Rationalisation plan as £4m is wiped off profits at Jones

JONES GROUP, the manufacturing, distribution and shipping company, has recorded grim results, as feared. It has announced a pre tax profit of a mere £114,000 for 1995, down from £4,123,000 in 1994. This implies losses were incurred in the second six month.

The results are as bad ads investors' worst fears, following the second profit warning in January. Shareholders had been warned to expect marginal profits due to problems in its radiator business. There was also an unexpected loss from Blugas, its LPG company.

Despite the severe downturn, and the depletion of its cash, it has decided to pay a final dividend of 4p, net per shares, down from 9p, making a total of 8p compared with 13p previously. Jones has to dip into reserves to make these payments.

The new group chief executive, Mr Pat Nevin, said the decision to pay a final dividend was made because a recovery is expected this year. However, a return to 1994's profit level is not anticipated in the short term. Rationalisation, he said, will help the company's cost base but it could be 1997 before, there is any recovery in the British radiator market.

Much of the costs incurred in 1995 are non recurring. However reflecting an uncomfortable underlying trend, an operating profit off only £266,000 was recorded down from a profit of £4,197,000 in 1994.

Sales of continuing activities fell from £87.1 million to £82.1 million. Earnings per share collapsed from 29.3p to 1.2p. Also, it has moved from a net cash position of £0.9 million to net borrowings of £10 million. Nevertheless, the gearing is still at a modest 35 per cent.

Chairman, Mr Denis Magee, blamed the poor results on the failure of the British radiator market to recover in 1995 in line with budget nary expectations, unanticipated cost overruns due to changes in manufacturing procedures, a mild winter a highly competitive British oil market and adverse currency movements.

Inadequate trading information on the radiator business was a contributor as was unexpected losses from Blugas. These problems area being addressed but at a cost of £1.1 million.

The shipping division, although broadly in line with budgets, had lower profits due to the weak dollar and the reduction in the fleet, following the sale of one vessel. These shortfalls, he added, were largely offset by a capital profit.

In the manufacturing division Mid West Circuits had a significant increase in profits. Tube Rollers "traded successfully". However radiators in both Ireland and Britain had "grave difficulties".

In the distribution division, the performance of Appian Fasteners was "satisfactory" with higher profits. In Ireland, however, the weather depressed the results from Jones Oil.

Looking to the future, Mr Magee said the year has begun well for the shipping division. Mid West Circuits continues to progress but Tube Rollers will be hit following the failure of a major customer. The difficulties in radiators "are not amenable to rapid resolution" and these businesses are not likely to return to profits this year.

Oil distribution is expected to be better and while Blugas should make profits these are unlikely to interest costs. A capital profit is expected to be generated when its headquarters at Beechill are sold.

John McManus writes Jones Group will look at the merits of disposing of some of its subsidiaries later this year, according to Mr Pat Nevin.

However, the short term was to return all its divisions profit, he said. In particular group will concentrate on making its radiator division profitable.

"Our focus is a turnaround strategy," said Mr Nevin, speaking after the an extraordinary general meeting of the company yesterday which approved the acquisition of one oil tanker and the construction Jones was not currently looking at disposing of loss making operations or any other dramatic restructuring said Mr Nevin.

"Long term these issues will have to be addressed. We will have to choose which businesses to develop," he explained.

Mr Nevin said that the company welcomed the decision by Mr Dermot Desmond to take a 3.3 cent share holding through his company International Investment Underwriting.

Mr Nevin acknowledged that he is under some pressure from other institutional shareholders to "do away with the loss making businesses". However, Mr Nevin said that he was addressing their concerns by trying to return all subsidiaries to profit.