Lancray costs Scholl pounds 800,000

SCHOLL, the footwear and toiletries group, warned of an pounds 800,000 write-off in its second half as it limped home with declining earnings in the first because of poor trading conditions across Europe.

The group, whose clumpy sandals still account for one-third of its pounds 150m annual sales, said it would write off the sum on the disposal of its French skincare products business, Isabelle Lancray.

Lancray, which has been loss- making since it was acquired as part of the purchase of the Valdor cosmetics group in 1989, was sold last month to a small French perfumery business.

Scholl's operating profits declined by 8 per cent to pounds 11.6m in the first half. Boosted by acquisitions, sales increased 3 per cent to pounds 85.8m. After Britain, which accounts for 26 per cent of sales, Scholl's largest markets are Italy, Germany and France.

Gross margins were maintained, but the group spent an extra pounds 650,000 on promotion and new product development.

There was a pounds 420,000 exceptional loss on the disposal of Scholl shops in France, Belgium and Luxembourg.

At the pre-tax level, Scholl lifted profits from pounds 11.6m to pounds 12.3m because of the interest benefit of last year's pounds 24.5m rights issue.

Earnings per share slipped from 11.6p to 10.4p. Scholl lifted the interim dividend from 2.5p to 2.6p and said it expected a 'satisfactory' result for the year.

The results were strengthened by the release of a pounds 1m extraordinary provision previously set aside because Scholl was not certain it would receive the full proceeds of the sale of a fashion hosiery business.

Neil Franchino, chief executive, said he had high hopes of the Gerard House herbal medicines company, acquired in May.

'It (herbal remedies) is a mega- business in Germany, with sales of DM3bn ( pounds 1.1bn), while in the UK it's only pounds 100m, so you can see the scope.'