Imdex cuts profit forecast

Drilling services company Imdex Ltd has scaled back its current year forecast revenue by 3 per cent and pre-tax earnings by 7.5 per cent after modifying the pricing strategy of one of its recent acquisitions.

The revison relates to Imdex's January 2008 purchase of System Entwicklungs GmbH (SEG).

SEG has world class down hole instrumentation technology, in particular, the "Target INS system", which is being used in the oil and gas industry.

Initial financial modelling for FY08 undertaken by Imdex at the time was based on existing orders for the sale of Target INS systems, Imdex said in a statement.

However, as with other down hole technology owned by Imdex, Imdex favours the rental model rather than the sale model and that marketing model has since been largely accepted by customers of Imdex.

In changing the marketing model for the SEG product, revenue and profit in the current year will be less than the published forecast by the Company.

The strategy of pursuing rentals rather than sales builds a more profitable and sustainable business in the medium to long term. This transition has had the effect of reducing forecast revenue and profit in the current year.

Consequently, FY08 revenue and EBITA forecasts are revised downwards by 3% and 7.5% respectively.

Robust trading conditions prevail and global demand remains strong in both drilling fluids and down hole instrumentation.