LIG to shed 200 jobs in photo lab closures

LONDON International Group, the condoms to cough mixture group, is to close three photograph processing laboratories and shed 200 jobs following a slump in demand for photo development.

The number of films processed annually in Britain has fallen from 94 million to 84 million in the past three years as fewer people have taken holidays, which usually stimulate the taking of pictures. The trend has been exacerbated by the poor weather this summer. Meanwhile, fierce competition among rival processors has caused the price of film developing to fall in real terms.

Operating profits from LIG's photo processing division fell from pounds 11.5m to pounds 6.3m in the six months to September, despite a pounds 3m increase in sales to pounds 73.9m as it continued to gain market share.

The three closures - in South Shields, Park Royal in west London and Enfield - will bring the number of laboratories down to 10. A number of distribution depots have also been closed since the recession started. The closures will cost pounds 2m, which will be charged against profits for the full year.

Tony Butterworth, LIG's chief executive, said the aims of the shut-downs were to lower the cost base and achieve a network of 'bigger labs, in strategic locations'.

The poor performance from photo processing meant that the group's pre-tax profits, before exceptional items, fell from pounds 20.5m to pounds 15.5m. Last year, there was a pounds 13.4m exceptional charge for the closure of its surgical glove plant, which pushed taxable profits down to pounds 7.1m. Earnings per share, before exceptionals, fell from 8.27p to 6.37p, but the interim dividend was held at 3.2p.

Borrowings rose to pounds 134.1m - more than shareholders' funds of pounds 126.2m - compared with pounds 107m at the start of the year, partly because of seasonal fluctuations. But working capital rose by pounds 26m, reflecting higher stock levels. Mr Butterworth said that cash flow should be positive for the full year and added that the medium-term objective was to reduce debt to less than half shareholders' funds.

Health and personal products, which include Durex condoms, surgical gloves and tights, rose from pounds 13.6m to pounds 16.1m. LIG is winning market share for condoms in Europe and is gaining new business in South-east Asia - the fastest-growing market for the group - and Latin America.

Biogel, the hypoallergenic surgical gloves introduced in the US two years ago, have achieved an 18.2 per cent market share. Profits from industrial gloves rose, despite the recession, but demand for household gloves was poor.