Shandwick shares fall after fresh warning: Profit increase entirely due to currency factors

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The Independent Online
SHARES in Shandwick slumped by 17 per cent to 26.5p yesterday after the public relations group headed by Peter Gummer warned that it was continuing to face tough trading conditions on both sides of the Atlantic.

The company, which has been struggling with a mountain of debt, increased pre-tax profits from pounds 1.5m to pounds 1.7m for the half-year to 30 April, but the improvement was entirely due to currency factors.

Earnings improved from 0.9p to 1.7p a share but the interim payout has been passed for the second year running.

Shandwick said it had not achieved any material improvement in its trading performance because there had not been any economic upturn. On a constant exchange rate, operating income fell by 6 per cent.

The group was also hit by a rise in interest charges from pounds 2.8m to pounds 3.1m, reflecting a jump in net debts from about pounds 62m to pounds 65m because of earn-out payments made in the first half. Although the interest charge was covered by operating profits of pounds 4.8m, against pounds 4.4m, the group expects net borrowings to rise to about pounds 66.5m by the year-end because of the appreciating dollar and further earn-out costs.

The company, with negative net assets of pounds 74m, was saved from collapse earlier this year after its banking consortium agreed to extend a pounds 70m borrowing facility until next January. It also faces potential liabilties on earn- out costs totalling pounds 12.3m over the next four years.

However, its workforce was trimmed from 1,910 to 1,833 in the first half, taking the total reduction to about 500 over the past 18 months. The latest cuts helped boost profit margins from 9.2 to 9.7 per cent.

Mr Gummer is stepping down as chief executive but will continue as chairman. He had assumed the dual role in late 1991 to spearhead a sweeping cost-cutting programme.