Having peaked at 300p early last summer the shares have been in retreat ever since, proving that the market is often a better guide to a company's fortunes than its own assessment of events. Yesterday's 55p fall to 144.5p represented a 28 per cent slump. It has been some roller-coaster ride - at the beginning of 1994 the shares could have been picked up for 30p.
As ever on the day of a profits warning it is hard to know if the market has over-reacted but given the disparity between the company's growing confidence in November and yesterday's admission that summer weakness "continued during the last quarter of 1996", the market was probably right to be cautious. Analysts took the warning badly yesterday, slashing their forecasts from an average of just over pounds 14m to about pounds 11m for the year to March with pounds 12.3m pencilled in for the following 12 months.
What is puzzling about yesterday's share price fall is that it seems out of all proportion to the scale of the company's problems. Destocking is holding back sales of the company's lathes but profits, while lower than expectations, are still expected to match last year's result. Demand at home is set to improve, 600 said yesterday, and the group's market share should continue to rise in the US and rest of the world.
On the basis of forecast profits, the shares trade on a prospective price- earnings ratio of 10 in the year to March. That is about right until the picture clears.