Cautious note for slimmed down Simon

After its drastic restructuring, Simon Engineering has emerged as a far slimmer but stabilised business. Its lethal debt burden has been eased – with gearing down from 118% to 43% – and its two surviving operating arms are making money. But the company still has debts of £37.6m and a portfolio of limited earning capacity. […]

After its drastic restructuring, Simon Engineering has emerged as a far slimmer but stabilised business.

Its lethal debt burden has been eased – with gearing down from 118% to 43% – and its two surviving operating arms are making money.

But the company still has debts of £37.6m and a portfolio of limited earning capacity. Trading profits of the survivors – Simon Storage and precision engineer Simon Carves – last year were a combined £17.8m.

Broker Warburg pencilled in £9m full year pre-tax profits. The City is cautious and reckoned shares were fully valued at 38p last week.

The clear-out detailed in the 1996 accounts leaves the company showing a loss of £50.6m compared with last year’s profit of £8.4m, which legally rules out a dividend. The company is seeking court approval to pay an interim from reserves.

Last year’s big deal to cut debt was the £57m sale of the US Access business which comes up for shareholders’ approval at the AGM next week.

The group pension fund is over-funded and there is an indefinite holiday on payments into it by the company. But this year the value of the holiday has been reduced by £13.4m to £35.1m to take account of the absence in future of contributions by the US Access workforce. The holiday pre-payments account for 40% of a balance sheet that was strengthened by £7.3m last year to £86.8m.