Sherwood slips on loose lace: Slack Continental demand depresses lingerie group's profits

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SLACK demand for lace in Continental Europe contributed to a 5 per cent drop in first-half profits at Sherwood Group, the lingerie and lace maker, writes Neil Thapar.

Taxable profits fell from pounds 8.2m to pounds 7.8m despite a 6 per cent jump in group turnover to pounds 70m.

Although earnings per share eased back from 5.3p to 4.8p, the interim payout has been improved by 11 per cent to 1p as the company was optimistic about prospects.

'The board is confident that despite the current economic difficulties in Europe the group will perform well during the remainder of 1993,' David Parker, chairman and managing director, said.

'We are maintaining our investment policy to upgrade plant and machinery and continue to place a strong emphasis on product design and development.'

The profits decline reflected difficult trading conditions in the Netherlands and Germany, which pushed the lace division's operating surplus from pounds 5.6m to pounds 4.6m on turnover up 8 per cent to almost pounds 40m. Sales had also shown a further advance in the third quarter.

Sherwood said it planned to improve the division's performance in Continental Europe by trimming costs and sourcing more of its lower-priced products from the Far East. Overall profits in the UK jumped from pounds 7m to pounds 7.5m, on a marginal drop in sales to pounds 44m. But higher shares in the British lingerie and nightwear businesses improved the garment division's profits from pounds 3.8m to pounds 4.4m.

The group also benefited from a first-time contribution of pounds 453,000 from acquisitions. Interest charges were virtually unchanged at pounds 1.3m.

NatWest Securities, the company's broker, is forecasting taxable profits of pounds 21m for the full year against pounds 17m in 1992.

The shares slipped 3p to 154p.