Too hot in the Enodis kitchen

Enodis; InterX; GeneMedix
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The Independent Online

Enodis, the maker of industrial fridges and cookers that changed its name from Berisford a year ago, has lost none of its capacity to disappoint.

Overzealous company forecasts last year forced it into an embarrassing profit warning. Then its US markets took a turn for the worse this year. It sold its Magnet kitchens business at a knockdown price as part of a big restructuring. And yesterday it dashed hopes of a takeover, saying three bidders had been unwilling to pay anything close to the 170p a share that its biggest investors had hoped to get.

Those unlucky enough to have bought in after weekend speculation of a deal, saw the shares fall 13 per cent to 117.5p.

Like Enodis, potential trade bidders are encumbered by debt, so many preferred to concentrate on muddling through the US downturn. The market for food service equipment – where Enodis supplies dishwashers, ice machines and the like to caterers – is some 10 per cent down on last year. Food retail, the market which includes chiller cabinets for shops, is even worse, down 15 to 20 per cent. Enodis has itself shed 900 jobs already, and it is almost certain that more will go.

The good news yesterday was that there was no new bad news on trading. The company said business had been in line with the market's low expectations. Analysts at UBS Warburg predict £70m profit in the year to September, down from £102m last time. But the company cautions that a good deal of its sales traditionally come in September, so market forecasts are by no means in the bag. Expect a fuller trading update in a few weeks.

There is no sign yet that this will show a pick up in the market, which may yet be more than a year away. Even then, Enodis is accident-prone and it will take time to establish any confidence in the company.

For the time being, potential buyers have proved unwilling to show that confidence. No potential chief executive has shown that confidence, either, and the company still has a vacancy at the top. Investors should be wary too. Avoid.

InterX

No company in the software sector is having an easy time this year, but InterX really is a dog's dinner. After admitting that the acquisition it bet the ranch on last year had not gone to plan, its management team were axed and the original founders brought back in.

They have embarked on a massive cost-cutting exercise while trying to salvage something from the wreckage. Consequently, the company's results for the 11 months ended 30 June make particularly unpleasant reading. It reported a pre-tax loss of £60.6m, hit by hefty goodwill write-downs and restructuring charges, while sales were a measly £5.6m. Comparisons with the previous year are meaningless because the business has transformed itself from a computer distributor into a software seller.

The restructuring, in which 25 per cent of its workforce were shown the door, reduced InterX's quarterly cash burn to £1.1m. It had £17m cash remaining at the end of June.

Not for the first time, InterX is being touted as a recovery play. But that looks optimistic. The company had to stop selling its core Bladerunner product and wind down contracts with existing customers. The website management software package just didn't do what it said on the packet. Now InterX hopes Bladerunner will prove useful in other fields. However, with the current economic climate forcing businesses to delay buying software, the prognosis is not good.

Shareholders cannot expect much upside from InterX's basket of investments either, since some are likely to need further funding.

They include a stake in computerweekly.com, an online IT news website, and a holding in Diligenti, a business offering various services to the pharmaceuticals industry.

Analysts are forecasting losses of around £56m in the current year on sales of around £5m. Its shares, which traded as high as almost £40 at the peak of the internet boom last year, closed last night at 126.5p, down 9.5p. With so many uncertainties and profits not even visible on a five-year horizon, only fools would rush in.

GeneMedix

Fancy getting into a future pharmaceuticals giant before it really takes off? Take a look at GeneMedix. The company is building drug factories in China, Ireland and Malaysia to produce cheap copies of other companies' biotech drugs for sale to markets where they do not enjoy patent protection.

Because costs are low in the Far East, GeneMedix should be able to undercut the established drugs, and position itself to get into Western markets when the products go off-patent there in about 2005.

Yesterday's interim loss of £680,000 was expected and the house broker forecasts break-even next year. The shares, steady at 79.5p, are high risk, but potentially high reward.

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