Shares in Innovation Group crashed by 23 per cent today after the company warned of a £1 million cut in profit as a result of integration costs.

The British software company said it needed more orders to meet its full-year expectations. Innovation shares were down 4.25p at 16.25p in afternoon trading.

The company, which provides business process outsourcing services for insurers including Aviva, said that the credit squeeze had limited its investment activity. One planned acquisition had failed.

This impacted planned adjusted profit by about £1 million, it said.

The integration of the Nobilas business, which provides car repair, accident and claim management systems, was going to plan but the company had decided to retain staff and property in the UK, which had contributed to the profit reduction, it said.

However, Innovation said that it had refinanced its bank loans and mortgage “on more advantageous terms” and secured new facilities for general purposes.

In its interim management statement, the company said it expected to be in a positive net cash position at the year end and continues to look forward to 2009 and beyond “with confidence”.

Brokers were generally upbeat about the company’s long-term prospects.

Altium Securities repeated its main "buy" recommendation and left its target price unchanged at 25p.

The broker said the statement showed encouraging news on operating cash flow and margins but disappointment over performance in South Africa, the Nobilas integration expenses and tighter debt finance.

Panmure Gordon and Landsbanki retained their "buy" ratings and 29p and 25p target prices respectively, while Investec kept its "buy" on the stock but cut its target price from 22p to 20p.

Julian Yates, an Investec analyst, said that although its forecasts were below consensus it was cutting further its pre-tax profit estimates by 13 per cent and 6 per cent in 2008 and 2009 respectively.

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