Crean moves to counter mood of investor criticism

James Crean, which has come in for strong criticism for its performance from institutional investors, has announced a number of board changes, including the appointment of two non-executive directors. The moves are designed to renew investor confidence. The chairman, Mr Domhnall McCullough, has decided to "step down" for "personal reasons" after nearly 30 years, the group has announced. It is understood that he wanted to retire for some time.

The chief executive, Mr Ray McLoughlin, has taken over as chairman and will retain the role of chief executive as a "temporary arrangement". A statement from the company does not mention which role is temporary. However, Mr McLoughlin has been charged by the board to look at the options open to the company to renew investor confidence, according to reliable industry sources. Also, no decision has been made on Mr McLoughlin's eventual role. Mr John Lowrie, of Scottish Provident, said he was "concerned that there not a natural successor" and would not like to see the dual role last "for any significant time". Scottish Provident is a recent investor in Crean. The statement from Crean noted that it "supports the IAIM guideline that there should be a separation of the roles of chairman and chief executive and it is their intention to restore the separation of the two roles as soon as is practicable".

The new non-executive directors are Mr Alastair McGuckian and Mr Gerard O'Toole. Mr McGuckian is chairman and founder of the Masstock Group, the agri-business group with interests in Saudi Arabia, Zambia, Russia and Britain. Established in 1970, the group employs over 4,000 people. Mr O'Toole is executive chairman of Nissan Ireland, the motor group with sales of £120 million. Mr O'Toole was an executive director of Crean from 1988 to 1989.

The James Crean management has come in for strong criticism. The share plummeted from 716p seven years ago to a low of 120p. They recently recovered to 140p. Some investors believe that Crean is a recovery stock. For example, US investor, Tweedy Browne, is understood to have invested in the group in the past year. In addition, Dolmen Investments said that at 135p, a prospective p/e of 6.4 per cent and a prospective dividend yield of almost 3.9 per cent, most of the negative news is already in the price. However, a number of institutional investors deserted the group recently and have been highly critical of its performance, noting that the outlook will remain poor until either the management is changed, or the existing management shows some coherent strategy to put the group on a sustained growth path.

Crean's most recent results showed a 25 per cent fall in profits to £7.1 million in the six months to June 30th, 1997. Two of its three divisions, food and electrical, are expected to continue with poor results in the second six months. As part of the restructuring, disposals will "lead to a loss of profit contribution and adversely affect 1997 profitability" until the proceeds are reinvested, is how Crean, at the interim stage, viewed its prospects.