Kenwood blames profits warning on poor demand

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The Independent Online
KENWOOD APPLIANCES, the Russell Hobbs kettles and Carmen hair- curlers company, was left vulnerable to a bid again yesterday when it issued its second profits warning in four months.

Shares in Kenwood, which spurned overtures from rival Pifco Holdings last year, fell more than 15 per cent to 0.4p after the company warned that second-half profits would be "no higher than those in the first half."

The latest in a series of shocks from the group came as Kenwood reported a sharp fall in half-year profits from pounds 2.2m to pounds 900,000 and passed on the interim dividend.

Analysts have revised full-year profit forecasts from pounds 7m down to pounds 1.6m.

Kenwood blamed the problems on "soft" demand for its key food preparation products such as the Kenwood Chef, and lower sales of deep-fat fryers as customers traded down to cheaper goods produced by rivals.

Kenwood has also been affected by turmoil in the Far East which has knocked pounds 900,000 from its bottom line.

Sales have collapsed in countries such as Malaysia where locals can no longer afford Kenwood products after the collapse in the local currency.

In response to the problems Kenwood plans to grow its sales by adding 17 new products in the second half.

More production will be sourced from China in an attempt to lower costs.

The distribution network in continental Europe will be streamlined.

Kenwood said it had not held any further talks with Pifco which declined to comment on its intentions.

However, analysts pointed out that with Kenwood shares only falling to 104p, the expected earnings per share this year of just 2p put the share on a stratospheric forward multiple of 51.

Pifco may, therefore, wait before making a move. However, analysts said there was scope for Kenwood to significantly reduce its costs through overseas sourcing.

"To be honest I expected the shares to fall further than this," one analyst said.

"It looks bleak but there is quite a lot to go for."