Watmoughs savaged by market

Watmoughs, the UK's biggest printer of newspaper supplements and agency mail order catalogues, yesterday became the latest group to be savaged by the stock market after unveiling a drop in half-year profits and warning of continuing excess capacity in the market.

The shares crashed 44.5p to 413.5p as full-year profit forecasts were lowered by analysts. Patrick Walker, the chairman who yesterday announced his intention to hand over to Sir Derek Birkin in 1998, said the market had overreacted.

Including a pounds 1.14m charge for two factory closures, pre-tax profits fell from pounds 10.1m to pounds 9.62m in the six months to June. But UK operating profits edged up 2.4 per cent to pounds 9.52m, with long-run gravure printing operations running in line with budget.

The figures were held back by the group's web offset printing business, which operates on short print runs and has suffered badly from an overhang of stocks following last year's rapid rise in paper prices. The market had been affected from the second quarter and the third quarter would still be hit by the problems, Mr Walker said. But with paper prices and stocks in the business back where they were in early 1995, the "vibrations we are getting are that things will be improving".

The group said it had replaced almost all the pounds 8m contract to print YOU magazine for the Mail on Sunday. It has won new business, ranging from TV First, a television listings magazine for the Mirror Group, to the relaunched Punch magazine.