WHEN shareholders in the cold storage group, Norish, sanction the sale of the Castleblayney cold store on Wednesday, it will represent the last dismembering act of the company's Irish operations.

With greater demand for intervention cold storage following the BSE crisis it might be tempting for shareholders not to sanction the sale. After all, it could be argued that money can now be made out of such storage, so why not stay in the business? That temptation should be resisted.

There probably is money to be made out of intervention now. But in the longer term, intervention is out and business plans cannot be based on short term opportunities. Such a strategy could leave a company with surplus capacity that nobody wants.

Ironically, Norish is probably lucky that there is a surge of interest for intervention storage. This provides it with a saleable business; otherwise it would be left with only a shell to sell.

And it needs that badly. Last year, it recorded a pre tax loss of £6.85 million. That is more than the value placed on the group by the Stock Exchange. Its pro forma net assets on May 14th 1996 amounted to £2.8 million. When that is contrasted with the bank loans of £4.4 million, it is easy to see the necessity for having a radical surgical job.

The proposed sale of the Castleblayney cold store is fairly straight forward. As the disposal does not involve the sale of shares in the Castleblayney companies, all the assets except the tangible fixed assets and the liabilities in the balance sheets will remain with the group. The consideration amounts to £1.65 million cash with the net proceeds of £1.5 million earmarked to reduce borrowings.

After the deal the balance sheet will take on a healthier hue. Borrowings will be reduced to about £2.9 million while shareholders' funds will rise marginally to £2.96 million. Still, the gearing at over 100 per cent will be far too high. Also, the group is obliged to repay £2 million of its term debt and reduce its short term facilities by £750,000 by December 31st 1996. Norish has already applied £0.98 million from the net proceeds of the disposals of its Dublin and Kilkenny coldstores against the term debt.

And the group believes its repayment obligations will be facilitated by the latest disposal. It also believes the reduction in short term facilities can be achieved from operating cash flow generated this year. If these plans do not succeed then Norish intends to seek to renegotiate the bank terms.

Norish has decided to take a small equity stake of 30 per cent in Lochmeen, the company which will operate the Castleblayney cold store following the disposal for a nominal £3,000.

The group makes it clear that a joint venture agreement with the majority shareholder allows it to participate in any upside arising from the reintroduction of intervention, but at the same time, minimise any downside as there will be no obligation on Norish to provide any further capital in excess of the initial subscription.

After the sale Norish will be left with four cold stores in Britain with a total storage capacity of 7.6 million cubic feet. So where does it go from there?

Norish appears to have only two options. First, it can continue within its existing structure and try to develop its operations. As it is very small, that course of action would hardly bring any rewards. Second, it could be taken over by either a private company which would use Norish's share quotation, or by a company in the cold storage business (or associated business). That would appear to be the most likely option. So how will shareholders fare?

They have already taken a terrible scorching. Throughout its relatively short history - it was set up in 1975 as a joint Irish/Norwegian enterprise - the shares have been placed at between 180p to 295p and at one stage reached a high of 395p. They plunged to a low of 50p this year and currently stand at 70p.

This puts a value of £5.9 million on the company which is way above the net asset backing of £2.96 million. Norish has the potential to generate an annual pre tax profit of around £1 million. If it achieves that, then a base would be placed under the share price with scope for an improvement. If not, then shareholders will see a further diminution in the value of their shares.