JFB issues profit warning: Green shoots fail to materialise at specialist engineer

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The Independent Online
WHEN JOHNSON & Firth Brown's interim figures were released in June, the specialist engineer was 'still at the stage of planting bulbs' rather than spotting green shoots, according to its chairman. But improved profits were expected in the second half.

That statement forced JFB to issue a profits warning yesterday because its next results were likely to be worse, not better. 'We were on the hook,' said George Hardie, joint managing director.

Profits for the six months to the end of September 1993 are expected to be below the pounds 2.1m made in the first half because the order book is less full. Even if orders improved it would be too late to have much effect on this financial year.

The shares closed at 40.5p, down from 48p.

'We did see things improve in the spring and early summer but since then they've gone backwards,' Mr Hardie said. 'We're still profitable and we have cash in the bank. But we didn't want people buying into our shares on analysts' forecasts of pounds 5m.'

He said conditions in Europe were tougher than expected. About 40 per cent of JFB's turnover is exported to Europe. JFB had hoped to gain from sterling's devaluation, but German competitors cut their own prices by up to 15 per cent to compensate.

'Orders are being deferred until the very last minute and margins are under pressure. We may well be bouncing along the bottom,' said Mr Hardie.

'We now have good grounds for believing that if green shoots turn into flowers, we'll start seeing (recovery) a few months down the road.'

At the interim stage, when profits of pounds 2.1m were down from pounds 3.2m in the equivalent period, the company held the dividend at 1p.

One analyst, who has downgraded his profits forecast from about pounds 5m to pounds 3.5m, said the final dividend could be in jeopardy if there was no sign of an upturn before the year-end.

He suggested that JFB might halve last year's 2p final dividend, giving a total of 2p for 1993 which would be uncovered on his forecast.