RapidCloud International Shares Dive on Profit Warning -- Update

(Rewrites first paragraph, adds detail and analyst comment.)

By Ian Walker and Tapan Panchal

LONDON--Shares of RapidCloud International PLC (RCI.LN) fell as much as 40% in early trade Tuesday after the company warned that it won't meet market forecasts, which it blamed on a number of factors, but said it is well placed to return to meaningful growth in 2016.

A new tax in Malaysia stopped companies investing in their IT, together with general weakening in that country's economy, impacted revenues, the computer and information technology services provider said. Growth in Singapore was also slower than anticipated and the more recently established Indonesian operation has taken longer than expected to become established, the company added.

Revenue for the year will now be similar to 2014, which is below market forecasts, the company said. In addition, extra costs as the company invested in its products and infrastucture, means profits will be "materially" lower than both market expectations and that achieved in 2014, RapidCloud added.

For the year ended Dec. 31, 2014 the company made a pretax profit of 3.24 million Malaysian Ringits ($0.75 million) on revenue of MYR17.82 million.

Shares at 1055 GMT are down 5.5 pence, or 26%, at 15.5 pence, having fallen as low as 12.5 pence earlier in the session. They are currently down 64% over the past 12 months.

"Whilst the period under review was challenging, we believe the company is now well placed to return to meaningful growth in 2016," Managing Director Raymond Chee said.

"The economic environments in which we operate appear to be improving and we believe our enhanced product and services suite is well placed to capitalize on any growth in our target markets. Management is therefore confident 2016 will be a much more positive year for the company," he added.

Northland Capital Partners said it is a disappointing end to the year with softness across its three key markets. "RapidCloud had invested in the expectation of growth that has failed to materialize as yet and the balance sheet looks underpowered. The outlook for 2016 is more positive but we would expect the shares to weaken further until there is evidence of delivery," the investment bank said.

Write to Ian Walker at [e-mail]; @IanWalk40289749 and Tapan Panchal at [e-mail]

(END) Dow Jones Newswires

December 22, 2015 06:17 ET (11:17 GMT)

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