Y2K glitches at Royal Doulton lead to another profit warning

ROYAL DOULTON, the fine china maker, issued another profits warning yesterday when it said a new computer system designed to make the company Millennium-compliant had developed serious problems.

The company, which is selling a range of Millennium gifts, said the problems led to delivery delays of up to 10 weeks and a sales shortfall of up to pounds 12m. The Stoke-on-Trent group has spent pounds 1m on extra staff to cope with the order backlog. "It's a cock-up," admitted Hamish Grossart, the chairman.

Royal Doulton's second-half financial targets will now not be met. It is forecast to record a full-year loss of close to pounds 20m instead of the pounds 10m previously forecast. The shares closed down 23.5p at 79.5p.

Royal Doulton's classic tableware operations have been hit hard by the decline of formal dining. The shares have been in freefall all year, and major shareholders recently called in Mr Grossart to help turn the company round.

He said yesterday: "In simple terms, the rate of deliveries we were able to produce ran at about half normal." There were problems with the hardware capacity of the new system, which cost pounds 100,000, and some software "teething problems" he said. There were also "self-inflicted" mistakes in setting up the group's warehouses.

There was little consolation for shareholders as Royal Doulton said that market conditions remain competitive. Overall turnover for the year would depend on the vital Christmas trading period, it said.

Weekly deliveries have now returned to levels before the new systems were introduced. Backlogs are expected to return to previous levels by year-end.

Royal Doulton is in the midst of extensive restructuring which has already cost 1,500 jobs. The IT failure is a further setback after a warning in August that it would take three to four years to produce reasonable returns for shareholders.

Royal Doulton is investigating whether it can claim compensation from the system's supplier, which it did not name. Royal Doulton was not insured for such business interruptions.