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Management changes lift Fine Art shares

Fine Art Developments, the greetings card to mail order group, saw its shares bounce 4p to 234p yesterday after it unveiled management changes and a restructuring programme to combat a slide in profits. Pre-tax profits fell from pounds 6.2m to pounds 2.07m in the six months to September, but the market was braced for bad news after a profits warning last month which has seen the shares nearly halve from 440p in November.

The group said Tony Johnson, who has been managing director since the middle of 1994, is to step up to become deputy chairman. His current role will be split between two joint managing directors, including Matthew Sharp, an existing director who will head the card and paper products division, and another to be recruited from outside, who will oversee the troubled mail order operation.

As part of plans to exit peripheral and poorly performing businesses, the group has sold its loss-making US mail order business and said negotiations for the sale of Papertree, a loss-making retail chain, were at an advanced stage, with a conditional contract having been exchanged. Analysts said the two disposals would eliminate annual losses of between pounds 2m and pounds 2.5m, including a pounds 1.4m loss in the first half.

Even so, Sean Eddie of NatWest Markets shaved his full-year profits forecast by a further pounds 2m to pounds 29m yesterday. Forecasts were around pounds 46m before last month's warning.

Agency mail order accounted for pounds 2.6m of the group profits shortfall in the latest six months, although some of the pounds 7.5m drop in sales reported in November has been clawed back with an extra pounds 4m marketing campaign, leaving them down pounds 5.2m. The group blamed the recent postal strikes for around pounds 1m of the profits downturn. Losses at the Dee operation are expected to double in the full year, Fine Art warned, but the major downturn will be at Express Gifts it said.