Goodman arm up 28%

Press, 20 November 1987, Page 23

Goodman arm up 28%

NZPA-Reuter London The British food company, Rank Hovis McDougall, under assault from Australasian food group, Goodman Fielder, has announced profits of £116.1M (SNZ33IM) — up by 28 per cent on last year. RHM, almost 30 per cent owned by Goodman Fielder, also announced a 30 per cent increase in final dividend to 5.84 p.

The news was good for RHM chairman Sir Peter Reynolds, the “London Evening Standard” said, who had staked a "fierce claim to shareholders loyalty” after advances from the Antipodeans for a merger of the two companies.

Mr Pat Goodman had recently asked for a seat on the board of RHM “but was politely shown the door”: subsequently he made known his wish to merge his group with RHM.

"Goodman with a near 30 per cent stake must not be

underestimated even after the collapse of the Australian stock market.

"RHM has a super cash flow and that’s just what his bankers will be keen on right now,” the newspaper said. Ranks’ general manager, Mr Stanley Metcalfe, said Ranks is interested in making acquisitions and could raise £4OOM (SNZII43M) for expansion. Confirming analysts’ forecasts of growth through mergers, he said, “We would look at further acquisitions if we found a sensible fit with growth prospects.”

He said £4OOM was the maximum the group could spend, given shareholders’ permission. He gave no further details. “There is not much more scope for internal growth at RHM,” analyst Stephen Carr at Warburg Securities said.

Carr said Ranks’ milling and baking operations, which form the bulk of its business, have expanded to account for

over a third of this year’s £I3OM trading profit. But he said there was now only limited room for internal growth. A leading food analyst, who declined to be named, said he believed Ranks would soon make a large acquisition abroad. “RHM gets about 30 per cent of its profits from operations in the United States and Pacific areas,” he said. “There are a lot of cheap buys on the U.S. market and this is where I would expect the action.” Ranks made its last acquisition early this year when it took over Avana Group in a cash and share deal. Avana contributed £9.2M to Ranks’ trading profit for the 53 weeks to September 5. Warburg’s Carr said Ranks was under pressure to perform in the face of a takeover threat by Goodman Fielder, Ltd, which last month raised its stake in Ranks to 29.9 per cent.