Earnings slump knocks LIG shares

SHARES IN London International Group, makers of Durex condoms and Marigold gloves, slumped yesterday as the company announced a fall in first-half earnings and issued a profits warning.

The City had expected lower interims owing to the launch of Durex in the US, but the slump in sales of medical gloves came as a surprise. The share price plunged by 31 per cent to 130p.

The group reported a 14 per cent drop in half-year pre-tax profits to pounds 7.9m and said that "full-year profits are unlikely to match those achieved in 1997/98". After a pounds 15m restructuring charge, LIG posted a first-half loss of pounds 9.8m.

Nick Hodges, chief executive, said the figures "reflected the impact of the US launch of Durex condoms and the transition of our examination glove business towards the manufacture of a premium range".

The group has been hit by an unexpected fall in sales of its standard medical gloves, which it had hoped to maintain at a high level as it makes the transition to making high-margin polymer-coated gloves. Mr Hodges said: "We were hoping to sell more standard gloves while we were moving into that sector, but the market is in a very difficult situation of overcapacity and falling prices." He also cited cheaper Asian imports.

Condom sales fell, with US sales down by 10 per cent owing to a rebranding programme.

LIG, which has a plant in Malaysia, was also hit by the collapse of the ringgit. It was forced to cancel a forward exchange-rate hedge, incurring an exceptional loss of pounds 2m.

Analysts were surprised the company had not mentioned the sales slump at a briefing last month. Michael King of SG Securities cut his full-year profit forecasts from pounds 45m to pounds 38m.