Buy-and-build software group Maxima has lost a third of its value after admitting a number of large contracts were cancelled and full year results to May will miss forecasts.

Management attributed the slippages, which occurred in the latter months of the half-year, to a ‘vendor consolidation exercise’ that saw its work transferred to a major rival. Despite strenuous efforts to make up for this loss, the broader market uncertainties have made it difficult to counteract and have seen client delays elsewhere in the business as well.

So even though revenues, profits and earnings per share are expected to be ‘well ahead’ of the first half of the prior year, Maxima now expects results for the full year to arrive below market expectations, ‘although still showing growth in revenues, profits and earnings’ on the comparative period.

Management remains confident despite the setback, with the company still expanding and on course to show growth this year. House broker Cenkos reminds that Maxima ‘has very good relationships with its customer base and a clear growth strategy’. Independent broker Seymour Pierce has cut its earnings forecasts by 9% and pencils in 25.6p for the full year and 27.7p for 2009.

The shares, recommended originally at 161p, had more than doubled to 329.5p by August last and in October we issued a timely suggestion to reduce shareholdings ahead of a drop to 240p in November and further recent falls. Maxima has hitherto proved a well run and reliable business and if you have reduced your exposure then sit tight, though it might take time before faith is restored. For the time being, newcomers should steer clear.

Growth Company Investor subscribers have full access to all our AIM and small-cap share recommendations. To subscribe today with a half-price offer, and gain immediate access to all the recommendations, click here.