Bottom Line: Fishery limits

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The Independent Online
IT IS difficult, on the other hand, to argue with the stock market's reaction to seemingly constructive news yesterday from the food processor Albert Fisher. Its shares, despite a dividend yield which is twice the stock market average, were marked down 10 per cent following the announcement of an acquisition, a rights issue and flat interim results.

The purchase of Rahbek, a Danish fish processor, is sensible enough and fits with Fisher's ambitions to add value to commodity products. But for pounds 40m in cash, plus the assumption of pounds 19m debt, it looks expensive. The total consideration is about 25 times Rahbek's 1993 after-tax profits, albeit in what is said to be an off year.

The one-for-six rights issue at 52p is to redeem pounds 48m of preference shares. But gearing will remain only a shade below 50 per cent once the rights money is offset against the acquisition costs.

Thanks to the sale of the Charles Sidney motor dealership, Fisher's half-year pre-tax profits rose from pounds 23m to pounds 31m. Operating profit, however, fell and margins in the ongoing business were squeezed from 4.3 to 3.9 per cent.

At 57p, down 6p, the shares are well below the theoretical ex-rights price of 61p. The interim dividend was held at 1.85p and if the full year payout is maintained the yield is 8 per cent.

With cover at barely 1.5 times underlying earnings, however, a maintained dividend in future cannot be a foregone conclusion, whatever Fisher's chunky US shareholders may wish. A p/e of 11 may discount the worst but upside is limited.