Warning from Jeyes sends shares diving: Interim profits will be 'substantially below market expectations'

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The Independent Online
SHARES in Jeyes, the household products group, tumbled 122p to 317p yesterday after the company warned that interim profits would be worse than last year and 'substantially' below market expectations.

Jimmy Moir, chief executive, blamed increasingly stringent definitions of insider dealing for the dramatic stock market reaction. 'We would have preferred to tell a few analysts and investors that expectations were too high,' he said. 'But you can't do that now.'

Yesterday's collapse was the second time this year that Jeyes' shares have slumped. Shortly before full-year figures for 1992 were announced at the end of March they fell from 470p to 406p in less than two weeks. Then, as yesterday, there was little trading in the shares.

Mr Moir said three areas were to blame. UK margins had fallen as a result of higher spending on promoting the company's bleach products, international sales had been disappointing and management redundancies had cost pounds 600,000 more than expected.

The cost-cutting programme was started some weeks ago with the aim of removing duplication after the acquisition last year of Globol, a German household products group. Job losses are expected to reduce annual costs by pounds 1m.

Jeyes is also consolidating its manufacturing on five sites from the present 11. Again, savings from the restructuring are not expected before next year.

The company said the acquisition of Globol was not to blame for the downturn. Sales had fallen in North America and Europe due to destocking and delayed product launches, but turnover and margins in Germany were still ahead of both last year and the company's internal budgets.

Analysts who had pencilled in pre- tax profits of pounds 7.6m for the current year pulled their forecasts back to an average of about pounds 6m. All the shortfall is expected to be in the first half, where expectations have been scaled back from pounds 3.25m to pounds 1.5m.

Mr Moir said he had spoken to institutional investors yesterday and they seemed happy that the warning represented a one-off hit to profits. He had placated them with the promise of an increased interim dividend.

Last August shareholders stumped up pounds 22m via a rights issue at 385p a share to finance the acquisition of Globol from BP when their existing shares were worth 474p.

Jeyes came to the market in 1988 at 140p, valuing the company at pounds 15m. Two years previously its management had bought the company from Cadbury Schweppes for less than pounds 5m.

(Photograph omitted)