Warning sends St Ives shares to 12-year low

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Shares in St Ives plummeted to a 12-year low yesterday after the printer again warned its full-year results would be "significantly below expectations".

The company said most of its markets "continue to experience overcapacity and fiercely competitive pricing". It said since December, there had been a sharp and significant cut in demand for web-offset markets, affecting media and commercial products.

St Ives said it would also lose work in the second half of its financial year, which ends on 31 July, as it had been unwilling to cut prices to unsustainable levels.

Yesterday's profits warning followed a similar alert in October and wiped 14 per cent off the shares. St Ives stock, which traded at 400p in September, closed down 45p yesterday at 274p, valuing the company at £284m.

The company, whose clients include Harrods and Virgin Holidays, said two plants in southern Florida, which had been damaged by Hurricane Wilma last year, had been out of operation for a long time. "Costly steps to place customers' work elsewhere were necessary and management resources were diverted towards the production of existing work, meeting immediate customer needs and restarting the plants."

Although the plants are operating again, St Ives warned that "sales of non-recurring work require rebuilding, against a background of further price competition in web-offset markets in the US".

Demand from banks and the financial services sector was also subdued, with the rise in corporate activity failing to generate a corresponding surge in paperwork. But the book business continued to perform well and the company maintained its market share.

Mike Allen, at Numis, said: "While the share price reaction is not surprising given the scale of the downgrade, we believe the current yield should offer further downside protection at these levels." He cut his 2006 pre-tax profit forecast to £32.3m from £42m and reduced his target price on the shares to 288p from 338p.