SHARES in textiles group Lamont Holdings fell 22p to 262p after the board disclosed mounting financial difficulties at its Shaw Carpets operation in Yorkshire and continued losses at its Moygashel linen business in Northern Ireland.
Although Moygashel is expected to return to profit next year, the Shaw Carpets situation, has deteriorated to such an extent that directors have decided to seek a buyer for the business and will close the plant if it cannot be sold.
The financial problems at Moygashel and Shaw undermined the group's profitability in the first six months of this year when Lamont's other activities performed well with "very satisfactory" results at Northern Ireland Carpets and carpet yarn spinners B.H. McLeery, both based in Newtownards, Co Down.
Overall group pre-tax profits, excluding property disposal, fell £1.1 million to £2.1 million sterling on turnover down £5.6 million at £58.9 million. Despite the setback, the board is paying an unchanged interim dividend of 3.65p a share.
The haemorrhaging at Shaw Carpets took the form of a £1.2 million increase in losses to £1.8 million on turnover down £550,000 at £10.68 million.
Growth in Shaw's losses is particularly disappointing" coming so soon after extensive restructuring and cost-cutting exercises in late 1994 designed to restore profitability. Financial difficulties mainly centre on marketing and product pricing issues rather than labour problems.
Chairman Dr Paul Vaight says the board "is determined to ensure that Shaw's losses do not continue". The board is now hoping to sell Shaw as a going concern. If a buyer cannot be found, the business will be closed.
Excluding future trading losses, estimated closure costs are put at £8 million. But Dr Vaight says the net cash inflow will be about £4.5 million, depending on finding a buyer for the vacant, plant.
Financial difficulties at Moygashel, at Dungannon, Co Tyrone, are much less severe. Although Moygashel's losses are not divulged by the board, analysts estimate that its annual losses are still running at around £1 million on turnover approaching £23 million. This compares with estimated 1994 profits of some £2 million earned on turnover slightly above £26 million.
After growing it's profits on back of the Irish linen boom the early 1990s, Moygashel wrong-footed by an unexpected fall in demand in 1995 caused by excess inventories in the fashion industry.
The market demand for linen has now stabilised at a level similar to underlying demand year but with greater emphasis coloured woven cloth, says Vaight, and Moygashel will to service this demand rat than gear up permanently to short-term peaks in demand.
The furnishing fabrics side of Moygashel is also having a "disappointing year" in a market place which has become increasingly fragmented and competitive.
