Good margins, now under pressure, have been at the expense of good customer relations. Sainsbury’s management is also under fire for losing ground to its rivals. WHAT’S wrong with Sainsbury’s? Our chart shows the way the shares have performed over the past five years. Clearly, the pattern of uninterrupted growth seems to have faltered. So can the stock stage a recovery? The answer, sadly, is a qualified no. Pundits proclaim a new era of low inflation, which translates at the high-street level into a wave of destocking, as consumers opt for value rather than quality – or so we are told
Whether this can last is hard to say. If anything goes wrong, they could prove impossible to sell.But Dean is a man who won’t let the grass grow under his feet and he has a useful sponsor in stockbroker Henry Cooke Lumsden They could be fun..
The implied earnings per share are nil, 0.82p, 1.27p and 1.75p respectively. A further deal could take the latter two numbers to 1.6p and over 2p respectively with the p/e ratio falling to six.The shares are tightly held and hard to buy. At 12p the property services group is capitalised at close to pounds 4m after gaining a cash injection from Dean himself and having spent some pounds 1m on acquisitions in the building maintenance and service sectors.A document by the company carries projections of profits moving from pounds 66,000 for 1994 to pounds 199,000, pounds 560,000 and pounds 770,000 for 1995, 1996 and 1997. That looks relatively undemanding and the shares should be able to move steadily higher even without further earnings enhancing deals.If Orbis rates as moderate to high risk, Alternative Investment Market quoted Dean Corporation, the vehicle for the comeback of Stephen Dean, is somewhere out among the white-knuckle rides. On those numbers earnings per share would be 2.5p and then 3p, leaving the forecast p/e ratio at 16 and then 13.3 times. Within this, borrowings amount to pounds 5.6m including a term loan of pounds 4.5m.But from a shareholders’ point of view, debt-financed growth when interest rates are low may carry risks, but translates into faster growth in earnings per share for any given profit increase.Mr Brentnall points out that full-year interest costs should be covered six times by earnings and that both the businesses are good cash generators.Analysts are forecasting profits for the year to 31 March 1996 of pounds 1.9m, against the pounds 198,000 reported for 1994-95, followed by pounds 2.3m for 1996- 97.
BT perhaps?Management, principally the vendors of First Security and Galequest, now own around 40 per cent of the group. One arguable worry is Orbis’s net asset deficit of pounds 3.4m as a result of writing off pounds 7.3m of goodwill on the Galequest deal. The new division provides total security system solutions for customers. These include Southern Electric, the Ministry of Defence, Tesco, HM Customs & Excise, and a mystery firm Orbis coyly describes as “the leading UK telecommunications company”. Purchased for a net pounds 7.4m in cash and shares, Galequest added operating profits of pounds 512,000, up 43 per cent on the previous half year, with sales up 35 per cent at pounds 2.3m.
