Meyer heads out of the woods: The Investment Column

Meyer International is at last showing signs of emerging from the gloom in which nearly all its operations have been immersed since early last year. Last year's 15 per cent plunge in timber prices, which caused so much pain in the forest products timber importing business, seems to have bottomed out since April. Meanwhile, decisive management action is successfully starting to address the impact of a still dull housebuilding market on the main builder's merchants chain.

Yesterday's figures, however, show how serious the damage has already been. Pre-tax profits crashed from pounds 51.6m to just pounds 1.1m in the year to March. Stripping out an unexpected tax credit, exceptional costs came in at a higher than expected pounds 37.3m, and even before those charges, underlying profits from continuing operations slid 26 per cent to pounds 44.4m.

With luck, the worst should be over. The sale of timber and merchanting operations in the US and Germany will eliminate losses totalling around pounds 2m.

More importantly, the pounds 22.3m investment programme to revamp the Jewsons chain of UK merchants is showing benefits. Excluding the cost of axing 500 jobs last year, margins grew from 5 to 5.9 per cent. Next year could see the virtuous circle of Jewson winning back some of its lost market share while boosting margins to approaching the 7.5 per cent enjoyed by Travis Perkins, the industry pacesetter.

Sentiment should be improved by yesterday's appointment as chief operating officer of Alan Peterson, who joined the board a year ago from BTR's Rockware glass business. It would be better still if Meyer sold the volatile forest products business, which saw its profits slump from pounds 23.4m to pounds 13.8m last year, but John Dobby, chief executive, has firmly ruled that out.

Hopes that a rival like Wolseley or Harrisons & Crosfield might do the job for him explain the recent run-up in Meyer's shares. But a bidder might have difficulty extracting more value than existing management, while the the market could still turn down again.

Profits rising from, say, pounds 45m this year to close to pounds 60m next would put the shares, down 4p at 411p, on a forward multiple of around 14. Hold.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003