Bottom Line: Turning around, the Wassall way

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The Independent Online
WASSALL'S 26 per cent increase in profits to pounds 12m from existing businesses was a highly creditable first-half performance in mixed markets.

That is only half the story, given that the acquisition of General Cable only a month before the period- end has doubled its size.

With his enviable record in turning round under-managed businesses, the City wonders whether Chris Miller and his Hanson-trained team can deliver the goods at General Cable as skilfully as they transformed DAP and Metal Closures.

In many ways, they face a similar task. At DAP, the do-it-yourself products group, the product line was reduced by a third with almost no loss in sales. Margins doubled to 9 per cent.

Metal Closures, the bottle top maker, was making nothing on acquisition; during the half-year to June it made more than pounds 5m on less than pounds 40m of turnover.

That contributed to pre-tax profits of pounds 11.8m ( pounds 9.74m), a 15 per cent jump in earnings per share to 4.7p and a 19 per cent dividend rise to 1.15p.

General Cable's 10,000 different products are sure to receive the same aggressive treatment. The 5 million square feet of manufacturing space in 22 locations will be rationalised, and although margins will never match DAP's they could easily double from their current 2.8 per cent.

The only black spot on the horizon is the rising price of raw materials.

However, the very fact that copper is moving higher suggests an encouraging increase in demand for Wassall, which commands 15 per cent of the US market. Rising bottle top sales have more than made up for pricier aluminium.

With proven management, improving markets and scope for plenty more margin enhancement, the only question is whether the good news is already in the price.

On pounds 37m this year and pounds 52m in 1995, the prospective price/earnings ratio falls from 22 to 16, which suggests that Wassall's skills are pretty widely understood.

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