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Abbeycrest hit by botched shake-up

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    By By Matthew Browne

    Date: Wednesday 21 Nov 2001

    LONDON (ShareCast) - Jewellery maker and distributor Abbeycrest said profits slipped in the first half as costs rose in the wake of a botched restructuring efforts at its leading UK business and debt climbed following recent acquisitions.

    In the six months ended August 31 pre-tax profits fell 3% to £509,000 from £523,000 a year ago. Despite a positive contribution from acquisitions, operating profits at its existing businesses, including jewellery manufacturer G&A, fell 25% to £741,000. But turnover rose 25% to £37.4m from £29.9m a year ago, boosted by £5.7m from acquisitions. Like-for-like sales rose 6%.

    The company said G&A ad been hit by rising costs following an abortive attempt to revive the under-performing firm. Bug-filled restructuring plans flew to pieces at the start of the year and performance caught the shrapnel.

    In order to limit the damage, Abbeycrest has hired more staff, a team of consultants, and raised inventory levels. Although trading had begun to recover by the summer, it said it expected the cost of these measures to be £1.2m by the year-end.

    Higher costs are likely to persist until the second half of next year when it hopes that the problems with its new systems can be ironed out.

    Meanwhile, financing costs almost doubled as interest repayments rose to £1m from £537,000 a year before after borrowings rose 43%. Abbeycrest blamed the rising costs at G&A for some of this but said acquisitions had also contributed.

    Its £4.25m purchase of wedding ring maker B&N in December 2000 was mostly funded through the issue of £3.4m in loan notes. B&N contributed £5.7m to group revenues and £911,000 to operating profits in the six-month period.

    It took on more debt to buy out minority stakeholders in its Asian operations. It spent $2.25m to increase its stake in Essex, its Thailand-based business, to 99.2%. It also bought a further 15% of Dynamic Creations Limited, its Hong Kong-based firm, raising its holding to 75%. This helped to boost earnings per share to 0.7p from 0.4p as it paid out less to its outside partners.

    Abbeycrest said demand for jewellery remained strong at the start of the second half, with orders increasing, especially for its UK businesses. Its international business also continued to expand, except in the US.

    The shares fell 6p to 82.5p on today's news, valuing Abbeycrest at £21m. Before today's figures, analysts had forecast full-year pre-tax profits of £5.5m and earnings per share of 15.9p.

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