Recently appointed finance director Neal Roberts said that he had discovered an 'overly optimistic forecast of expected sales, a reduction in achieved sales and the under-forecasting of costs and currency implications'. The company said it would have to ask banks to relax covenants on its £110m debt pile.

The admission downgrades expected earnings before interest and tax to between £13m and £14m on sales of between £113m and £115m. Guardian's previous forecast to the end of October under former finance director Peter Jakob suggested that earnings would come in at about £20m on sales of £126m.

At least £8m in charges are also expected after the firm axed its webhosting business in September. Chief executive Peter MacLean must now ask a consortium of banks including Barclays, Allied Irish, Bank of Scotland, Royal Bank of Scotland and Kredit Anstalt for temporary flexibility on loan covenants.

Guardian iT said overall market conditions continue to deteriorate and it would respond with a rigorous review of its cost base and financial forecasting methods. Expansion plans formulated when Guardian iT shares were trading at 1655p 15 months ago turned into an expensive burden as the market went sour.