Marlborough issues its second profit warning

recruitment group Marlborough International yesterday issued its second profit warning in three months. The group is now making a further provision of €2.5 million (£1.97 million) to cover bad debts.

At the end of February, Marlborough made a €1 million provision against the failure of its debtors' control system, which meant that many debts in the past year went uncollected. Marlborough has now taken the view that many of these debts are uncollectible and has increased the provision by a further €2.5 million.

This means that Marlborough will not even reach the profits targets that were revised downwards after the problems with debtors, a €300,000 write-off against its investment in an online recruitment operation and a tightening of margins.

NCB Stockbrokers has already reduced its profits targets for the year to the end of February to just €1.2 million. If this forecast is accurate, then the further €2.5 million provision against the debtors will mean that Marlborough will report a substantial loss for the year.

Mr David McKenna, managing director, said the substantial shortfall arose when some debts became uncollectible. He added that the bad debts were a mixture of a small number of large debts, including one of £85,000 (€107,928) and another of £65,000, as well as a large number of smaller debts. Many involved dot.coms "who caught us badly", he said.

Mr McKenna declined to comment on the progress of his management buyout plan. In late April, Marlborough informed the Irish Stock Exchange that the management group headed by Mr McKenna was at the early stages of preparing the MBO and was approaching funding sources.

Marlborough shares - which traded as high as €5.35 during 1999 - have collapsed since that first profits warning and even the prospect of a buyout has failed to lift the share price. This year, the shares have fallen from €1.45 to a low of €0.47. Yesterday, the shares fell two cents to €0.50 where the company is valued at €15.8 million.