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Shares in Smiths News Plc fall as much as 13 percent as the largestnewspaper and magazine distributor in the UK forecasts first-half profit similarto the year ago period, hurt by lower margins, price competition and increasedinvestments in its Bertrams book wholesaling business.
"Books is significantly weaker than expected and more than offsets a strongperformance at newspaper and magazines," Liberum analyst William Shirley says ina note.
"Margins are low given the relatively high dependence on Amazon andthe investment costs of a new business."
The brokerage nearly halved its forecast for earnings before interest andtax in the books business to 4.7 million pounds ($7.88 million) and cut itsearnings per share forecast for the company by 6 percent.
Liberum also cut its price target to 220 pence from 241 pence, but retainedits "buy" rating on the stock.
Smith News posted first-half underlying profit before tax of 24.9 millionpounds in 2013.
The company is set to report results for the six months ended Feb. 28 onApril 23.
Shares in Smiths News were down 11.5 percent at 181.75 pence at 0916 GMT onMonday, making the stock one of the top percentage losers on the London StockExchange.
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Reuters messaging rm://abhirup.roy.thomsonreuters.com@reuters.net($1 = 0.5967 British pounds) (Reporting by Abhirup Roy in Bangalore)