Buy-and-build software group Maxima lost a third of its value after admitting that a number of large contracts were cancelled and full-year results to this May will miss forecasts.
Management attributed the slippages, which fell 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, broader market uncertainties have made it difficult to counteract and there have been client delays elsewhere in the business.

So, even though revenues, profits and earnings per share are expected to be ‘well ahead’ of last year, Maxima now expects full-year results to come in below market expectations, ‘although still showing growth in revenues, profits and earnings’ on the comparative period. Despite the setback, it is important to note that the company is still expanding, boasts good relationships with its customer base and is on course to show growth this year. Nevertheless, independent broker Seymour Pierce has cut its earnings forecasts and now sees 25.6p for the current year, ahead of 27.7p for 2009, placing the 151.5p shares on forward multiples of 5.9 and 5.5.

Originally recommended at 160p in 2005, shares in Maxima had more than doubled to 329.5p by last August. In October, we issued a timely suggestion to take some profits by reducing shareholdings ahead of a drop to 240p in November and further recent falls. Having said all that, Maxima has hitherto proved a well-run and reliable business and has a good consolidation story to tell. So long as management can restore confidence, this should prove a misstep. Sit tight for recovery.