Fyffes sticks to cautious acquisitions policy

With net cash of £58.6 million and with interest rates destined to fall further, it is even more imperative than ever for Fyffes, the fresh-fruit distributor, to make use of its cash hoard. Its cash generated £1.4 million in interest in the group's latest interim results. That represented only 6 per cent of its pre-tax profit. If the cash was funnelled into suitable acquisitions, it could generate around £7 million. That would quintuple the existing return and would be well worth going for. It would also boost earnings per share by more than 20 per cent. Most Fyffes acquisitions have been small to medium-sized add-ons. Strategically well chosen, they have made a positive contribution.

Fyffes and Wibdeco Partners were involved in the £147 million takeover of the Geest banana business in the West Indies and Central America, but most Fyffes observers are now waiting for it to make the big move and make a really large acquisition.

That would satisfy its critics. But Fyffes is likely to maintain its cautious approach. Acquisitions for acquisitions sake alone have plenty of pitfalls. The bottom line is that it is preferable to have an embarrassment of riches than a problematic acquisition.