The pre-tax profit figure for the six months to 30 October compares with pounds 15.2m in the corresponding period last year. Turnover rose by 31 per cent to pounds 337.9m but group margins fell from 7.6 to 5.8 per cent.
Alan Clements, group chairman, blamed the margin erosion on clients' increased servicing requirements. Instead of taking delivery of paper in large amounts from time to time they now wanted it in small quantities and often.
Earnings per share fell from 12p to 9.3p but the interim dividend was maintained at 2.75p.
Mr Clements was bullish about demand for paper products. 'The UK economy appears to be moving ahead again after a slow summer, while on the Continent, although the recession persists, there are indications that the decline may be over,' he said.
Spicers, bought for pounds 91m in July, contributed pounds 3.9m in the final three months of the period.
At St Regis Paper several cost reduction programmes were completed and the new PM3 recyling machine has touched full capacity after just 11 weeks. Mr Clements expects the business, which was losing about pounds 5m a year, at least to break even.
The company regards the removal of subsidies for waste paper collection on the Continent as vital.
A packaging directive is now going before the European Parliament, but it is only expected to bring benefits in the long term.
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