Wagon rolls on in face of slump on Continent: City alarmed despite advance in payout

WAGON Industrial, the Telford- based engineering conglomerate built up by John Hudson, announced pre- tax profits up by nearly 50 per cent to pounds 18.1m but warned that the recession on the Continent would hit first-half profits this year.

Wagon's shares plunged by nearly 10 per cent yesterday from 417p to 377p as the market digested the bad news from Wagon's operations in Germany, Spain and France. This was despite a final dividend of 11.175p, making 17.308p for the year to March 1993 against 16.484p last time.

The company previously benefited from making almost half its sales overseas, principally in mainland Europe, which had counterbalanced the slump in the UK.

Now, losses at Forkardt, Wagon's German subsidiary, are set to worsen and lead to further restructuring costs.

Mr Hudson, chief executive, said: 'The first half saw the UK side improve, but in the second half when the UK left the ERM the Continental recession started with a vengeance. There is an utter lack of confidence among the European machine tool companies which Forkardt supplies, and this year will be one of transition.'

For the same reason, Mr Hudson said that Wagon's UK car parts, general capital goods and materials handling operations would do better this year, but would still be held back by lack of demand from Britain's main trading partners in Europe.

The City was encouraged by Wagon's achievement in keeping pounds 15m in net cash in the bank, and Mr Hudson said he was planning a number of relatively small acquisitions.