IWP says forecast growth unlikely to be met

IWP International, the household and personal care products company, has warned shareholders that it will not meet its earlier growth forecasts for the year. This will represent its first glitch since the chairman, Mr Joe Moran, reorganised the group a decade ago.

IWP had alerted shareholders, last November, about the impact from the collapse of the Russian and east European markets for both cosmetics and toiletries. However, "difficult conditions have continued into the second half and have resulted in an over supply situation in our principal markets. The net impact is reduced revenue at lower margins", according to a statement yesterday. Brokers had been predicting a 10 per cent to 15 per cent rise in pre-tax profit in the year to March 31st, 1999. While trading profit will be higher, pre-tax profit will be lower due to the impact of higher interest costs. In addition, the higher number of shares in issue - up from 70 million to 77.3 million - will depress earnings; some brokers have downgraded their earnings per share projections from around 35p to 25.8p. This would represent a 22 per cent drop on 1997/8's earnings.

Mr Moran told The Irish Times that trading in the second half was "more severe" than anticipated and that budgeted sales were not met. Sales to Russia and eastern Europe by Constance Carroll, the British manufacturer of colour cosmetics, were budgeted at £6 million.

However, sales were virtually nil - just $100,000 was generated. The other disappointment was Royal Sanders, the Dutch manufacturer and distributor of personal care and household products. It had budgeted for exports of some £6 million but only managed £1 million. This, he added, was "very disappointing".

The difficult trading conditions have continued into this year. Its household products' division, particularly in the British retail market, is "also encountering difficult trading conditions".

However, IWP is confident that growth will be resumed in the next financial year. It should return to "double digit" growth, said Mr Moran. While the budgeted growth for this year will not be met, he stressed the long-term outlook remains positive. IWP noted that the recent acquisition of Jeyes has strengthened the group's market position in Britain. The budgeted synergies have been attained. The benefits, in terms of reduced costs, are expected to kick in from April. These "will have a significant" impact, according to Mr Moran.

He increased his shareholding in IWP last December, through the purchase of 1.25 million shares at 170p (215c), at a total cost of £1.2 million (€1.5 million). They have since fallen to 160c (126p).

Asked if he got his timing wrong, Mr Moran said he was "quite happy" with that investment and was "there for the medium term". He complained that the share price "does not reflect the value of the business" and questioned the low rating accorded to second line companies. Asked about the possibility of a dividend cut, he said that would have to be decided by the board. While it is "hard to be definite", he did not think a dividend cut was likely.