Jones share price to fall after second profits warning in four months

JONES Group shares are heading for a sharp fall after the second, profits warning from the manufacturing, distribution and shipping company within four months.

Jones shares did not trade from their overnight 200p, but Davy stockbrokers were last night quoting a 100p 150p bid offer spread for the shares although some, other broking firms were quoting a 170p 200p spread. Whichever spread is correct, it seems certain that Jones shares will fall at least, 30p and possibly much more when they next trade on the Irish market.

In the second profits warning in less than four months, Jones has said the out turn for 1995 will be well below expectations. Since the first warning in October 1995, trading conditions have "deteriorated", and, as a result, the out turn for 1995 "will be significantly lower than currently anticipated by the market yesterday's statement said bluntly.

On top of this substantial downturn, Jones will have to contend with restructuring costs. The group has not quantified the outturn for 1995, but profits could fall to less than £500,000, the lowest level since it went public in 1973. This would imply losses in the second half.

Asked about redundancies, chief executive Mr Pat Nevin said "certain redundancies have occurred in the radiator businesses in Britain and Ireland". Oil distribution in Britain also had some redundancies. He said he could not quantify the extent of further redundancies "at this stage" because the group is "continuing to review the businesses".

The plan, said Mr Nevin, was to adjust these businesses so that they are matching demand. No improvement is expected in the British radiator business this year, but the refocussed companies are expected to perform better.

Although Jones maintained the interim dividend of 4p net a share, the maintenance of the final dividend must be in jeopardy. A maintained final dividend would have to be paid out of reserves, so it is likely to be either cut or passed altogether.

Jones is being hit on two fronts. The radiator division is being adversely affected by a further deterioration in the British construction market which accounts for 90 per cent of its radiator sales. The distribution business has had to contend with the mild summer, which has resulted in a downturn in the second six months.

The only brightish glimmer is in the shipping division which is performing as anticipated. This division is to be expanded with the purchase of a 6,600 tonne deadweight tanker from the Dutch shipbuilding yard Barkmeijer Stroobos. It will be able to carry 6,000 tonnes of cargo, bitumen, oil and chemicals.

The tanker will cost £11.05 million and delivery is expected in June 1997. This contract will have to be approved by the Jones shareholders at an extraordinary general meeting.

The ship will be financed from cash flow and borrowings. The group's gearing will be less than 40 per cent at the end of 1996, when substantial payment would have been made, said Mr Nevin. He also expects a strong profit recovery from the group this year. That, however, will be from a very low base.