Crash wipes pounds 80m off Molins' value

Molins, the cigarette to teabag making equipment group, saw its shares crash 227.5p to 360p yesterday after it issued its fourth profits warning of the year. The company, which has already been hit by accounting irregularities stretching back 10 years at a US business, was forced to admit yesterday that it had been over-optimistic about the second half of the current year, which was now on course for "substantially" lower operating profits.

Peter Harrisson, chief executive, said Molins had been looking for results broadly comparable with the second half of 1996. However, shipments of tobacco machinery to the Far East had been affected by delays in receiving letters of credit, resulting in sales in the first half coming in pounds 5m lower than expectations.

Those sales would now come in in the second half, Mr Harrisson said, but consequent to that delay there had been discussions with some of Molins' Far Eastern customers, in particular the Chinese State Tobacco Monopoly Authority about some pounds 10m to pounds 12m of orders which had been delayed.

"Had they come in before August, we would have been able to manufacture and produce them before the year end in December," he said. That is now looking unlikely. "We have a risk which covers recovery of overheads in the factory and relates to despatches in terms of orders at the year end."

Mr Harrisson refused to quantify the likely effect on profits, which brokers had previously forecast at around pounds 13m for this year, but estimates are now likely to tumble again. Yesterday's share price fall wiped pounds 80m off Molins' market value, leaving it at a mere pounds 127m, less than half its value as recently as April last year, when the shares peaked at pounds 10.35.

The latest dismal news from Molins came as the group revealed a slump into a pounds 7.7m loss in the six months to June, against profits of pounds 13.6m before. The figures included a pounds 13.4m exceptional loss at Langston, the US business hit by the accounting problems, which the group announced in its last warning in July. The figure includes a total of pounds 12.2m for overstated profits and investigation costs of pounds 1.2m. Mr Harrisson refused to say whether KPMG, the group's auditors, would be sued over the issue. "We are going to review with them all the circumstances of the Langston irregularities," he said, but would not forecast the outcome.

He also refused to rule out further exceptional charges, but said order intake at Langston had improved over the past few months.

Molins' figures were also hit by a pounds 1.5m rationalisation charge to reduce costs in the Brazilian operation, which moved into loss in the period.

Excluding exceptional items, pre-tax profits more than halved from pounds 15.6m to pounds 7.2m, on sales cut from pounds 147m to pounds 125m. The group blamed the strength of the pound for eroding its competitive position at a time when demand in some of its markets had slowed down. The interim dividend is held at 6.5p.