Holliday shares plummet by 25% after profit warning: Foreign competition undermines Spanish operation

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The Independent Online
SHARES in Holliday Chemicals, the Yorkshire-based specialist chemicals company that was floated in the spring, fell by nearly 25 per cent yesterday when the firm issued a profit warning.

Holliday said problems in Spain, where it makes chemical ingredients for pharmaceutical manufacturers, had worsened. It said profitability was being affected by increased competition from Indian and Chinese rivals.

Holliday's profits were expected to advance by between 10 and 20 per cent to pounds 14m for the year to the end of December.

Yesterday, however, Holliday said its profitability would be the same as last year. Reported pre-tax profits were pounds 7.6m for the year to 31 December, 1992. This year's figure will be about pounds 12.5m - substantially higher because the flotation paid off debt and reduced Holliday's interest charge.

Michael Peagram, the chairman, said the prices for its Spanish product had fallen by 10 per cent in dollar terms. He added: 'While price erosion is a feature of this market, the rate of decline in the third quarter was abnormally severe.'

He said other parts of the business were performing well but the profits shortfall in Spain would negate advances elsewhere. Costs had been cut and new products introduced for less volatile markets, he added.

Mr Peagram led a venture capital-backed management buyout in 1987, and was named Venturer of the Year in September this year by the Venture Capital Association.

Shares fell 51p to 174p yesterday, below the April flotation price of 195p. Mr Peagram said stricter reporting obligations required by the Stock Exchange meant the share price fall was exaggerated.

'When a company issues a statement about profits, people are used to assuming that the situation is traumatic. Of course we are disappointed with our performance, but we have to be careful people do not over-react.'

BASF, the German chemicals group, saw a 44 per cent drop in pre- tax profits in the first nine months of this year.

The nine-month profit fell from DM1.1bn to DM607m ( pounds 241m) and was blamed on a 5 per cent drop in selling prices and the persistent recession in key sectors and markets.