Shares dive as Saltire moves into the red

Investors in Saltire, the electronics parts distributor, took fright yesterday, sending the shares plummeting by more than a fifth to 26.5p after the group announced it had plunged into the red in the six months to July and warned that profits for the year would fall well short of expectations.

Saltire plans a management shake-up which will lead to redundancies after being hit by the sharp rise in the value of the pound and continued problems at its Romanian subsidiary which has been badly affected by the country's economic difficulties. It made a pre-tax loss of pounds 1.4m in the first half of the year compared to a profit of pounds 2m the year before.

It is Saltire's third profit warning in a year. The shares have collapsed from 109p a year ago and a high of 370p in 1994.

Tom Long, chairman, said: "These results are very disappointing. We are a small company and economic ill winds hit us more severely than larger, more resilient groups."

The group warned that the continued strength of sterling would continue to knock the group's profits. However Mr Long said the operating performance would improve in the second half and it should make a small operating profit for the year as a whole.

The strong pound hit margins in its Dutch, German and French businesses which cost the group around pounds 300,000. Saltire is now looking to close its warehouses in continental Europe and dramatically reduce the stocks it holds.

Turnover in Network, the division supplying Romania, halved to pounds 11m. The business lost pounds 500,000 in the first half due to the weakening local currency and a downturn in the economy which led to poor demand and curtailed exports.

Sales at Maplin, the retail business Saltire bought 18 months ago, have also been disappointing. The performance of its mail order side has yet to live up to expectations. Mr Long said the group should survive its latest problems and the balance sheet was strong enough to support its operations.