The Investment column: Wace presents a triple whammy

There appears to be a jinx on Wace, the printing and packaging group. In the 1980s and early 1990s, Wace was dogged by problems culminating in a series of profit warnings. Recent events suggest history is about to repeat itself. Since March, when they hit a high of 279p, the shares have been falling steadily on the back of a warnings over margins and then in May over profits.

The triple whammy was delivered yesterday by news that pre-tax profits have crashed from pounds 10m to pounds 4.21m in the six months to June. Earnings per share have slumped from 7.3p to 1.4p, not quite enough to cover an unchanged interim dividend of 1.85p. The shares accordingly slid 15p to 152p.

The merger of Wace's existing wine and spirit labelling operations with those of Ferry Pickering, a maker of specialist packaging acquired for pounds 26m last year, was always going to be expensive, but the market was wrong-footed by the pounds 3.2m exceptional unveiled yesterday, which comes on top of a pounds 800,000 loss on the closure of a US plant.

More serious was the performance of the UK businesses. Excluding acquisitions, printing profits slid from pounds 6.2m to pounds 3.5m in the half, hit by the destocking flagged by the company earlier in the year and hefty competition, exacerbated by desperate rivals on the brink of collapse. Meanwhile, imaging, the process of transforming images and words into a form in which they can be printed, crashed from pounds 2.2m to just pounds 800,000 as a large customer slashed his business with Wace.

The figures would have been worse, but for pounds 800,000 profits from Ferry Pickering and Hallmark's Irish greeting card plant, also acquired last year.

Chief executive Trevor Grice has been feted by the City for turning the group round, but with profits unlikely to top pounds 17m this year, his stock has (literally) taken a tumble. A forward multiple of 14 and gearing of 67 per cent suggest investors should exercise caution.

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