SSL warns again on profits and puts medical arm on sale
Tuesday 01 April 2003
Long-suffering shareholders of SSL International endured fresh agony yesterday when the condoms-to-surgical gloves company issued another profit warning and put its entire medical business up for sale.
The company said sales had been weak across the business, sending its shares down 13 per cent to a new low.
Among the factors cited, surgical gloves sales to hospitals in the US and the UK have been hit by price competition, while falling prescription drug prices in Italy are forcing pharmacists there to demand better terms from SSL on supplies of Durex condoms.
Brian Buchan, chief executive since 2001, said that despite the disappointment, the group had made considerable progress since sorting out a glut of condoms caused by dubious marketing practices for years up until a management clear-out in 2001. Group sales for the year to 31 March are now expected to be about £620m, he said. "The sales for the year are up, the profits are up, we are just £14m or £15m below pretty ambitious sales objectives," Mr Buchan said.
The disappointing revenues come despite dramatically increased spending on marketing and product launches. The shares were off 24p at 166p even though there was a broadly warm welcome for the news that SSL has appointed Rothschild to auction the medical business.
The disposal plan affects one-third of the group by sales, and could raise £275m to cut debt. It tears apart the conglomerate created with the merger of Seton Scholl and London International Group in 1999. The division's brands include Hibi antisceptic scrub and Biogel surgical gloves, and its disposal will leave the company to concentrate on Durex and Scholl footcare.
Analysts point out SSL has a poor record in making disposals. The Marigold gloves division has been up for sale for more than a year with a string of suitors having turned the business down. Michael King at WestLB Panmure said: "If they are able to get the medical division away quickly and for a decent price then there may be some hope for the share price."
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