The weak housing market claimed another victim yesterday when shares in Avonside, the building supplies group, collapsed by a third to 50p, their lowest point since floation three years ago.
The shares slumped after Avonside announced worse-than-expected results for the six months to June, halved the dividend and warned that profits for the full year were likely to fall significantly below 1994 levels.
Profits declined to pounds 1.1m from last year's pounds 2.6m on sales that increased slightly to pounds 39m. In February 1994, the share price stood at 191p.
Avonside's announcement is the latest in a string of downbeat announcements from the troubled sector.
In recent weeks Tarmac and BICC have announced that they are to abandon housebuilding. YJ Lovell has also put its housebuilding arm under the hammer.
Avonside announced a phased withdrawal from housebuilding in September but it is still reliant on the housing market through its building supplies division which supplies plumbing, heating and other building materials to contractors.
Housing completions at its Parry Homes and Avonside homes subsidiaries fell from 116 to 70 and the divisions slumped from a pounds 1m profit in the first six months of last year to a small loss this time. Both are up for sale, but with the market flooded with other housebuilding companies, buyers are few and far between. "We have had offers but not at the kind of prices we had hoped," Craig Slater, finance director, said.
The company said that the length and severity of the recession, combined with rising raw material costs, had placed margins under pressure for housebuilders and sub-contractors which have struggled to pass on the increases.
Management changes had been made at the timber frame and glazing divisions, both led by a new managing director. A small number of jobs will be cut and systems improved.
The dividend was cut from 2.10p to 1p. Bank borrowings stand at pounds 8m and gearing at 31 per cent.