FYFFES has consolidated its primary position in the European banana business after buying out the remaining 50 per cent of a Dutch distributor for Pounds 22.2 million. The acquisition will give an immediate boost to earnings, Fyffes has stated.
The company has also reported its expected fall in first-half profits, with pre-tax profits falling from Pounds 20.8 million to Pounds 20.2 million. Shareholders were warned at the a.g.m. earlier this year that first-half profits would be down on last year. Earnings per share were marginally higher, largely due to a lower tax charge, and shareholders are getting a 10 per cent increase in their half-year dividend.
Fyffes bought 50 per cent of the Dutch company, Velleman & Tas, in 1994 for Pounds 15.9 million and is paying a total ofPounds 22.2 million for the remaining 50 per cent. Payment to the vendor, Mr Dick van Aken, will be phased, with Pounds 4.5 million on completion of the deal two further tranches of Pounds 4.5 million in 1998 and 1999, plus another Pounds 6.5 million which is profits-dependent. Fyffes is also taking on Pounds 2.2 million of subordinated loan stock.
Velleman had profits of Pounds 6.5 million on sales of Pounds 174 million lastyear. The group has a substantial business in Europe and sources most of its bananas from Uniban, the largest Colombian producer. It operates from two locations in Rotterdam and also has a 50 per cent stake in Rotterdam Fruit Pier which has a 100,000-square-foot cold storage plant.
Fyffes' half-year results were marginally ahead of the revised forecasts after the a.g.m. profits warning. Turnover was marginally down at Pounds 663 million, while a 3.8 per cent fall in operating profits was based on a number of factors - lower selling prices because of higher supply volumes, as well as a 12 per cent strengthening of the pound and 15 per cent by the dollar against continental European currencies.
As usual, Fyffes ended the period in a strong cash position, with net cash of Pounds 49.1 million compared to Pounds 19 million this time last year and Pounds 70 million at the end of the full year last October. Fyffes' cash hoard meant that it received almost Pounds 1.4 million in interest compared to Pounds 1.2 million in the first half of last year.
Since the end of the half-year, the company has committed itself to spend up to Pounds 22.2 million on Velleman & Tas, but will receive Pounds 8.6 million from Guinness Ireland for its 18.5 per cent stake in United Beverages. Analysts expect Fyffes to end the year with net cash of around Pounds 80 million in the absence of further acquisitions. If this is the case, then market sources believe a substantial share buy back is likely later this year.
The chairman, Mr Neil McCann, said trading conditions in the second half are broadly unchanged and analysts are expecting full-year profits of around Pounds 44 million and earnings per share of about 8.5p.
