AUSTRALIA are natural favourites for the World Cup

AUSTRALIA are natural favourites for the World Cup. Not only are they the form team but they are also course and distance winners. They arrived in India yesterday after another triumphant season in which they won two Test series and the one-day World Series at a canter. Should other sides begin to wobble, England, who have a siege mentality on tour second to none, will surely start to move up the pecking order.If reports from trouble spots such as Colombo, Karachi and Peshawar – where England have two of their group matches – are accurate, then this competition could yet be decided by the team whose cricketers play best wearing Kevlar jackets instead of coloured flannels.. Unhappily, that may be about to change as the spectre of terrorism in Sri Lanka and fundamentalism in Pakistan takes its toll on the psyche.

As Australia and West Indies become more jittery, having asked for their group matches in Colombo – scene of the recent massive terrorist bomb – to be rearranged, the innocent charm is lost.But if opinion is split over the decision taken by two of the tournament’s draw cards, then the rise of fundamentalism and the unreasoning terror it preaches at least makes their decision understandable if not entirely forgiveable. It is clear that the group has been refocused, and that a clear strategy and operational improvements are taking place at all levels of the business.The main objective has been to make Wyko a leading player in the overnight distribution of engineering parts, mainly in the UK but also worldwide. At Wyko, that happened in the year to end-April 1994 when pounds 4.2m of losses included pounds 598,000 of exceptional operating expenses and pounds l.57m to dispose of discontinued operations.But it would be a mistake to suppose that the subsequent rocket-powered improvement in trading is just an accounting trick. When a company knows it is going to have a bad year, it is tempted to pile into the figures every piece of bad news and clear the decks for the new management to shine thereafter.

A little later, Johnson was joined, also from IMI, by the new finance director, Geoff Winters.
The next clue is the classic “kitchen sink” operation. His answer was to recruit as his new managing director Richard Johnson, previously a senior manager at the engineering and metals giant IMI. An exciting moment is to identify a company making the transformation from spiralling failure to virtuous success. An example of a group in this happy position now is engineering distribution specialist Wyko at 114p

There are clues when a business is on the turn The most obvious is a change of management. Major shareholder, founder and chairman of Wyko, Philip White, realised he had a problem in the early 1990s as his group struggled with recession. It knows the management well and may use the quote to expand.Investors will have to be patient for deals, but should follow advice from brokers and buy before a re-rating with the results..

SUCCESS breeds success in the stock market. Years ago, a research paper by Greenwells, a broker that has since been swallowed up, explained the ability of some companies to maintain strong growth by arguing that successful businesses enter a virtuous circle of achievement. Last year, however, they under-performed, after a pounds 20m charge for restructuring at General Cable and as conglomerates went out of fashion.At 273p, the shares command a p/e of around 151/2, dropping to just 13 on 1996 profit forecasts of pounds 60m.In November, Wassall spent pounds 17m on a 68 per cent stake in the Singapore- quoted trailer maker York Pacific, which gives it a beachhead in the Far East. Earnings per share have grown from 3.8p to a forecast 17p in 1995.On a five-year view, the shares have outstripped the market by nearly two-and-a-half times. For 1995 and 1996, estimates are pounds 30m and between pounds 40m and pounds 45m, against depreciation of pounds 17m and pounds 19m.Since 1988, Wassall’s profits have leapt from just pounds 343,000 to brokers’ estimates of around pounds 50m for 1995 when it reports on 20 March.

We have to keep saying, ‘that’s not what it’s all about’.”The figures bear out the rhetoric: in 1993 and 1994, Wassall had capital investment of pounds 13.4m and pounds 21.8m, 60 to 70 percent more than depreciation. The group now looks for businesses that have under- rather than over-invested. This is partly through necessity – the bargains, gung ho markets and liberal accounting of the 1980s are long gone – and partly because of the challenge.”One of the best ways to increase profit is to increase investment,” Mr Miller says. “We still get hordes of merchant bankers offering us deals, saying ‘it’ll lift your earnings in year one’ And that’s that. In many ways Evode was a better fit with DAP, and, of course, the “conglomerate” charge was trundled out against them.Mr Miller points out that there is more to Wassall than the asset-stripping that served Hanson so well and the financial engineering that drives so many deals. Wassall was then worth just pounds 1.9m; now it is worth pounds 515m.The shoe shops were quickly sold and a series of deals followed: Hille Ergonom furniture and Antler luggage for pounds 29m in 1989; bottle-top maker Metal Closures for pounds 47m in 1990; DAP adhesives in the US for pounds 58m in 1991; and copper wiring group General Cable, also in the US, for pounds 177m two years ago.The group still smarts, though, from being outbid by Laporte for adhesives maker Evode in 1993. Their links with Wassall’s US chief, Kevin Doyle, also date back to the Swiss days, so the team gels on both sides of the Atlantic.The two men started building their conglomerate by reversing the Miller family office furniture business into J W Wassall, a tiny Leicestershire shoe retailer, in 1988.