FINANCIAL MARKET
Page 22
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NFC: a good start — or is it?
THE ANNOUNCEMENT of the first financial statement of the National Freight Consortium — after three months' trading — was an eagerly awaited event in the transport industry, not least by those employees who had invested in it. It is worth taking a close look at the results from two angles, that of the employees and in the wider context. We can then consider the impact of the massive management shake up announced a few days after the results.
Anyone who originally bought 100 NFC El shares discovered on June 30 that their value had jumped to £165.
Because of the unique structure of the NFC, the shares are not available on the open market. An independent valuation has to be made — this was it; £1.65 a share. For the largest shareholder (40,000 shares) that is a paper gain of £26,000. His confidence in the company's future has paid off particularly well — at least at this early stage.
Why, however, has the share value risen? The answer is that the assessor — independent remember — has approved the company's progress to date.
That is not the only benefit for shareholders; there is the interim dividend being paid on the company's "A" ordinary shares (they're the ones held by the employees, pensioners and families). This is 4.5p per share net (6.4 per cent gross) which represents £4.50 for the 100share shareholder and £1,800 for the company's biggest — the one with 40,000 shares.
Taken together, the announcements add up to good news for those employees, and others, who took the plunge earlier this year. However, it is a paper gain and the share values could equally take a knock if the results, later in the year, are not as good as expected.
As the NFC's deputy chairman and chief executive, Peter Thompson, said at the press conference, it was a high risk business for the people investing. The company is now valued at £57.5m compared with the £53.5m for which it was sold to the Consortium. The rise in share value, in fact, is only 8 per cent in relation to the total funds involved. The equity is only £7.5m and cash borrowings cover the rest of the working capital.
Interest payable for the quarter on this was £3.4m, which calculated on a same again basis for the rest of the year works out at £13.6m. That is a lot of money to find even out of earnings which could approach £500m in the first 12-month period. NFC director of finance, James Watson, said at the conference that a main aim was to reduce short term borrowings.
As for the financial results themselves, the NFC's trading figures showed a turnover of £121m of which £3.8m was profit. Redundancy payments then cut this by £600,000 to £3.2m but then what are described as property profits produced another £2.6m to go into the kitty to generate a total profit figure of £5.8m.
Although it was explained at the conference that, right from the start, the NFC had indicated that it would be making full use of its property and land interests to generate revenue, the property profits item attracted several press questions. The figure was not broken down and, without the £2.6m from this item, the results would have taken on a totally different complexion. The NFC would do well to spell out a little more the meaning of this area of activity in future reports — in its own interests to avoid any misunderstanding over asset disposals.
On the trading results of the company, the NFC board was more explicit. Chairman Sir Robert Lawrence indicated that the parcels activities in Roadline, National Carriers and Scottish Freight showed an improving trend in performance. Special Traffics Group had performed well, particularly Cartransport and Cotrali-Pickfords, with Containerway and Roadferry and Tanldreight showing substantial recovery.
The BRS and Pickfords Group remained strong profit earners, but were finding the going tough particularly so far as the distribution and travel markets were concerned.
National Carriers had still not fully adjusted its overhead levels, however, following the loss of the British Rail Express Parcels Service. Tempco and Waste Management did not trade at satisfactory levels, one because of over-capacity in the cold storage industry and the other through a lack of demand for industrial and domestic waste disposal.
As for the future, the NFC considers that the pattern that has emerged so far this year will continue with improvements stemming from a small uptui the economy although there be further pressure on opera cogs.
The NFC intends to contint its policy of product diversification with emphasil increased marketing and sell activities. Mr Thompson said considered the worst period the recession was past althot rates were 10 to 15 per cent lower than they should be. TI ,manufacturing industry was over its worst, had stopped d stocking and was re-stocking little.
The situation with High Str distribution was improving a NFC services were gearing themselves more to retail distribution than in the past ii which industry had been the main sector served.
How happy was the NFC management with these resu Not as much as they might hE been, it would appear. Why otherwise change the consortium's structure so radically and why re-shuffle tl top management so emphatically? It is particular!) early in the consortium's life f( change of chairman — out go( Sir Robert Lawrence to the rol of a non-executive director. In comes Peter Thompson in a n "supremo" role.
Only the BRS Group is left unchanged in the re-shuffle w Brian Hayward and David Whi given new challenges as the "strong men", respectively, o the new National Services Group and a restructured Picldords Group.
National Carriers and Roadl are brought together in a group of their own. Most intriguing of all is the appointment of Jack Mather t( head the new Property Group. This emphasises more than eN the need for the consortium tc be more explicit in the future about this area of its activities.
• by George Malcolm