The signature tune of James Crean, the print and packaging, electrical and food company managed by Mr Ray McLoughlin, could aptly be called Playing the Waiting Game. That is, if any of Crean's shareholders can, after all those wasted years, adopt a melodious mode. Which is distinctly doubtful, as the details of the hiving-off of the company's print and packaging side has yet again been postponed.
The plans were first announced last October, with the end of 1998 as the target date. This was then shifted to early this year, and, when this second date was not met, it was thought that the details would be announced in tandem with the preliminary results. But we have now had the preliminary results, and details of the plans have been postponed yet again. However, given its record, perhaps too much should not be expected from a group that has continually disappointed.
Rather than being judged on each rare morsel of information, the company should be assessed over a much longer period. And the facts speak for themselves:
Earlier this decade, Crean was the 10th largest company in the State, with a market capitalisation of some £260 million (€330.13 million). If it had merely managed to grow in line with the market, it would now be worth £1 billion. In fact, it is valued at just £40 million (€50.78 million), even after a rights issue that raised £30 million in 1994, and is not listed among the top 50. So just where has that £250 million gone?
Crean's 1996 bid for the 28.8 per cent of Inishtech it did not own valued the print and packaging group at £90 million, and its own stake at £64 million. The print and packaging division is now probably worth less than one-third of that.
Crean's electrical division is made up of J&N Wade and OLC. It has been singularly unsuccessful, and profits have fallen from £2.9 million in 1996 to £0.7 million in 1998. Crean has now decided to exit from this business and has agreed its sale to WF Electrical, a leading company in the British wholesale electrical market - but at a substantial cost.
Although the consideration is £18.8 million, it will lead to a sizeable loss of £17 million (€21.59 million). It is not a particularly good deal for Crean, as the consideration consists of £10.5 million sterling cash and £5.5 million sterling in five-year redeemable convertible bank-guaranteed loan notes with the low fixed rate of interest of 4.75 per cent. While the notes are convertible into 831,666 WF shares (which might prove worthwhile, as WF has been a good performer), they are hardly appropriate for Crean, as it is in a restructuring mode.
Shareholders were under the illusion that the subordinated loans to Dutch office products company, EJA, were safe. Not so. Although Crean disposed of its 50 per cent holding in this company in 1995, shareholders were consistently told they were secure. "The directors (of Crean) believe that EJA will be in a position to meet its repayment obligations to the subordinated loan holders, including Crean," said Mr McLoughlin in his last annual statement. However, there is now to be a provision of £8.9 million. Did none of the directors suggest the need to make a provision before now?
When Mr McLoughlin took over the dual role of chairman and chief executive in December 1997, it was said this would be a temporary arrangement. Now, 16 months later, he still holds both reins, contrary to the guideline by the Irish Association of Investment Managers. But he aims to hold onto the reins until the de-merger goes through - whenever that may be.
The document giving details of the electrical division's sale, released last Thursday, contains a section on directors' service contracts. It gives details of the salary of Mr Matt Kwasek, who manages Crean's food division (Freezer Queen Foods), and nothing else "other than the details which have already been published in accordance with the Listing Rules in a circular to shareholders dated 22nd April, 1996".
Shareholders will have to dig out that document to remind themselves that the director it refers to is Mr McLoughlin, who is entitled to a basic salary of £200,000. The agreement does not have a fixed term. But that document does not disclose his entitlement to four years' compensation - that is, £800,000 - if a group takes a 30 per cent stake, or more, of Crean, regardless of the bid terms. Clearly, Crean has not worked as a publicly-quoted group - the shares are now lower than when Mr McLoughlin took control over 20 years ago. The role of the institutional shareholders, who have invested on behalf of pension funds, is hard to understand. The five largest own a 29 per cent stake between them and have seen the value of their holdings whittled away.
It will be hard to drum up any enthusiasm for the hiving-off proposal, which envisages separate share quotations for print and packaging (PPCO) and food (Crean), or for its sale. Why not a management buyout instead?
Whatever happens, Crean shareholders have little hope of singing a happy tune.
