The company announced 700 redundancies and said it would be charging pounds 8.5m against this year's results to cover the reorganisation. The market had expected a charge of between pounds 2m and pounds 5m.
Stephen Barker, Hartstone's chairman, who headed a management buy-in of the troubled Glamar hosiery business in 1989, said: 'This is not anything like as bad as it looks. Trading in the shares has been volatile and we wanted to clarify the company's performance and prospects.'
Hartstone's shares had already fallen from 275p last week after BZW, the house broker, downgraded its profit forecast. Yesterday's statement from the company prompted a further shaving of estimates to about pounds 23.5m, compared with last year's profit of pounds 22.1m. Last summer BZW expected profits this year of pounds 38.5m.
Mr Barker said Hartstone had accelerated a reorganisation that was already in place because of deteriorating trading conditions in Europe. Demand has fallen and, although the company has gained some market share, margins are under pressure.
All hosiery manufacturing in Spain is to be concentrated on one site and the workforce across Europe will be reduced from 3,200 to 2,500.
The company warned that a promised reduction in gearing from 80 per cent at the interim stage to 50 per cent would not now be possible. To sweeten the pill the final dividend will be higher than last year's.
Shareholders in Hartstone have had a rollercoaster ride over the past 12 months. Between May and August last year the shares tumbled from 280p to 123p after investors took fright at Hartstone's accounting treatment of two acquisitions.