In a statement to the City, Ilion said: "Following difficult trading conditions in the UK during the first four months of 1998, it does not expect to meet market profit expectations for 1998."
The company said its trade in March had been in line with budget but after that it had been "exceptionally disappointing" in the UK. "UK sales in the first four months have only grown by 22 per cent, considerably below budget," it said.
Gross margins in the UK had improved from their low point in the fourth quarter of 1997 and were in line with budget, Ilion said. "The board expects to achieve substantial profits, but it is too early in the year to be precise. The consensus market forecast for pre-tax profit was pounds 8m."
Ilion's cost base is predominantly fixed in the short term and the shortfall in sales has translated into a significant decrease in profits relative to budget, the company said.
In its results statement in March, Ilion said it was now operating in a less predictable environment and that markets outside of France had started slowly in 1998.
"That volatility has continued," it said. In France the sales growth this year has been around 70 per cent with a consequent greater contribution to group profits but it was insufficient to compensate for the shortfall in the UK.
Wayne Channon, Ilion Group chairman, said: "I am confident in the strategy of retaining our market leadership in the UK and we will ensure that the required actions are taken to protect this position, albeit at the expense of short-term profitability."