The recent profits warning for the Big Food Group came as a big surprise since the group has such a strong management team.
City analysts believed the group, managed by Bill Grimsey and Bill Hoskins, to be experiencing a turnaround in trade. However, the profits warning has led to shares dropping 59 per cent to 38p. In December 2000 shares were valued at 339p. The group's frozen foods division has reported a loss for first-half trading, compared to an £8m profit in 2001.
Directors of the company were left to explain to shareholders what had been happening.
John Smelt from Aegon Asset Management, one of the group's largest shareholders, told the Financial Times: 'Investors' faith in the turnaround story has been dealt a big blow. Part of the value of the stock was faith in management. This will be a concern hanging over the stock for some time.' Questions have been raised over the group's financial future, with a cash injection being needed to help ease debt worries.
Grimsey, however, said the group would not breach any of its covenants because of the profit shortfall expected in the first half of the current year.
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