Hepworth seeks to stop the rot

Shareholders in Hepworth, the boilers, pipes and building materials group, were bracing themselves for poor half-time figures yesterday. But the slump in profits from pounds 35.5m to pounds 11.1m was much worse than expected and the shares shed another 3.5p to 208p.

New chairman Jeremy Lancaster and Jean-Francois Chene, who returns today as chief executive, are determined to stop the rot and have launched a full strategic review.

The dividend has been slashed, the interim payment is down from 5.5p to 3p and the final will be cut from 9p to 5p. Restructuring could start before the year-end but the full outline of the plans will take six months.

There is certainly much to be done. A closure of the factory in Brussels accounted for pounds 5.9m of the profits fall and the group made a disappointing pounds 13m loss on disposals.

The underlying trading performance was also poor. Turnover in the continuing businesses was down 4 per cent to pounds 305m, and profits were down by a third to pounds 21.6m.

Translating profits from UK exports and overseas activities, which together account for 50 per cent of sales, cost the group pounds 5.2m. Redundancy costs and pension charges together cost pounds 1m more than last year.

Currency costs could aggregate to pounds 10m by the year end and pension charges could double to pounds 5m in the second half, rising to a maximum of pounds 11.5m in 1998 when contributions resume.

Analysts have downgraded forecasts for the full year to around pounds 52m, equal to earnings of just under 14p a share, and pounds 60m and 16p of earnings in 1998, which puts the shares on a prospective p/e ratio of 12.8.

The shares have suffered a long decline from a peak of 500p in February 1994 but shareholders will have to wait for the board's review before they can hope to see a recovery. High enough for now.

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