Hartstone hopes lift shares: Refinancing by banks 'agreed in principle but not cast in stone'

(First Edition)

SHARES in Hartstone moved up sharply yesterday on hopes that the ailing ladies tights and leather goods company is close to sealing a refinancing package with its 23 bankers.

Shaun Dowling, chairman, said: 'We have agreement in principle but we have not got it cast in stone.'

Shares rose 9p to close at 42p yesterday. Before a series of profit warnings in the spring, the shares were trading above 200p. Acquisitions have left Hartstone with pounds 92m of debt, more than twice the value of net assets.

Mr Dowling refused to give details of the capital reconstruction but analysts expect the plan will include a rights issue.

The cost of the refinancing is likely to be large. Mr Dowling indicated the final bill - including penalty payments related to the debt and professional fees - could be as much as pounds 16m.

However, he hinted that the company may not pay compensation to Stephen Barker, its former chairman. Mr Barker, who resigned in May, was due to receive pounds 400,000. Mr Dowling said yesterday: 'We have not paid it yet.'

Hartstone also published half year results yesterday. Pre-tax profits slumped to pounds 428,000 from pounds 10.5m for the six months to 30 September.

The company said its strained financial position contributed to the fal in profits. It was obliged to reduce stocks, and selling prices suffered.

Hartstone was also hit by a higher interest bill. Debt climbed because it was making deferred payments for acquisitions made before the group's problems emerged.

Sales rose from pounds 162m to pounds 185m. Earnings per share fell to 0.3p from 6.7p. There is no dividend.