Bottom Line: Wace looks to a multi-media future

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THE renaissance of Wace, information handler and printer, appears more or less complete.

Pre-tax profits for the six months to June rose 57 per cent to pounds 11.1m, while earnings increased 144 per cent to 10p a share - a far cry from the pounds 26m loss in 1992. The advance was all the more impressive for being achieved in the face of intense price pressure.

Paper pulp inflation is working against the group, but Wace keeps a tight rein on costs. Another 181 jobs were shed, taking total numbers down 13 per cent in the past three years to 4,440. Productivity measures, including simple steps such as invoicing earlier, also helped operating margins widen from 6.9 to 8.6 per cent.

With its past troubles just about sorted out, Wace is looking to the future. Its main business is transforming packages of information in raw form into film ready for the printing press, and printing.

In future, it wants to cash in on the rising demand for multi- media by handling and transmuting data for media other than print. It is a brave step, and one not guaranteed to succeed. However, Wace has proved it can run its traditional business profitably.

Investors can also draw comfort from the company's success in cutting debt. It struggled under borrowings twice the size of net assets three years ago. Now debt is halved, largely thanks to internal profit generation, and the gearing ratio down to 80 per cent.

At 264p, up 10p yesterday, the shares trade on a forward price / earnings ratio of 17.5 - bang in line with the printing and packaging sector. But if Wace can deliver on multi-media, it could be rewarded with a premium rating.

Long-suffering shareholders have some way to go before recouping the falls of 1989 to 1993. Relative to the market average, Wace shares languish at 50 per cent of their value five years ago.

However, the shares have outperformed by 250 per cent during the past 18 months. Even so, Wace holds attractions for new investors.

The 50 per cent increase in the interim dividend to 1.5p gives a clear indication of management's confidence. The yield is a paltry 2.1 per cent, but Wace is a growth stock. Buy.

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