Horizon Technology Group's share price halved yesterday after the company warned lower margins were squeezing earnings during what should have been its most profitable period.
In a trading statement which analysts described as a coded profit warning, the Internet services company said there had been deterioration in the general business climate over the past two months and in particular during April.
Horizon, which employs a total of 650 people, has laid off 30 staff in the UK, with another 30 to follow shortly. Chief executive Samir Naji said most of the job losses would occur in the UK. He said the company had to adjust its cost structure which was designed for an environment generating 50 per cent growth down to one which produced 10-15 per cent growth.
The company's share price, which went as high as €14 in the first quarter of 2000, plummeted to €2.00 from €4.05 yesterday before closing at €2.19. Horizon floated on both the Irish and London stock exchanges at €1.64 a share in December 1999.
Chief executive Mr Charles Garvey said the company was trying to tackle the downturn by reducing resources, streamlining operations and merging or eliminating smaller services.
The cost of the restructuring which, he said, would result in a reduction of 10 per cent in Internet services costs, will mean an exceptional charge of €2.0-€2.5 million but would ultimately translate into an annual saving of €5.0 million.
Mr Garvey said he was confident that after the restructuring Horizon would deliver good earnings growth next year.
Technology analysts were not so confident, however, and Mr Ronan Furlong of Dolman, Butler Briscoe stockbrokers said he expected the company's troubles were far from over.
"I already have Horizon as a sell so I cannot do much more to downgrade them further," Mr Furlong said.
He said that while he expected the company, which has offices in Ireland, the UK and Germany, to remain viable, its earnings growth targets were likely to come under continued pressure.
"Nowadays people are looking for very high value-added, specific niche applications and they don't necessarily need companies like Horizon to implement them. They may go directly to source," he said.
Mr Furlong said there was a big move away from Horizonstyle instructor-led training to direct e-learning from CD Rom or via the Internet.
Horizon, which has been the preferred partner of leading US computer group Cisco Systems for technology training has another Irish company at its heals.
SmartForce which specialises in e-learning applications last week announced a deal with Cisco.
