Telspec forecast to slide pounds 6m into red

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The Independent Online
Frank Hackett-Jones, founder and non-executive chairman of Telspec, saw the value of his stake nearly halve to pounds 35m yesterday after the Kent- based telecommunications equipment maker issued its second profit warning in four months.

The forecast of a slide pounds 6m into the red is expected to lead to shareholder pressure for a strengthening of the board, and in the City questions were being asked about the future of Dr Garth Riley, the chief executive.

The shares slumped 45 per cent to 222.5p compared with more than pounds 10 at the end of last year when Mr Hackett-Jones's controlling stake was worth pounds 160m. In 1994, Telspec was floated as one of the hottest new issues of the year.

Dr Riley warned in May that interim profits would be worse than expected, leading Credit Lyonnais Laing, the company brokers, to cut its profit forecast to a profit of under pounds 2m before tax.

But under a new finance director, Alan Harrold, brought in earlier this year, Telspec found the problems revealed in May were far worse than expected.

The main reason for the unexpected deterioration into a pre-tax loss is that the management has been caught out in component purchasing, as a sharp increase in sales left the production side of the business short of supplies at a time of booming prices. This left Telspec buying electronic components at high prices on the spot market.

Dr Riley said the results for the six months to June would be "adversely affected by a number of temporary factors". Turnover was 25 per cent higher than a year earlier at pounds 35m, but the difficulties had been "significantly worse than originally expected".

Other factors blamed in the May profits warning were lower than expected sales in the Middle East and Asia Pacific, an order downturn in Australia and delays at a new factory in Turkey.