Profits under pressure at James Crean

DISAPPOINTING results have been recorded by industrial holding company, James Crean, which has announced marginally lower pre tax profit of £9.53 million, in the six months to June 30th 1996.

Chief executive, Mr Ray McLoughlin said the electrical business in Britain was "soft" but the group was hoping that it would strengthen. Also, the group was confident about the second six months. They "may be a little better" than the first half.

He argued that the pre tax profit was not directly comparable with the first half of last year because interest costs associated with acquiring the minority shareholders in Inishtech occurred only in 1996. Mr McLoughlin contended that profits after tax and minorities, which rose by 12 per cent, were more meaningful.

Crean has had between 25 and 30 enquiries about buying its subsidiary, Inishtech. However, there have been no firms offers, so far.

Asked about the retention of the Inishtech management team, he said the senior and second line management had been given new contracts.

The latest results show a rise in sales from £130.7 million to £155.2 million. Operating profits of the continuing operations fell from £12.2 million to £11.9 million. Interest payments rose from £2.6 million to £4.1 million. The gearing amounts to 66 per cent and this rises to a high 97 per cent when the convertible loan stock is taken into account. However, this will drop when Inishtech is sold.

Fully diluted headline earnings per share rose from 12.7p to 14p. The interim dividend is being raised by 5 per cent to 6.5363p.

A breakdown of the different divisions shows food sales up from £45.4 million to £54.7 million while operating profit grew from £5.2 million to £5.9 million. The increases, the group said, were driven by the poultry business which saw an 84 per cent boost in sales while operating profit jumped by 40 per cent.

Frozen meals saw a 37 per cent drop in operating profit but this is not considered a trend because of timing differences. Prices and volumes have stabilised.

Sales in the electrical division rose from £21.5 million to £29.7 million, while operating profit grew marginally from £1.26 million to £1.39 million. OLC and Arron, which were acquired, made a positive contribution which would be significant in the Bull year, Crean said.

Sales in paper, printing and packaging, were up 19 per cent to £46 million, while operating profit grew by 7 per cent to £5.3 million.

EJA, the former Dutch subsidiary sold last year, continued to experience difficulties but Crean now feels the worst is over. EJA owes Crean £8 million, payable in 1999, which Mr McLoughlin says is secure.

Asked about the lost Mars distribution franchise which could cost it £1 million in profits, he noted it would enable Crean to transfer its investment of some £8 million for use elsewhere in the group.

The shares, unchanged at 220p (12 month high 265p; low 178p), are on a prospective price/earnings ratio of 7.9, assuming earnings per share rise from 24.6p to 28p. They have little attraction.