Murphy's new `broom' may presage change

TWO months into his job as chief executive of Golden Vale, Jim Murphy has set himself a short-term goal of restoring Golden Vale's profits to what he describes as "more acceptable levels".

But after the group's worst financial results since it became a public company, Mr Murphy and his management team are also deeply involved in a root and branch review of the company's entire operations.

"All sectors of the business are being critically reviewed, including manufacturing facilities, markets, management resources and business structure. The appropriate actions will be taken on an ongoing basis."

That bald statement means, in effect, that Golden Vale, under the management of Mr Murphy, will be a totally different animal from the company than its previous management. "Our figures highlight the fact that we are too dependent on butter and powder, and simply taking costs out of the business will not address that problem of overdependence.

We have good businesses in the rest of our portfolio and we have a strong balance sheet. We are going to develop Golden Vale as a broad-based food business. If we need acquisitions, we will make them but they will not be in the basic dairy business...

He added that Golden Vale would be totally in favour of co-operation with other dairy groups, and did not fall short of contemplating mergers. "If an opportunity to co-operate with somebody else arises, and it makes sense, we will take it," he said.

"I'm encouraged by the support of the board, the forward-looking attitude towards developing the business, and the willingness to look at anything. My responsibility is do what's best for shareholders and if that involves cooperation or formal links with other processors, then I will discuss that with the board."

When questioned about the perceived conflict between different factions on the Golden Vale board, conflict which manifested itself in the controversial dismissal of the former chief executive Mr Jim O'Mahony, Mr Murphy declined to comment on the circumstances, which lead up that dismissal. However, he said: "What I've found at Golden Vale in the past two months is not what I've read about in the past year."

And on the corporate structure which leaves outside investors in control of the plc but the crucial milk supply in the hands of farmers through the co-op, Mr Murphy said: "Golden Vale's structure is different and that's all part of the review I'm carrying out. I don't rule out changes to the corporate structure and I'm looking at the most recent reports. With the full support of the board I believe we will.come to what we think is the best solution."

The most recent report, one prepared for the company in 1995 by IBI, indicated that some directors of the plc felt that the co-op exerted too much influence over the plc and effectively controls the plc through its control of Golden Vale's milk supplies. IBI said that this structure put Golden Vale at a competitive disadvantage against other dairy plc's.

That indirect control is one of the factors which has led to growing disillusionment among institutional investors.

Addressing Golden Vale's cost base will also pre-occupy the new chief executive. But Mr Murphy would not be drawn on suggestions analysts that the Vonk cheese plant in Holland

Nor would he be drawn on suggestions that Golden Vale does not require three cheese processing sites - Charleville, Coleraine and Roermond in Holland - and three butter/powder operations at Charleville, Bailieboro and Artigarvan in Northern Ireland.

Two months into the job, there is a general belief that Golden Vale has no option but to give the new chief executive an extended honeymoon period. "They are all aware of how badly they company came out of last year's events and know that the company cannot afford a repeat. Jim Murphy is in a strong position to force through the required changes, even ones that many on the plc and co-op board might find deeply unpalatable" said one source.