The Week In Review: Cadbury could be sweeter

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The Independent Online

It has been a good centenary year for Cadbury Schweppes, the food and drink giant, which is on course to deliver its strongest sales growth for a decade.

Cadbury indicated yesterday that it is on course to deliver sales growth of 5.7 per cent this year. The group is in the process of selling off its European soft drinks arm, leaving it focused on its core chocolate and chewing gum operations and its US fizzy drinks business. It intends to use the proceeds to cut its £4.3bn debt pile.

But it is not all rosy at Cadbury. Its US drinks business is facing stiff competition from Coca-Cola and Pepsi. Also, despite a cost-cutting programme, margins have suffered across the group due to events outside its control, leaving it unable to meet its profit margin target this year. With its shares trading at 16 times earnings, Cadbury is at best a hold for now.


We live in a cash-rich, time-poor generation and the Spanish restaurant chain La Tasca is looking to profit from this trend. It's been less than a year since the group's float and La Tasca has already started to generate serious cash. The stock still trades at just 15 times next year's earnings. For a fast growing company such as La Tasca, that is not expensive. Buy.


If readers had bought £100 worth of shares in Ashtead on 13 March 2003, their stake would now be worth just under £6,000, and forecast-busting second-quarter results this week extended the winning run. The key to Ashtead's success has been the US construction boom. The tool-hire group generates 83 per cent of its profits from across the Atlantic, where business is booming. The shares have probably got further to run. But hold for now.


Baggeridge Brick reported a 30 per cent drop in profits and issued a warning for the near future this week. To put it mildly, the company is suffering from tough business conditions. Demand for its bricks is weak, while Baggeridge's cost base has soared because of the high energy prices. But Baggeridge has a strong balance sheet, which should help it weather the crisis. Investors should not rush for the exit but hold on.


At first glance, shares in John Menzies, the logistics group, look cheap. However, an Office of Fair Trading investigation into the UK's market for newspaper and magazine distribution - where Menzies generates about two-thirds of its profits - hangs over it. The wrong outcome could seriously undermine profits. The shares are best avoided, at least until after the OFT report.


Although some fragility in parts of the global economy have created tough conditions for the publishing company Reed Elsevier, this year it continues to grow across all four of its main divisions. The shares' short-term prospects are likely to be shaped by what the company does with its spare cash. Reports suggest that it may be looking at an acquisition, but handing back some cash to shareholders has not been ruled out. Waiting for some clarity over the cash pile may be the order of the day for now. Hold.


Group 4 Securicor has delivered on all of its promises since its merger with Falck last year. In fact, it has managed to fully integrate the two businesses 12 months ahead of target. The international security giant now looks to be in rude financial health and achieving solid growth. At a group level, organic growth is running at 7 per cent per year. The company gets 15 per cent of its business from developing countries, where it is enjoying 20 per cent annual growth. The stock is a safe bet. Buy.


Shares in Air Music & Media Group struck another bum note this week after the distributor of cut-price DVDs and easy- listening CDs slid into the red and unveiled a boardroom shake-up. It's too soon to say how it will perform over the crucial Christmas period. Investors should remain cautious. Avoid.


The hotels group De Vere deflated takeover speculation this week by saying that it had rejected a preliminary approach and adding that it was not currently in takeover talks. But the news did not deter investors, who speculated that the mystery bidder might yet return. Driven higher to 728p by the bid speculation, the shares are now fully valued. Hold.

The above are recommendations from the daily Investment Column.

There's a distinct lack of Christmas cheer at Yule

Yule Catto produces a heady cocktail of chemicals that go into products from paints and glues to medical gloves and drugs. Suffering one of its periodic comedowns, the company had to admit this week that profits at its pharmaceutical arm are continuing to slide and it has no major new products up its sleeve until at least 2007.

Yule specialises in generic drugs - where sales usually soar when a product is launched but are quickly eroded as competitors copy the product. It has also seen its margins squeezed across the group by record oil prices and the soaring cost of related raw materials.

The main business, polymer chemicals, is better - good volumes and better prices mean margins are improving. Yule is trying to cut costs and reshape the third part of the business, performance chemicals, to limit the slide in profits there.

It's making progress with the sale of the Autoclenz division, announced this month. It shut a factory in Huddersfield in July and the chief executive, Alex Walker, hinted at more closures. However, even the group's assurance that its performance would meet City expectations failed to reassure the market, with the shares down 6 per cent yesterday. At 275.5p, the stock is a hold at best.

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