Henlys warns of £20m school bus hit

The bus maker Henlys saw its market value nearly halve yesterday after it raised the alarm on its Blue Bird arm, which makes the distinctive yellow American school buses.

The alert, analysts cautioned, put the company in danger of breaching its banking covenants and threatened its ability to pay dividends.

Shares in the company collapsed 42 per cent, or 42p, to close at 59p after it warned that problems at Blue Bird might wipe £20m off the group's operating profits for the year.

Henlys said earnings for the year to 30 September were now likely to be "substantially" below current market forecasts, mainly because of a delay in Blue Bird's recovery.

It said that the order intake for new commercial bus, coach and motorhome products was increasing at a slower rate than expected, while there were reduced margins on delivery of some school buses.

Analysts estimated yesterday that Henlys would now turn out a loss for the year of around the £7.5m level. After exceptional items, it made a loss of £34.4m last year.

The alert also raised concerns that Henlys, which only recently rehashed its borrowing arrangements, might be in danger of breached associated covenants. Henlys said yesterday that it was keeping its lenders informed of the position and was in "continuing discussions".

Analysts also fretted about the company's ability to pay dividends. The company scrapped its final dividend last year, after a disappointing trading performance, leaving investors with just an interim payout of 1p a share.

The statement comes only a month after Henlys reported a 91 per cent fall in annual pre-tax profits, before accounting for goodwill amortisation and exceptional items, to about £2m. Within that, its Blue Bird division recorded a profit, before exceptional items, of £2m - far beneath the £27m profit recorded in the nine-month period a year before.

Henlys said yesterday that stringent cost reduction actions were under way at the Blue Bird division and that staff numbers there had been cut by more than 30 per cent in the first quarter of the year.