Fountain no longer lumbered with timber
Article Date: Jun 06 2000Former timber planting specialist Fountain claims to have'brought about a major transformation' by moving to utility servicing, after a £2 million loss. It is not out of the wood yet, but is on the right track, writes Roxanna Mohseni.
Last year, the vegetation management group Fountain plunged £2 million into the red. The reason, according to chief executive Barry Gamble, was that it 'lost control,' of a freestanding timber contract, incurring a £2.7 million exceptional cost.
This prompted withdrawal from timber harvesting in the UK towards a more favourable sales mix and a hoped-for place among the higher rated support services clan. Fountain is currently focusing on longer-term service contracts for utilities, such as leaf-clearing and tree-removing for Railtrack's routes and East Midlands' electricity lines.
As a result, this division has grown from 38 per cent to 53 per cent of turnover, which is down 3 per cent to £15.4 million at the interim stage. Group profits dropped by a third to £330,000 before the exceptional charges, with management keen to point out that this is essentially a recovery situation.
Fountain is still involved in landscaping, which, despite its shorter contracts, complements its core utilities business with contract wins for the likes of Heathrow airport. Higher margins are being sought from forestry projects, which have suffered from dwindling timber prices in the UK. Although Gamble admits that 'forestry cannot be the main driver for a public company going forward', he is keen to continue niche forestry activities in America where timber prices have held up.
House broker Charles Stanley forecasts full-year profits of £750,000, rising to £900,000 for 2001. Shares in the Aim-listed outfit have performed poorly in recent years and management still have a lot to accomplish before the market rewards it with a re-rating.
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