Investment Column: Meyer gets a better balance

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The Independent Online
IT HAS been a busy few months for Meyer. Acquiring the Harcros chain of builders' merchants last December and selling off the softwood and panelling business has already shifted the balance of its business.

In the year to March turnover increased by 10 per cent to pounds 1.25bn and pre-tax profits, before exceptional charges, rose by 20 per cent to pounds 53.4m. The Jewson builders merchants accounted for over half the turnover and almost three-quarters of operating profits against 40 per cent and 46 per cent respectively the previous year.

A four-month contribution from Harcros added pounds 10m to operating profits and helped lift Jewson's margins from 5 per cent to 7 per cent, doubling operating profits from the builders merchants business to pounds 41m.

The acquisition also created an exceptional charge of pounds 23m, while selling the timber business added a further pounds 11m of exceptionals. Interest charges trebled to almost pounds 8m and a combination of falling softwood prices and the strong pound reduced operating profits by another pounds 6m.

This year margins the costs of integrating and rebranding Harcros will hold back margins. However, Meyer's chief executive Alan Peterson expects the deal to yield pounds 10m worth of savings this year, rising to pounds 20m in the future. Margins should reach 8 per cent by 2000 if the housing market continues to grow.

Nevertheless, brokers yesterday scaled back profit forecasts for the current year from pounds 76m to pounds 73m. The shares have risen strongly this year but fell 6p to 424p yesterday. At 14 times forecast earnings they look high enough.