TEAM Communications, the German-US film and TV licensing group, saw its shares plunge 25% to Euros2.7 on Frankfurt's disaster strewn Neuer Markt after it put out a profit warning.
The company said: "revenue and earnings for the financial year ended December 31, 2000 will be below the company's prior expectations."
It pointed to two reasons: the change in US accounting rules which accelerate amortisation on film assets and, second, its cancellation of some long-term film sales contracts.
Company chairman and chief executive, Drew Levin did not quantify the write downs, but said: "the SEC gives us the choice of making the amortisation adjustment in 2000 or the first quarter of 2001. We are going to take it in the last quarter of 2000, which means all 2001 revenues from the two libraries we bought last year are a plus."
Levin said: "TEAM is extremely healthy and we will produce new estimates within a couple of weeks. This is a non-cash situation and although it will affect earnings in the fourth quarter [of 2000] it will rapidly increase earnings in years to come."
Company spokesman Stefan Forstner said that TEAM, which is also quoted on the NASDAQ market, is planning to bring back some library titles from the intermediaries which in some European countries had sold films on its behalf. "We now have TEAM Germany and Dandelion in the UK. We now have the experience to do this ourselves. Although there is a cost this will produce a higher margin." Levin described the move as: "recapturing some long term deferred guarantees."
Analysts said they were surprised by the announcement and could not yet determine whether the company would deliver profits or losses when it reports the full year figures in late March. One, from brokers Sal Oppenheim, said: "It is not clear whether there is also a change to the group's ongoing trading.
"What is certain is that it is becoming harder to sell American programming into the German market. The two big broadcast groups have decided not to buy so much from small licence traders; reality and quiz shows are growing in popularity - these are typically produced in house or locally - and there are more German TV-movies screening. TEAM would probably do well to produce more in Germany."
Earlier this month TEAM secured a $45m commitment from the Canadian Imperial Bank of Commerce (CIBC) which allows it to create a $50m production pool, TEAM TV Fund. At the time Levin said: "The new fund significantly augments our company's ability to meet the growing demand for original dramatic programming from all of the key broadcast and cable network buyers around the world."