Investors looking to Murphy for change

Investors with nervous dispositions must have got a bit of a shock when Hibernia Foods, the Dublin-based manufacturer of frozen desserts, ready-made meals, and savoury products, announced net losses of £7.9 million (€10 million) for the year ended March 31st, 1999. Founded by Oliver Murphy as Hibernia Meats in 1977, it has always been bursting with hope and this culminated with a share listing on Nasdaq in 1992.

The latest results do not ignore the losses but neither do they highlight them. Instead, Hibernia heads its statement with the declaration that sales increased by 57 per cent. It proudly notes that this is a record.

Hibernia then focuses on the two major acquisitions which were "successfully integrated". This is followed by a statement that the EBITDA (earnings before interest and depreciation) was "positive for the fiscal year". Lastly, it promises to "roll out major new ready-meals initiatives in the third quarter".

Heady stuff but the losses have hurt the group. This is seen in the balance sheet which shows a fall in net assets from £13.7 million in 1997/98 to £8.05 million.

Hibernia will have to build up its lost net worth if shareholders are to be reassured about where the group is going. There is no doubt the group had some exceptional barriers last year. These included seasonal losses during the first two quarters from an acquired company, the exclusion of full benefits from higher margin products, and costs associated with development expenditure and a new management structure. The group promises that these benefits will come through this year.

Hibernia has manufacturing facilities in north-east and south-west England. In 1997 it proudly declared that the rise in its share price from $0.8125 in January 1997 to $3.50 by September 1997, a 331 per cent gain, outperformed all the other Irish food groups. It didn't mention that the shares had been $3 in 1995.

But the shares did have a big runup and reached almost $8 by January 1999. Since then they have drifted down to under $5. Investors will be expecting Oliver Murphy, chairman and chief executive officer, to turn the company around in the third and fourth quarters of this year; otherwise they will become more disillusioned.