Little to show for Albert Fisher's three-year revamp

The Investment Column

Stephen Walls became chairman of Albert Fisher in July 1992. Since that time the food processor's shares have fallen 35 per cent, even after yesterday's modest uptick, and have underperformed the rest of the market by 61 per cent. Trading for all food manufacturing companies has been difficult during that period, but this is nonetheless a failure of dramatic proportions.

Figures for the year to August were billed as marking the end of Mr Walls's three-year restructuring programme. It certainly went out with a bang - underlying profits of pounds 40.1m, up a fraction from last year's pounds 39.5m, were blown away by a pounds 151m exceptional item that covered Fisher's withdrawal from operations in Germany, Spain and most recently North America. The company trotted out the usual nonsense about this being nothing more than a book-keeping exercise, but as far as shareholders are concerned, this is real money that the company has squandered.

The rot started long before Mr Walls assumed executive control, but despite his claims to have transformed the group from a commodity food supplier to a value-added processor, all the important measures have continued to move in the wrong direction. Since 1990, earnings per share have fallen from 9.2p to 4.1p, even before exceptional charges. The operating margin of almost 7 per cent at the beginning of the decade is currently under 3 per cent. Shareholders' funds have been in steady decline, net cash has been reversed into gearing of more than 60 per cent and the number of shares in issue has risen by more than a sixth.

Figures for the 12 months to August were the usual mixed bag with the seafood division the most notable disappointment. Despite increasing sales from pounds 305m to pounds 396m, operating profits only nudged ahead from pounds 7.5m to pounds 7.7m. The usual litany of weather-related excuses was rolled out, but it could not disguise the fact that the targeted 5 per cent return on sales looks like so much wishful thinking. European fresh produce also failed to match expectations.

Elsewhere there were encouraging signs of improvement from the European food processing arm, where profits jumped from pounds 12.1m to pounds 19.4m and, on a smaller scale, in the continuing North American produce businesses where, on flat sales, profits increased from pounds 3.3m to pounds 5.2m.

Reflecting those hopeful signs, Fisher's 3.75p dividend was maintained, the main impetus behind an 8 per cent rise in the shares yesterday from 39.5p to 42.75p. It is quite some indication of the market's continuing scepticism that, after the rise and despite as strong an indication as Mr Walls is allowed to give that the payout will be held in the future, they now yield almost 12 per cent.

On the basis of forecast profits this year of pounds 45m and pounds 48.5m next time, the shares trade on an undemanding price/earnings ratio of 9. Undervalued, but until the market learns to believe management's optimism, or unless an earnings-enhancing share buy-back appears imminent, they are likely to remain so.

Another warning from Jacques Vert

Jacques Vert, the womenswear retailer and wholesaler, may covet an upmarket reputation for its clothing but its shares are more suited to a charity shop. The company issued yet another profits warning yesterday - its fourth this year - and warned investors not to expect a profit until 1998. This comes after the company passed on its dividend earlier this year and parted company with its chief executive who had been in post barely four months.

It is a sorry tale. Few analysts now bother to follow the stock and it is difficult to see shareholders persisting either.

The shares plunged 30 per cent yesterday to just 29.5p. They have now lost around 90 per cent of their value since May 1995 when the shares stood at 217p. In those heady days the company was starting to build a reputation as a retailer rather than a rag trade wholesaler and the shares had risen sharply.

Yesterday's warning was prompted by orders for the spring-summer 1997 season coming in below expectations. The recovery in retail sales in the first quarter has turned out to be a false dawn with sales of the autumn and winter lines proving disappointing in the second quarter.

The company has paid the price for deserting its core audience last year. With a reputation for quality suits for weddings, Ascot and the like, Jacques Vert drifted towards a younger, more casual look. After commissioning some market research to find out who its customers are it is returning to a more formal look for the over 50s.

Chairman Bill Reid says the research will be used to influence future product designs though these will not be in the shops until next year. A re-organisation of the retail portfolio is continuing with the worst stand-alone sites and concessions being closed. The company has teamed up with House of Fraser to open concessions in its department stores.

Jacques Vert announced losses of pounds 5m in August together with stringent new banking facilities. The company says it is operating within those new limits which run until next May. Analysts are forecasting a pounds 3m loss this year with break even next. Avoid.

MY wraps up a good year

Paperboard and plastic packaging may not sound terribly exciting but parts of the sector - pharmaceuticals and the higher-tech end of the food business - are showing good growth. Few companies are as well placed to benefit from that as MY Holdings, which yesterday turned in an impressive set of full-year figures, more than justifying the doubling of its share price over the past 12 months.

Pre-tax profits of pounds 12.6m were better than expected, struck from a 13 per cent increase in sales to pounds 86.8m. Earnings per share of 6.67p, 28 per cent higher, left a full-year dividend payout of 2.4p, up a fifth, well covered.

Encouragingly, margins in all MY's businesses were better as more volume was pushed through the company's plant and the mix shifted away from commodity industrial work. The return on sales of 14.5 per cent was 2.5 percentage points better than in the previous year.

One of the main drivers of this impressive performance has been demand from the growing pharmaceuticals industry where complicated packaging requirements ensure good margins. Healthcare accounts for 24 per cent of sales but 36 per cent of operating profits.

The other main division, food and consumer packaging, is also enjoying good growth with profits a third higher than in 1995. Demand for chilled and ready-meal packaging continues to grow as our eating habits change.

One of the great unknowns about MY is the fate of 64 per cent of the shares which Malbak, a South African conglomerate has said it may sell. Set against the overhang that represents is the possibility that a predator might use the opportunity to launch a bid.

On the basis of forecast profits of pounds 14.5m, the shares, up 4p to 105.5p, trade on a prospective price/earnings ratio of 13. Compared to earnings growth of almost 20 per cent that is harsh. Good value.