News that profits for the financial year due to end next week would fall 8 per cent short of expectations sent shares in the group crashing by 59.5p to 632.5p, knocking pounds 160m off its market value. It comes less than three weeks after the appointment of Malcolm Bates, deputy managing director of GEC, as non-executive chairman of the group.
The statement came just two minutes before the stock market closed and was the culmination of a day of confusion in the City, during which a round of year-end briefings between Andrew Fisher, Premier's finance director, and analysts at leading broking firms was postponed at the last minute.
The company said last night it delayed the meetings and issued the warning after a meeting with its own brokers, Barclays de Zoete Wedd, but the no-show prompted rumours that the company was about to issue a much worse update on current trading.
Last year's deal met with an unprecedented public revolt by institutional shareholders, led by Standard Life, which suggested Farnell was overpaying. The company has been warning all year that market conditions have been deteriorating.
Analysts were left puzzled by the announcement, which pinned much of the blame for the profits shortfall on the Farnell Electronic Services volume distribution operation, which is due to be sold to Arrow of the US for $300m (pounds 186m).
One analyst described it as weird. She said: "They have come out with a trading statement about a year which no one is interested in and a business which has been sold. The worry is it is a veiled profits warning about the year that is about to start."
Profits post-exceptionals are now expected to be around pounds 11m lower than previous estimates at around pounds 128m for the current year, rising to pounds 185m in 1997/98. Premier said weak market conditions, particularly on the volume side, had continued into the second half, a problem compounded by the pound's strength.
Since the acquisition of Premier, twice the size of the original Farnell, around two-thirds of the profits will be denominated in dollars, which will be reduced on translation into a sterling much strengthened since the acquisition.
Premier said the integration of the US business "continues to proceed very well" and joint market development initiatives were being implemented with "promising" early results. It added that group cash flow remained "strong".
Comment, page 19
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