Until recently this restructuring, largely masterminded by the chief executive, George Paul, had done little for the company's share rating. Between the beginning of 1989 and the end of March, Harrisons & Crosfield shares underperformed the stock market by 45 per cent.
This was partly because pre-tax profits were nearly halved from pounds 130.7m to pounds 71.3m between 1989 and 1991, underlining the point that while the company was diverse it was diverse in a number of decidedly cyclical sectors. Indeed, the output of chrome for timber treatment and pigments for colouring building materials ropes together its chemicals and building products divisions.
Since spring the company's market standing has improved. The pounds 67m purchase of BOCM from Unilever in April is expected to add pounds 3m or pounds 4m net of interest to profits in the second half after pounds 15m of reorganisation costs are taken against provisions. Interim figures to 30 June, out yesterday, show that determined cost-cutting has lifted pre-tax profits by 12 per cent to pounds 40.6m in tough markets. Meanwhile investors have gained confidence that their dividend income will be secure despite an uncovered payment in 1991 and the chance of a further, smaller shortfall this year.
With M&G - a vociferous proponent of the uncut dividend - as a near 10 per cent shareholder, one should perhaps expect no less. But the company appears happy to see gearing rise towards 60 per cent against 56 per cent now, assuming a maintained final of 7.2p. Disposals, mainly the freehold of its revamped City head office, could make a big dent in that figure.
At 134p, up 6p, Harrisons & Crosfield, yielding 9 per cent, is an attractive cyclical recovery share. But with no recovery in view a further re-rating may be delayed.