SSL shares dive 28% as profit margin estimates cut and jobs go

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The Independent Online

SSL International, the beleaguered maker of Durex condoms, is to cut at least 300 jobs after a setback in its financial recovery plan.

The company's shares plunged 28 per cent after its current managers admitted they had overestimated the profitability of the business they joined at the start of last year. SSL is still at the centre of a fraud investigation after previous management is alleged to have overstated profits and artificially inflated sales figures.

Brian Buchan, the chief executive, said operating margins would be less than 14 per cent, not the 16 per cent he had predicted just five months ago.

"I don't feel apologetic about that. This is the first time that we have been able to do an analysis on a full-year's trading. We have an increasingly clear view of the business and its costs, and the business has got fatter than it should have."

The group is focusing on four core brands, including Durex and Scholl, the maker of shoes, socks and odour eaters. Mr Buchan said recent disposals had reduced the need for a large back-office staff.

About 150 jobs are going in North-west England, including at its headquarters in Cheshire, which is to close. A further 150 sales and financial jobs are going in continental Europe.

And there are likely to be additional layoffs before the end of the year, after management promised a "fundamental re-examination" of its manufacturing business. Mr Buchan said options included outsourcing a greater proportion of its manufacturing, and an overhaul of its suppliers. The group employs 5,000 people in manufacturing, mainly in the Far East, with 850 in the UK.

Mr Buchan insisted about half the reduction in forecast margins was down to the recent hike in insurance premiums, but there was still strong criticism from analysts and investors. Paul Diggle, an analyst at WestLB Panmure, said: "The feeling is that investors have had their patience terribly tried and, even after a new management, even after a year that was supposed to sort out most of the big problems, there is still more restructuring needed to improve things."

SSL shares tumbled 161.5p to 419.5p, wiping out the gains of the last 14 months.

The Serious Fraud Office is investigating SSL's finances after the company admitted in 2000 that profits had been overstated by £19m. The company had also been artificially inflating sales figures by encouraging wholesalers to take on more stock than they could sell by offering knock-down prices. The practice, known as trade loading, was estimated to have inflated reported sales by £63m. The investigation is likely to last at least another year. Yesterday's statement confirmed SSL had finally eliminated all excess stock.

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