Chesterton shares slump by 40 per cent after second profit warning

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Shares in Chesterton International, the estate agent, yesterday slumped by more than 40 per cent to 23p after the company announced its second profit warning in three months. Chesterton cautioned it would make "a substantial loss" for the year to June but said it would not release its final results until later this month.

The announcement comes after the group said in August that profits would fall "substantially below market expectations".

The warning is the latest instalment in a disastrous saga at Chesterton. In September 1996, the company uncovered a pounds 1.4m black hole in its accounts, over half of which resulted from double-counting of profits.

The shock announcement coincided with the exit of Giles Ballantine, the group's chief executive. Chesterton tried to puts its problems behind it by introducing a set of financial controls but the latest warning has once again shattered investor confidence in the group.

Chesterton has been pursuing an active disposal strategy since August in a bid to turn its fortunes around. On 1 October it announced the sale of its loss making residential property management business and on Tuesday it agreed to sell its 49 per cent stake in the group's US asset management business to the majority shareholders. The company is currently discussing the sale of its loss-making plant and machinery division and may also dispose of its construction services business. The group which made a pre-tax profit of pounds 2.4m last year, has seen its share price slump from its June 1994 flotation price tag of 100p.

Chesterton said in August that profits would be lower than expected due to poor final quarter trading and the adoption of "more prudent" accounting policies. Shares dropped by 40 per cent to 33.5p, but Michael Holmes, the new chief executive, said then that the "fundamentals of our business" were still sound.