Crean disappoints with marginal rise in profit

DISAPPOINTING results have been recorded by James Crean, the industrial holding company, which has announced a marginal rise in pre tax profit from £14.95 million in 1994 to £14.97 million in 1995. Sales rose a mere 1 per cent to £262.3 million. The company has performed below market expectations.

Higher interest costs, a fall in profits from the food division, adverse currency movements and the non receipt of interest from EJA, its former Dutch office products associate, are blamed for the lacklustre results. Interest costs went up from £4.4 million to £5.3 million. Adverse currency movements cost the group £1.1 million.

The operating profit from the US based food division dropped from £10.06 million to £8.86 million while sales fell 1 per cent to $147 million. This was mainly due to a 13 per cent decline in sales of frozen food, which was offset by a 24 per cent increase in canned poultry turnover to 58 million.

The drop in frozen food sales followed a loss of market share due to promotional initiatives by competitors. This slippage was reversed in the second half and the volume decline arrested. Canned poultry turnover grew rapidly due to a 41 per cent increase in sales to conventional supermarket outlets.

Crean sold its 50 per cent shareholding in EJA at the end of 1995 but still holds a subordinated loan of £9.5 million with a coupon of 7.2 per cent which is not being serviced.

EJA has been experiencing difficult trading conditions over the past 18 months which has resulted in it breaking certain bank covenants although all principal and interest payments are being met.

The banks have agreed to a waiver until July 1996 and in return the holders of the subordinated loans have agreed to defer interests. But this deferral may be extended beyond the next 12 months.

There was no growth in the group's electrical division which experienced a contraction in sales, from £43.8 million to £42.8 million and a marginal fall in operating profit from £2.79 million to £2.76 million. Crean explained that the British market for industrial electrical products softened considerably in the second six months.

There are, however, some bright features in the group's latest results. Sales in the paper, print and packaging division, operated by Inishtech, increased from £68.2 million to £82.2 million, while operating profit jumped from £8.8 million to £10.5 million. All of Inishtech's business areas, with the exception of florists' sundries, achieved growth in profits and sales.

Despite the standstill in group profits, Crean has declared a final dividend of 8.65p net per share, making a total of 14.875p - a 5 per cent increase on 1994. Earnings per share fell from 19.7p to 18.5p.

Net borrowings rose from £39.9 million to £43.6 million, which puts the gearing at 20 per cent.