Education software company Riverdeep reported a 9 per cent increase in third-quarter revenue this morning but some analysts raised concerns about the deterioration in margins.
Revenue increased 9 per cent on the previous quarter to $56.7 million, the company said. The revenue figure includes the contribution from e-learning company, Broderbund, which Riverdeep acquired in August.
But gross margins on the firm's education software products declined to 78.3 per cent from 83.6 per cent over the quarter. Some analysts blamed Broderbund, a lower-margin business, for some of the decline but margins in the existing business may also have fallen.
Riverdeep, which will hold a conference call later today to discuss the results in detail, will come under pressure from analysts to explain the fall in margins.
Yesterday, shares in Riverdeep fell to all-time lows following publication of a broker's report that criticises the company's management.
The report by Merrion Stockbrokers concludes a "management credibility issue" is a significant factor weighing on Riverdeep's shares. It also says it cannot definitively dismiss concerns about potential accounting issues raised earlier in the year.
The report highlights poor disclosure of financial information regarding revenues and the mismanagement of earnings guidance release for 2003. The broker has also lowered its sales forecasts to $263 million (€264 million) from $283 million for 2003, and downgraded earnings per share to $1.35 from $1.75 for the same year.