ISA shares slip following warning

Distributor suffers a massive drop in share price after the City revises profit expectations. Wale Azeez reports.

Consumables distributor ISA International's shares plummeted by moreises profit expectations. Wale Azeez reports. than a third of their value last week, following a profit warning issued by the Leeds-based company.

According to the cautious trading statement released on 17 June, the company warned it had revised the outlook for its forthcoming half year and for the remainder of the year to 31 December, after trading performance in May fell below expectations.

The warning stated: 'The Board has concluded that profits for the year will be materially below current market expectations.' Shares fell 21.5p to 41p - some 34 per cent - after the announcement, as the City revised profit expectations from £8 million to £6 million. At its peak last year, the company's shares stood at 242.5p.

The distributor has been dogged by depressed European sales arising from a strong pound and cited squeezed margins in the indirect channel as a factor in its poor performance. Previously, ISA told PC Dealer that it intended to increase direct sales from 46 to 70 per cent (PC Dealer, 27 August 1997).

The firm issued a previous warning on 13 May at its annual general meeting.

At the time it said investment had been made in recruitment, but it was 'not expected to benefit the group until the second half of the year'.

According to last week's warning, the John Heath unit acquired in March 'will not make a meaningful contribution to the first half results'. Although the distributor had expected it to account for some revenue in the second half, it will be at a rate slower than anticipated when the unit was bought.

As such, it will retain 1997 dividend levels for shareholders.