The Investment Column: Cray offers a lesson in wonder shares
With luck, yesterday's results for the year to April should mark the nadir of the group's problems, although the imminent departure of Roger Dye, the only recently appointed finance director, is not a good omen. An pounds 835,000 profit in 1995 has been replaced by a massive pounds 19.4m deficit at the pre-tax level after new management threw in all the bad news it could find.
That the dismal tidings were hardly unexpected is reflected in the modest 3.5p dip in the shares to 41p yesterday. Most of the pain last year was borne by the Communications business, which makes equipment for and installs computer networks.An pounds 8.2m write-off on stock as a result of weeding out loss-making products and reducing the portfolio is only slightly higher than previously indicated. But the decision to concentrate the business on Watford has led to a further pounds 2.6m property charge.
That comes on top of a pounds 4.2m provision taken elsewhere to try to cap the running sore of paying uneconomic rents for properties now empty after the decision to reverse the previous expansion programme. Even so, Cray faces a annual drain of at least pounds 2m for rents which will wipe out the cost savings to be derived from the latest factory closures.
Management has taken decisive action to focus the business, symbolised in yesterday's pounds 11m deal to sell the profitable P-E International management consultancy operation to the AIM-quoted Lorien. The communications business now boasts an order book of pounds 79m, bigger than last year's turnover, and appears to have a potential best-seller in its ethernet switch. The partnership deals with industry leaders like Cisco and Stratacom of the US also look sensible for a tiddler like Cray.
Therein also lies its problem, as Cray is up against giants like BT and IBM. Profits may rebound to pounds 6m this year, putting the shares on a heady multiple of over 20, but the real hope must lie in takeover prospects. Hold.
- 1 Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Dad attempts revenge on teenage daughter, plan backfires spectacularly
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Isis 'throw man off a building for homosexual affair' and beat him to death when he survives
Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
Boris Johnson claims porn-obsessed Islamic jihadists are 'literally w*****s'
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Ball pool for adults opens in London
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...