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Highlights:
Merit Group PLC shares experienced a significant decline of 30% following a profit warning related to its Merit Data & Technology division.
Full-year revenue and profit forecasts have been revised downwards, with anticipated figures now approximately 10% and 40% lower than market expectations.
The company's first-half underlying profit (EBITDA) is projected to decrease by 33% year-over-year, attributed to reduced revenue and challenges in converting sales pipelines into new projects.
Merit Group PLC, (LSE:MRIT) listed on the AIM market, is facing considerable challenges following a recent profit warning issued by its Dods Political Intelligence division. The company’s Merit Data & Technology arm has encountered difficulties due to clients' hesitance to engage in large-scale IT projects, leading to a significant adjustment in the company’s financial outlook.
For the financial year ending March 31, revenue is now projected to be around £18.5 million, marking an 8% decrease from previous estimates. The adjusted EBITDA is expected to decline to approximately £2.0 million, and a shift to a loss before tax and non-recurring items of about £0.8 million is anticipated based on current trading conditions. This represents a substantial setback for the company, which had aimed for stronger performance.
The preliminary results for the first half of the fiscal year, ending September 30, indicate an underlying profit of approximately £1.2 million, down 33% from the previous year, with revenues falling 6% to around £9.3 million. The Dods Political Intelligence segment is performing in line with management’s expectations, but the Merit Data & Technology division reported an 8.5% year-on-year revenue decline. This downturn is attributed to various macroeconomic and local factors that have adversely affected prospects' willingness to commit to new IT initiatives.
Overall, Merit Group PLC's challenges highlight the current market uncertainties impacting the technology sector, especially in securing large-scale projects. The company’s leadership will need to navigate these obstacles while working to rebuild client confidence and drive future growth.
