FYFFES and its West Indian partners, Wibdeco, have gone to the High Court in London in a row with Geest over the calculations used to determine exactly how much they would end up paying for Geest's banana business.
Late last year, Fyffes and Wibdeco agreed to pay £147.5 million for the Geest banana business, but the two sides now are in dispute on how some aspects of the deal in particular the banana business's working capital - should be treated. Fyffes would not comment but it is understood that the sums involved are tiny in the context of the £147.5 million size of the deal.
The dispute, which sources close to Fyffes indicated does not endanger the acquisition, is expected to eventually go to an independent auditor for arbitration.
The £147.5 million acquisition of the Geest banana business through the joint venture with Wibdeco has, however, already begun to pay off for Fyffes, with the firm's half year results including a £2 million contribution from Geest since the acquisition was completed at the end of 1995.
Fyffes/Wibdeco has also appointed the former Greencore chief executive, Mr Chris Comerford, as Geest chief executive based in Southampton. Mr Comerford has worked as a consultant for Fyffes for a number of years since he resigned as Greencore chief executive in the wake of the Talmino affair.
It is understood that Mr Comerford was closely involved in the negotiations leading to the Fyffes/Wibdeco takeover of the Geest banana business and will play a key role in returning the Geest banana business to a level where it would provide Fyffes and Wibdeco with a reasonable return on their investment.
The Fyffes half year results were marginally ahead of market forecasts, with pre tax profits up 16.8 per cent to £20.8 million and operating profits up 22 per cent to £19.6 million. There was a big increase in the contribution from "minority interest" - where Fyffes does not have a controlling stake - and these contributed £4.1 million - up from £2.36 million in the same period in 1995.
With sales up 12 per cent to just over £600 million, Fyffes' operating margins have improved sharply from under 3 per cent to 3.26 per cent.
Analysis believe that much of the growth in sales and operating profits came from the businesses acquired in the period although there was also good volume growth in the core banana business. Bananas account for about 30 per cent of Fyffes' total sales. Turnover in Britain and Ireland was up 9 per cent and up 27 per cent in continental Europe.
Interest income on the group's cash hoard fell in the period from £1.75 million to £1.12 million, reflecting lower interest rates, while net cash at the end of April was just under £19 million, compared to £46 million at April 1995.
Since the year end, Fyffe's/ Wibdeco has sold the Geest plantations in Costa Rica for $14 million (£8.86 million). This sale, as well as the consequent shipping restructuring, is expected to eliminate an annual loss of over £7 million sterling.
The joint venture is still considering the future of the two Geest ships which are currently on charter and whose debt accounted for £55.3 million of the £147.5 million acquisition price. A Fyffes spokesman said the ships might be retained.
Fyffes shares traded unchanged on 106p yesterday, and analysts do not expect any great movement in the shares until the Geest savings begin to flow through.
Full year forecast for this year are in the order of £44 million profits and 8.5p earnings per share.
