APV warns of restructuring

APV, the food processing equipment maker which recently returned to profit after two years of re-structuring, went into reverse yesterday when it issued a profits warning.

The shares slumped by 17 per cent when the company warned shareholders that pre-exceptional profits would be "significantly lower" than last year's pounds 7.1m. The main dent to the bottom line will be additional restructuring costs which will knock at least pounds 8m off profits.

Addressing shareholders at its annual meeting yesterday, the directors blamed the downturn on a 5 per cent reduction in its profit margins over the past year and "challenging conditions" in most of its main markets.

Although APV said it expected to make progress in the second half backed by the restructuring benefits, the shares slid 15.5p to 74p on the warning.

The slump is a significant setback for the company, which had been limping towards recovery after five lean years helped by former finance director Neil French. He was appointed in late 1994 to replace Clive Strowger who departed after a profits warning and a dividend cut.

Mr French had acted to halt the slide in operating margins and funded a restructuring programme by selling seven peripheral businesses.

He axed nearly 1000 jobs and incurred exceptional charges of pounds 32m in 1995. This caused the group to slump to a pounds 18m loss.

Profits of pounds 27m last year appeared to indicate the corner had been turned. But Mr French hinted then that the restructuring would have to be accelerated to offset the effects of sluggish trading conditions. Fierce competition in retailing has discouraged investment in the kind of catering equipment APV supplies.

Director Sir Charles Reece retired at yesterday's meeting. Chairman Sir Peter Cazalet is steeping down in September. He will be replaced by Mike Smith, a former BTR director.