Debt worries persist despite IWP profit

Dublin-listed toiletries group IWP earned pre-tax profits of €1.1 million and cut its debt mountain by €20 million in the year to March 31st, but brokers remained concerned yesterday at the scale of its remaining €77 million liabilities.

The company reported a 12 per cent fall in sales to €170.5 million from €192.7 million for the previous 12-month period. The company said yesterday that adverse foreign exchange movements cost it €14 million in turnover.

IWP said the closure of the loss-making Michael Harvey product range cut a further €6 million from the top line, attributing the balance to a decline in wholesale sales in Poland.

Operating profits rose by 60 per cent to €4 million in the period from €2.5 million. IWP said the improvement was due to the strong performance across all its operating units, with the exception of its Constance Carroll perfume brands.

The company also faced a net exceptional charge of €11.4 million to cover the cost of the restructuring and refinancing of its operations during the year. It ended its 2004 financial year with a loss of €2.8 million after tax. Adjusted losses per share were 2.02 cent.

During the period, it closed its loss-making Canadian operation, sold its household products business and two non-core plastics and components manufacturers, Skiffy and Siderius.

This and a refinancing approved by shareholders in late March allowed it to cut its debt by €20 million to €77 million.

Analysts yesterday said the reduction in debt was one of the brighter spots on IWP's 2004 figures. They also singled out the fact that its Royal Sanders business in the Netherlands had returned to profitability and cited a good performance by the Jeyes Group, in which IWP has a 35 per cent stake, as good news for the company.

Despite that, Davy Stockbrokers analyst Mr John O'Reilly said in a note yesterday that the results made grim reading.

"Net debt of €77 million stacks against cash-generating potential of about €5 million. The sale of its holding in Jeyes would bring this ratio to a tolerable level," Mr O'Reilly said. "But pending this, and evidence of improving performance in remaining operations, the stock is purely speculative." Mr Paul Meade of NCB rated the stock a hold.

Chief executive, Mr Jim Murphy, acknowledged yesterday that the group had "further work to do" to deliver returns to shareholders.

IWP has operations in the UK, the Netherlands and Poland, and produces branded and own-brand cosmetics, fragrances and toiletries. The brands it owns include Panache and Tweed perfumes. Its shares fell by 1 cent in Dublin yesterday to 24 cents from 25 cents.