Payout doubts hit Graseby

SHARES in Graseby, the former Cambridge Electronic Industries, fell more than 20 per cent yesterday as it reported a pounds 500,000 fall in interim pre-tax profits to pounds 4.6m.

Profits were in line with City expectations, but some analysts were concerned about Graseby's ability to maintain its final dividend.

After falling from 167p to 133p, the shares are paying a gross yield of almost 11 per cent. The interim payout was unchanged at 3.3p.

Borrowings will remain high even after the company's pounds 8.5m sale of a site in Enfield to J Sainsbury, a deal brought forward by Graseby.

Moreover, the company expects no upturn in the markets for its depressed controls and manufacturing service divisions for another 18 months.

The results would have been a great deal worse but for last year's acquisitions of Tace and Goring Kerr, which between them contributed 55 per cent of group trading profits of pounds 5.6m.

Graseby suffered a pounds 3m decline in profits from its defence business. The group has shed 280 of its 530 defence staff and more will leave by the end of this year. Redundancies will reduce Graseby's staff numbers from 2,000 to less than 1,700.

Paul Lester, chief executive, hopes the cost-cutting will enable the non-core controls and manufacturing businesses to produce better results without relying on the end of the recession.

Mr Lester said Graseby's recent purchase of 80 per cent of Intertest, a firm that has devised a way of using X-rays to detect bone and glass, makes it the only company in the world able to detect the full range of food contaminants.