Investors in Watmoughs yesterday dived for cover following a warning from the printing and packaging group that half-year profits would fall short of the pounds 9.62m made in the same period last year.
Within minutes of the announcement in late morning trading, shares in Watmoughs plunged by 25 per cent, wiping pounds 60m off the company's stock market value. The share price failed to recover, and closed the day at 272.5p, down 87.5p.
The share price of Watmoughs, which produces many colour supplements for the newspaper industry, has been extremely volatile over the past 12 months, reflecting disappointments with the company's trading performance.
And the price was already 20 per cent below its recent peak of 440p reached in February before the profits warning hit the stock yesterday.
Making one of his last statements before retiring, Patrick Walker, chairman, told the company's centenary annual meeting yesterday that the gravure operations in the UK, which make up about two-thirds of turnover, were being hit on two fronts.
The operation was suffering from the relatively high cost of paper in the UK and the strong pound, which is making jobbing contracts on behalf of customers in continental Europe uneconomic.
The group has also incurred additional start-up costs on new contracts. The markets for financial printing and packaging remain competitive. Overseas operations in Spain and Hungary which generated almost a quarter of last year's profits, were progressing well in local currency terms but the value of profits translated into sterling is suffering.
A company spokesman claimed however that the market had over-reacted. The warning was no different in quality or quantity from the warning that accompanied the preliminary figures in March, when the company reported a 6.3 per cent drop in profits to pounds 22.2m in 1996.
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