THE strong pound and the Asian economic crisis joined forces to claim another victim yesterday as Clyde Blowers issued a profits warning that wiped a quarter off its share price.
Executive chairman Jim McColl said the double whammy stripped #500,000 off the bottom line during the six months to
February, when pre-tax profits advanced from breakeven to #545,000.
Once again, the Glasgow-based engineering company had to dip into reserves to keep the interim dividend unchanged at 2.67p.
Looking ahead, McColl said full-year profits would be less than expected, but still ahead of the #1.1m achieved in 1997 as a result of improved margins on the company's sootblowing business.
Clyde Blowers shares plummeted 64p to a two-year low of 189p as Richard Andrews of house broker Greig Middleton slashed his full-year profits forecast from #5.8m to #3.3m.
Andrews said full-year profit would be dented still further by #300,000 charge to cover planned redundancies at the Richard Simon subsidiary in Nottingham.
This makes light materials handling machinery for transporting and packing grain, sugar, chemicals and pharmaceuticals and has been hard hit by the strong pound and the Asian crisis.
The plant has been undercut by German and Japanese competitors offering lower prices. And many of its financially troubled customers in Malaysia, Indonesia and the Philippines have put their orders on ice.
McColl said Richard Simon, which accounts for about #10m of the group's #70m turnover, would shed 34 of its 133 employees as a result of the downturn. But there were no plans for layoffs at Clyde Blowers' other UK factories in Glasgow and Doncaster, he added.
The Glasgow plant produces soot blowers - specialist machines for cleaning the inside of industrial boilers with steam and compressed air - whereas Doncaster makes heavy materials handling equipment, such as machinery for removing the ash from power
station furnaces.
And Clyde Blowers is enjoying better fortunes in both sectors.
Following its acquisition of Bergemann in Germany and Copes-Vulcan in the US, the group controls 55% of the world market for soot blowers and is able to make good margins on this business. And since most of Clyde Blowers' soot blower manufacturing is carried out overseas, this division, which accounts for two- thirds of group turnover, is immune to the strong pound.
Clyde Blowers is launching a joint venture in China this month to make ash-handling equipment in Beijing. This will complement its joint venture in Shanghai which makes soot blowing equipment.
Yesterday's collapse in the share price cut Clyde Blowers' market capitalisation to #28m, leaving McColl's dream of a company worth #300m by 2000 in tatters.
The emphasis will be on cutting costs and improving efficiency under Bob Hepburn, who joins as chief operating officer in June from Siemens in Newcastle.
FACT FILE
Interim19981997
Pre-tax profit #545,000 #89,000
Turnover#35.0m#28.6m
EPS2.48p0.54p
Dividend2.67p2.67p
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