A clear-out of underperformers, alongside a decision to fix the focus single-mindedly on the Scholl brand, has already worked wonders for operating margins, which have jumped by more than a third in the six months to June. The effects of that on yesterday's interim results are muddied both by the pounds 35.7m exceptional charge taken last time and the negative impact of the pound in the latest figures. At the pre-tax level, losses of pounds 21.9m turned into a surplus of pounds 15.4m, but stripping out the effects of one- offs and exchange rates, underlying operating profits were up 25 per cent. There is still a bit more to go for on margins. But the real test for Mr Wallis and his team is to prove their ability to build the top line.
Scholl has strong positions in some markets, notably the bunions to deodorant footcare products business and in sandals and other footwear sold through chemists. The hope is that further expansion into chiropody services at its 90 European retail outlets and new products will get sales moving.
Only time will tell, but there should be scope to pump more products through the distribution network. The management is also ready to contemplate acquisitions with firepower which could be worth up to pounds 100m. Meantime, there are no talks with Schering Plough, Scholl's original owner, about buying the US operations, the one part of the business Schering still retains, but the possibility of Schering bidding for Scholl plc could provide some support for the shares, up 7p at 286p yesterday. At that level, they stand on a forward p/e of 17, assuming profits of pounds 22.5m in the full year. Reasonable value.