Graseby Plc has proposed an initial public offering to list the common stock of its wholly-owned environmental products subsidiary, the Graseby Andersen Group, on the NASDAQ National Market System in the US. The aim is to ensure that Graseby Andersen has adequate resources to fund further growth, possibly by the acquisition of complementary companies or product lines. At the time of offering, the company will comprise Graseby’s UK and US environmental businesses, Graseby Andersen Inc and Graseby Andersen Ltd, as well as two new additions in the form of wholly-owned subsidiaries, Graseby Specac Inc and Graseby Specac Ltd. For the year ending December 31 1992, total turnover at the Graseby Andersen Group was $39m or UKP22m. Operating profit stood at $4.7m or UKP2.6m. Andersen will issue and sell new shares, while Graseby will also sell some of the equity held in the Specac firms. Andersen has a net book value of $14m, and the listing is expected to raise at least $25m, or approximately UKP17m at current exchange rates. Graseby will retain the controlling share. The Cambridge-based group intends to use the cash it receives to increase group shareholder funds and reduce borrowings, which increased UKP600,000 to UKP20.8m due to exchange rate movements. The company reckons that the cash injection will give it enough ‘flexibility’ to further develop its other profitable product monitoring and medical businesses. Since it acquired Tace Plc and Goring Kerr Plc in 1991, it has focussed less and less on its former core defence activities due to the near collapse of the defence industry. Staff numbers here have been pruned back to 250 from 580, and chief executive Paul Lester reckons that the division can make money at that level. He added that there was no point in trying to sell it because noone wants defence activities any more. Nonetheless, both operating profit from continuing operations – down 23.4% to UKP9.5m – and earnings per share – down 85.1% to 1.3 pence, or 32.8% to 8 pence, if restructuring costs aren’t taken into consideration – have suffered as a result of a significant downturn in performance of the defence business. Profits gnerated from defence fell to UKP300,000 in 1992 from UKP6m in 1991, not even including redundancies. Turnover likewise dropped to UKP14.7m from UKP36.6m because, Lester said, virtually all major orders were delayed.
Heavy restructuring
Heavy restructuring has also taken its toll. For the year ending December 31, pre-tax profits plummetted 86.5% to UKP1m, while turnover fell 5.9% to UKP102.6m. Pre-tax figures were hit by UKP5.8m losses on the disposal of non-core activities – machine tool maker, Ajax, industrial controls firm, Controls UK, and flexible circuits manufacturer, Flexitech – as well as the closure of DMS. This included UKP3.6m written off to reserves in earlier years. Similar charges amounted to UKP1.6m in 1991. But the group made UKP1.5m on the sale of properties – a site in Enfield went to J Sainsbury Plc for net proceeds of UKP8.6m, and a site in Newmarket, occupied by Roxboro Ltd, was sold for UKP1.4m. While this added UKP5.5m to distributable reserves, Graseby also felt compelled to make a UKP2.9m provision against the land and buildings revaluation reserve, given the depressed state of the UK property market. Still, ‘taking into account all relevant factors’, the board is recommending that the dividend be maintained at 1991 levels. The final dividend will stay at 7.6 pence per share, which when added to the interim dividend of 3.3 pence, makes an unchanged total of 10.9 pence. Unfortunately, the cost of this dividend – UKP6.9m – has led to a deficit of UKP6.1m, which will be taken from shareholders funds. This has helped to increase gearing to 99% now from 67% in 1991. Performance at the rest of the business, excluding defence, was mixed. While sales at the medical businesses grew 11% to UKP13.4m, profit fell by UKP200,000 to UKP2.4m due to increased expenditure on product development and international marketing – various offices have been opened in Europe and Hong Kong. The
French medical company also suffered because of a three or four month disruption in the supply of the only product it does not design and manufacture itself – a plantable port, manufactured by a US company, which is used to control the amount of drugs given to a patient undergoing chemotherapy, met with quality problems. Both the controls and manufacturing services businesses were adversely affected by recession in their markets. Combined sales here fell year to UKP16.9m this from UKP17.5m last, while profits dropped to UKP200,000 from UKP800,000. Turnover from the instruments division, including a full year’s contribution from Goring Kerr and a seven month’s contribution from Goring Kerr Interest, increased 62% to UKP32.2m. Profits were also up by UKP2.9m to UKP4.2m, due mainly to ‘an excellent performance’ from the product monitoring business and a much improved performance from the US electro-optics activities. The New Jersey site has now been closed and merged with the Orlando, Florida-based one. This resulted in the loss of about 20 staff, bringing the total headcount here to 100. Finally, sales from the environmental companies, including a first full year contribution from Tace, increased by UKP9.9m, with profits up UKP1m. Graseby reckons its not all doom and gloom, however. While Europe is still suffering the effects of recession, it believes there are signs of upturn in the US economy. The devaluation of sterling should also make things easier for UK firms heavily involved in the export trade. In addition, it cites ‘an encouragingly strong order intake’, including three major defence contracts. According to the company, these deals had been in the offing for some time, but were finally concluded in December and January. Jointly valued at UKP5m, Graseby believes they should provide a good base for improved performance in this area.
