City File: Everything in Fison's garden is not so rosy
Sunday 06 March 1994
With pre-tax profits for the year down by at least 30 per cent to anywhere between pounds 50m and pounds 70m, Fisons is paying the price for its former habit of boosting the figures by counting sales to its own wholesale business as profits.
'It's a kitchen sink job,' one industry expert says. ''Fisons is throwing everything at the profits to reduce them.' Last week Fisons also got rid of the European fertilizer business. But not even the best of Growmore bags can shorten the long, hard winter suffered by the shares, currently at 128p.
IT can be hard for management to admit to a mistake, but shareholders in the upholsterer Rexmore have profited handsomely from the Rosenblatt family's decision to ditch its loss-making timber acquisition now that the shares have risen from 24p to their current 83p in the past year. Nevertheless, there is still time to climb aboard.
At the halfway stage in the current year the company bounced from a pounds 143,000 loss to pounds 688,000 profit. House broker Panmure Gordon expects that to turn into a pounds 1.5m profit for the year to March, against a pounds 1.4m loss in 1992-3.
That would translate into earnings per share of 9.6p, helped by the fact that Rexmore will remain untaxed for a couple of years. That puts the shares on a prospective earnings multiple of 8.6 and yield of 3.4 per cent. Good value.
ENTERPRISE Oil is due to reach peak production this year, mostly in the North Sea, just as the oil price threatens to slide below dollars 13 a barrel. Pre-tax profits, due out on Thursday, will fall to about pounds 126m from pounds 145m the previous year, and should stay flat in 1994.
Yet Enterprise will also be generating as much as pounds 200m in uncommitted cash flow, which will be useful for expanding its exploration programme and paying down its debts. It is also by far the most active independent in the North Sea, with excellent acreage.
It is drilling in Italy, has a two-well programme in Cambodia, and is about to start work in Romania. The Black Sea business looks especially promising. So Enterprise is not heading for the dividend cut some analysts are predicting. Whether the shares are a buy is another matter. NatWest Securities says sell; Henderson Crosthwaite says buy at 427p.
THE boom in mobile telephones has proved a bonanza for electronic components suppliers such as Abacus. The company provides cabling for 'base stations' that look like blots on the landscape but are vital for creating a national mobile telephone network.
Exports are also growing steadily as Germany and Middle and Far Eastern countries set up their own mobile phone infrastuctures. Not surprisingly Abacus's cabling factory is working round the clock, necessitating a move to bigger premises in Gloucestershire.
Nex week Abacus is due to take a party of City analysts on a site visit - a move that could lead to a substantial profit upgrading. At present, the company is expected to make pre-tax profits of about pounds 3.8m for the year to 30 September, rating the shares at 193p, on 22 times earnings. But they look set for a flurry.
THE market has still not totally forgiven Hillsdown Holdings for the exuberance of its overexpansion into every type of food in the late 1980s. In the past few months the shares have crept back to 175p, but this is a long way from the glory days four years ago when they peaked at nearly 300p. Next week's results will show that the new management team installed in early 1993 has cleaned up the group so thoroughly that it is in good shape to take advantage of any upturn in the food business. Meanwhile, now that gearing is down below 40 per cent, the dividend is safe, and the yield of over 6 per cent looks extremely tempting.
OLD connections die hard. Robert Earl is about to appoint his old friends at UBS Securities as co-brokers to Pelican Group. The former Hard Rock Cafe boss runs the growing US end of this trendy group of thematic restaurants, while chairman Roger Myers, no mean theme-merchant himself, runs the British end. They now have a dozen branded chains in both Britain and the US, with names ranging from Cafe Rouge and Mama Amalfi to, wait for it, Cafe Tu Tu Tango.
Bringing in UBS is a step aimed at building up institutional support for the fast-expanding chain. The shares have risen to 86p since we recommended them in January. But they're still worth following.
TI Group is still dogged by a depressed aerospace market following its acquisition of Dowty. Nevertheless, it is likely to report 1993 pre-tax profits of at least pounds 125m on Thursday compared with pounds 87.4m in 1992 - a figure struck after pounds 20m of exceptional costs. With luck, there may be news on its planned joint landing gear venture with the French group Messier-Bugatti. The deal is taxiing painfully slowly through the corridors of assorted French ministries. Completion should boost the shares, which closed 13p up at 427p on Friday.
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