3D's profit warning hits shares after tech troubles

SHARES in dental technology specialist 3D Diagnostic Imaging dropped by almost a third yesterday after the Dundee-based firm issued a profits warning on the back of a product fault.

The company also announced that it was in discussions with "potential investors" as part of efforts to strengthen its balance sheet and that it had identified savings of 850,000 a year.

But 3D refused to give further details of the cost-cutting programme, saying it would update the market in due course.

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The company revealed that sales had been brought to a halt after a manufacturing defect was found in its CarieScan Pro device, which is used to scan teeth for cavities.

The firm said the problem had been sorted and that the equipment was back on sale.

But 3D cautioned that full-year sales would now be around 700,000, instead of the 1.2 million previously predicted by house broker FinnCap, with pre-tax losses expected to be 2.4m instead of 1.7m.

The pre-tax deficit had stood at 1.2m in 2010, before the device went on sale.

The house broker cut its target price on 3D's shares from 19p to 9.4p following news of the "manufacturing issues". Analyst Keith Redpath said: "This (manufacturing fault] is not uncommon in the early stages of a product launch and shipments have now recommenced.

"The resultant product outage leads us to revise our forecasts and price target."

Redpath noted that, now the product was back on sale, shipping could start to China, Europe, India and the UK, where the firm has signed distribution agreements.

3D yesterday said that a number of other distribution deals were expected "within weeks" and that it had signed a contract with dental sales company CoreStrength to help boost business in Canada and the United States.

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The company told investors: "The directors believe that potential sales within export territories outside of North America over the balance of the calendar year could equate to some 60 per cent of the US shortfall.

"With the re-launch of the CarieScan Pro and stronger sales support across North America, plus the addition of the positive - and previously un-anticipated - global opportunities for the product, the directors look forward to being able to announce a significant improvement in the company's trading performance in the coming year."

3D's CarieScan subsidiary was formed when investors bought the intellectual property of Idmos, an Aim-quoted company spun out of Dundee and St Andrews universities that fell into administration in April 2008.

The firm initially listed on the Plus stock exchange before moving to Aim in November.

Existing investors in the business include Scottish Enterprise and a syndicate led by investment group Evolve Capital.

3D closed down 1.35p at 3.03p.