Fisons profits swallowed by one-off costs: Drugs group moves to put its affairs in order with write-offs and provisions

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The Independent Online
FISONS yesterday cleared the decks with more than pounds 90m of write-offs, provisions and extraordinary costs in a last-ditch attempt to straighten its affairs.

As a result the troubled drugs group, whose market capitalisation has shrunk from more than pounds 3.2bn to under pounds 900m since 1991, barely broke even last year.

It made pounds 1m pre-tax profits in the year ended December compared with pounds 123.6m in 1992. Trading profits shrank to pounds 37.4m (pounds 117.4m) on turnover of pounds 1.3bn (pounds 1.1bn).

Patrick Egan, Fisons' chairman and acting chief executive, said profits would have been nearer pounds 100m had it not been for abnormal factors, including a one-off pounds 40m decline in the key drug division's pounds 42.2m of trading profits.

Behind this fall lay a pounds 28m loss for the abandonment of 'front end loading', a practice dating from 1982 whereby customers were encouraged with incentives to place orders in December before the end of the financial year.

This meant sales were brought forward from January and February of the following year, making production unnaturally seasonal. The pounds 28m should be clawed back in the current financial year, however.

A further pounds 4m related to costs associated with the change, while a second pounds 4m was the cost of a consultancy study. The balance was down to the transfer of manufacture of solutions from the UK to France.

Other one-off costs included a pounds 20m restructuring charge which contributed to the pounds 39.6m loss in the scientific instruments division, and pounds 32.9m of losses on discontinued businesses. These included a pounds 14.5m write-off on disposals by the scientific instruments side and a pounds 13.1m write-off of goodwill on the anticipated sale of the European horticulture business.

Of the other two divisions, laboratory supplies made trading profits of pounds 27.6m (pounds 25.9m) and horticulture pounds 4.2m (pounds 3.1m).

Mr Egan said he could not imagine any further provisions being necessary. 'We have had a good clean out,' he said. 'We have set the business up to move forward.'

Fisons has long been rumoured as a bid target, but Mr Egan said that its share price - which, assuming profits of pounds 100m, is on a multiple of around nine times earnings - grossly undervalued the company.

'We should be in the 15-17 times earnings range,' he said. 'This is a high-quality business.'

The shares were steady at 130p.

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