The market was braced for bad news after Berisford said last month that workers at Magnet's Darlington factory had voted for strike action, hitting production. But what stunned analysts was news that Welbilt, a US manufacturer of commercial kitchen equipment for the likes of McDonalds and Burger King, had been hit by a series of problems ranging from lower demand to difficulties with a new computer system.
The shares plunged 40.5p to 106p after Berisford said the set-backs meant profits in the year ending this month would now only be around pounds 25m. That is below the pounds 26.9m the group made last year, its first profit for several years, and well below analysts' forecasts of around pounds 35m for the current year. The company's forecast that it would raise the total dividend by a half to 4.5p failed to reassure investors.
The news means both the major acquisitions made over the past two-and- a-half years to revitalise the previously loss-making commodities group have now turned sour. One City observer said yesterday it would be "touch and go" whether the present management could survive.
He said: "Magnet was what people were waiting for. But the problems at Welbilt mean no part of the business is going well now. Two acquisitions and both have gone wrong but at least Magnet was cheap." Given the net pounds 26m paid for Magnet, the pounds 295m paid for Welbilt meant "the burden to do something with Welbilt is greater."
Mr Bowkett, who invited controversy last year after making a paper profit of pounds 6.4m on the exercise of share options, was putting a brave face on yesterday's news. "I think in the City it's normal to over-react to good and bad news."
Magnet was currently running at 40 to 50 per cent of capacity, but should be back to full stretch by the first week of November, he said. Although the previous workforce of 375 had been dismissed, 70 had been re-employed and 100 new workers had now also started work. The impact of deferred sales as a result of the strike would be around pounds 3.5m, although some of that would be made up by extra business in the new financial year starting in October, Mr Bowkett said.
The US business has been hit by the "inefficient introduction" of a computer system.Reuse content