Profits fell 13.6 per cent at jewellery distributor Abbeycrest as higher diamond costs hit UK margins, writes James Crux.

'Margin was the problem', grumbles Abbeycrest's (ACR) finance director John Sutcliffe, following a 13.6 per cent pre-tax profits fall to £4.5 million at the gold and silver jewellery manufacturer and distributor. In the year to February, sales rose 12.4 per cent to £78.8 million, but higher diamond prices and a strong dollar hit fixed price supply contracts in the UK.

Sutcliffe regards the slump as 'a one-off' and is confident that diamond prices have now stabilized. But, after getting its fingers burned, Abbeycrest's forecasts for the current year are cautious, with management looking for a pre-tax profit of £5.5 million on sales of 'between £85 million and £90 million'. Sutcliffe admits that an area of concern is the effect that the US economic slowdown might have on the group's Thailand operation, Essex International. This has a 50 per cent exposure to the American economy.

More encouragingly, sales growth was recorded by every one of the group's companies and a £1.6 million sales contribution came from the newly acquired wedding ring manufacturer, Brown and Newirth. Abbeycrest enjoyed a 42 per cent uplift in sales in the Far East, where Dynamic Creations in Hong Kong and Essex International contributed a first full-year profit of £1.48 million on £16 million of sales.

The shares, which fell to 80.5p after the recent profits warning and which Sutcliffe described as 'trading beneath the net assets of the company', jumped 14.5p to a new 2001 high of 102p as investors picked them up on the cheap. Previously, the high was 101p and the low 80.5p. Earnings per share fell to 12p (16.6p).

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