Shares plunge on warning from Forward

Ray Chamberlain, chairman of Forward Group, saw nearly pounds 33m wiped off his personal net worth yesterday after shares in his once fast-growing electronics company crashed following a surprise profits warning.

Forward, one of Europe's biggest makers of printed circuit boards, said a sudden fall-off in demand for its products and higher costs meant that it would effectively only break-even in the second half. The news represents a sudden shift into reverse for a group which combined its warning with news of tripled profits in the first half. The shares accordingly plunged from 281.5p to 132p yesterday.

Mr Chamberlain, who saw his 40 per cent stake in the company collapse in value from pounds 61.7m to pounds 28.9m, was putting a brave face on his problems. In a statement, he announced a 25 per cent uplift in the interim dividend to 1p and reported "encouraging prospects for 1997" following a series of meetings with key customers. Along with encouraging forecasts for the European printed circuit board industry, "I remain confident that 1997 will prove to be a successful year for Forward Group," he said.

But brokers said that pre-tax profits which soared from pounds 2.01m to pounds 6.21m in the six months to July are the last the group is likely to see this year. Previous full-year forecasts had been for around double that level. Orders, normally run on a four- to six-week cycle, have slumped in October and November, as manufacturers, caught out a year ago by overestimating the expected demand for chips and boards, appear to be shortening their stocks.

Meanwhile, Forward's aggressive expansion policy is expected to run up pounds 1m in exceptional costs as the three acquisitions made so far this year are integrated with the rest of the business. Gearing, 35 per cent at the year end, has already moved up to around 50 per cent and Forward warned that it was above previous expectations.

Derrick Bumpsteed, chief executive, echoed his chairman's optimism. "Things were looking good until the final quarter, when we started to go through a destocking period.... I think it's going to run across the year-end period, going through to the back end of January. There is no question in meetings with customers that things are looking good for next year."

Mr Bumpsteed blamed over-optimism amongst customers last year, particularly the personal computer industry, which saw its market fall off going into 1996 and is only now recovering. Although around 45 per cent of Forward's sales go to the telecoms market, with defence, photocopiers and the like also more important, the personal computer market tends to set the trend, Mr Bumpsteed said. The underlying growth rate of 8 per cent was "still there and still strong", he added.

Stephen Williams of brokers Williams de Broe has halved his forecast for the current year to pounds 6.25m, rising to above pounds 10m in 1997/98. He said most of the damage had occurred in the high volume end of Forward's business, mainly Exacta Circuits, acquired last year, and Forward Circuits. He said the news shocked the market, but he suggested the orders could start coming back in December as customers geared up for next year.