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Profits Warning Lorien, one of the few agencies that seemed to have bucked the trend during the downturn, yesterday issued a profits warning. Lorien’s figures for 2001 showed an increase in profits from 1.3 million to 2.2 million. They said that their profits in 2002 would be no less than those of 2001. They were proved correct with profits of 2.4 million. They did warn at the time though that they had cut costs to the bone, and that there would start to be an impact on the business if they cut any more costs and they banked on the fact that recovery would finally come in 2003. Lorien are a low margin agency and so when companies need to cut costs, they can help. However, it has now come to the stage of the downturn when they are being seriously impacted too. The company’s figures for the six months ending at May 31st will be released in late July. However, the company has said that for the six months that profits will be well below market expectations. Conditions Most Challenging for a Decade According to the company:- “As highlighted at the preliminary results in February, trading conditions last year were the most challenging seen for over a decade. Against this backdrop, the Board stated then that it would be a challenge to maintain the Company's 2003 financial performance at the levels achieved in 2002” However, trading conditions have not improved in the first half of this financial year. The company claim that they are investing for the long term and will have to ride out the market downturn. They say:- “The Board has continued to manage the Company for the long-term and as such has maintained its investment in new services for which start-up costs will be incurred in the first half. “Predominantly as a consequence of this investment being greater than anticipated, the Board believes Lorien's profit before tax for the year-ending 30 November 2003 will be materially below current market expectations. “The Company's strategy remains to invest in and develop both its IT Resourcing and its Specialist Services operations”. Recovery Soon? So is a recovery likely soon? Not according to the company, although they are hopeful of some prospects. They say:- “Whilst an imminent recovery is unlikely in any of the sectors in which the Company operates, Lorien has certain encouraging and material prospects which the Board hopes will crystallise in the second half of this financial year. So what did the market do? It marked down the Lorien shares by 10p from around 60p to 50p. The market doesn’t like bad news now, with jam to come in the future. It’s used to companies saying that the future looks bright even if the present isn’t as good as they thought it would be. Whilst Lorien are unlikely to be in any great trouble, because of their low debt, and their positive cash flow, the longer the recovery takes in coming, the longer a company with its costs pared to the bone is going to suffer. Gerry McLaughlin Jul 17, 2003 Email this article Printer friendly page Previous Page
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