Investment Column: Marginal success at Nightfreight

Put good management into a bad business, so the saying goes, and the business usually wins. Nightfreight's new management team are hoping to be the exception to the rule. Installed last May after the parcel carrier had issued its umpteenth profits warning, chairman David Cobb and chief executive Ron Sullivan are trying hard to turn the business around.

Contrary to the grim impression given by yesterday's full-year results, which showed pre-tax profits dropping 30 per cent to pounds 3.77m, they appear to be succeeding. Margins in both the parcels and the logistics divisions improved in the second half as management concentrated on cutting costs.

The long-term aim is to get group margins back to around the 9 per cent level they were in 1995. In 1997, they were just above 4 per cent.To achieve this, Nightfreight is doing things like using postcodes instead of the old county boundaries to route its parcels.

That said, there is still a lot to be done. Amazingly, the company owns half its truck fleet even though leasing deals are more attractive than ever. Gearing, though falling, remains over 100 per cent.

With such a desperate history behind it, investors will want to see results before sinking any more cash into Nightfreight. But on a multiple of just seven times house broker Panmure Gordon's 1997 earnings forecast, the shares, up 2p yesterday to 32.5p, can hardly go any lower, and there is always the chance of a bid. Risky, but worth a punt.