Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Smaller Companies: Ransomes' new broom no guarantee of revival

Robert Cole
Sunday 07 November 1993 19:02 EST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

COULD the appointment last week of Peter Wilson as chief executive of Ransomes, the lawnmower manufacturer, mark the turning point for the shares?

It would not be the first time an injection of fresh management has reversed shareholder fortunes.

It happened at the supermarket group Asda when Archie Norman joined as chief executive, and similarly shares in the oil giant BP staged a volte face when David Simon replaced Bob Horton in the top job last year.

But a change in management does not guarantee success. Consider the textiles group Dunkeld, where a new team armed with a strategy for recovery took control last spring but was only in place about six months before the banks lost patience and appointed administrative receivers.

Ransomes could go either way. After an ill-timed US acquisition in 1989 it has been struggling under debts three times as great as its net assets.

Perhaps more worrying, profits from the business are only just large enough to cover interest payments on the debt. In the half-year to 30 June interest charges were pounds 4.2m and operating profits were pounds 5.4m.

Underlining its financial difficulties, Ransomes has suspended dividend payments on preference shares.

The performance of the ordinary shares has reflected its financial position. The price has dropped steadily since peaking at 232p in early 1989 to just 16p last Friday. During the same period the shares have underperformed the market by 95 per cent.

Mr Wilson takes up the position at the end of this month. He replaces Bob Dodsworth, who has been chief executive since 1977.

The non-executive chairmanship has also recently changed. In October John Kerridge - best known for his time as chairman and chief executive of Fisons, the pharmaceuticals company - stepped down in favour of John Clement, formerly chairman and chief executive of Unigate, the dairy group.

Ransomes plainly needs relief from its debt burden. This may be by selling assets - perhaps the US businesses that landed it with the debt in the first place.

A more likely candidate for disposal is a significant parcel of industrial land in Ipswich which, because of its proximity to Harwich, is being promoted as a base for European-minded enterprises.

Both possible disposals are helped by economic recovery here and in North America.

The other obvious way for Ransomes for reorganise its finances is to persuade its bankers to swap debt for equity. But because of the dilution it would bring a debt-equity swap would be almost as unwelcome to shareholders as receivership.

Some comfort, however, can be drawn from the fact that Mr Wilson's renumeration package includes share options.

Mr Wilson brings management skills learnt with the conglomerate BTR and more recently Northumbrian Water.

He said his first task would be to make sure the manufacturing processes here and in the US learnt from each other and that the most was made of cross-marketing opportunities. If the company shows it can improve its trading performance, negotiations with its backers will become easier.

If Ransomes does survive, and that is not a foregone conclusion, buyers at 16p should earn the full benefit of recovery. The risk is high, but so is the potential reward.

(Graph omitted)

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in