A reduction in like-for-like annual profits is forecast at Lamont Holdings, the Northern Ireland textile group, partly due to increased losses being suffered at its Irish linen offshoot, Moygashel.

The profit warning accompanies miserable interim figures. Although first-half profits increased £500,000 to £3.54 million, the sale of the group's interest in the Connswater property development in Belfast produced one-off disposal profits of £2.8 million.

Adjusting for the Connswater profits and exceptional redundancy charges, like-for-like interim profits before tax shrunk by £1.6 million to £1.34 million. Turnover fell £1.5 million to £42 million. The main factor behind the profit reduction was a £2.05 million collapse in operating profit earned on fabrics and fabric printing where turnover declined £2.3 million at £30.75 million.

In particular, Moygashel suffered a sharp increase in first half losses due to a £2.8 million reduction in turnover to £4.9 million caused by a change in the timing of retail buying.

Confirmed linen apparel order books are currently similar to last year's in a good market, said Lamont chairman, Mr Paul Vaight. But customers have "significantly" delayed committing to colours until much later in the year. Customers are now confirming their colour selection and Mr Vaight said that Moygashel revenues will "grow substantially through the second half as finished product is despatched".

Inevitably, though, some of the off-take may be postponed into 1999, adversely affecting second half profitability.

While the Moygashel problems were caused by changes in the market, operational difficulties were experienced in commissioning new production plant at Bonded Fibre Fabrics. Production runs were frequently interrupted with loss of output and increased costs and wastage. Good progress is now being made in overcoming these difficulties, and Mr Vaight says expected efficiency gains from £7 million plant investment "are starting to come through".

Elsewhere, turnover increased by £800,000 to £11.3 million at the group's carpet and carpet-yarn interests in Northern Ireland. But margins were squeezed in the fiercely competitive British market, leading to a £130,000 decline in operating profit to £790,000.

Despite the current year setback, Lamont directors believe the group is well placed to exploit its key market positions.

Although the interim dividend is unchanged at 3.5p, the market in Lamont shares is braced for a reduction in the final figure on the assumption that second half trading realises the board's forecast of lower profits.