The Week In Review: Premier Foods stays bullish after setback

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The Independent Online

But in a half-year update yesterday, the group said trading was on track, despite a slow start. The group, which emerged from the remnants of Hillsdown Holdings, has made it its mission to breathe life back into unloved British brands, from Ambrosia rice pudding to Angel Delight. It reckons that with the right level of nurturing (or cash to splash on marketing campaigns), it can get us all dolloping gallons of Bird's custard on our puddings again. And it has plenty of capital to burn on buying up our former cupboard staples because it is a highly cash generative company.

Since 60 per cent of its grocery business - dubbed "ambient" because all its products can be stored at room temperature - is branded, Premier believes it can stand up to the supermarkets' bullying tactics on prices.

The 40 per cent of its sales that comes from making own-label jams for the likes of Tesco and Asda also provides useful scale. Eventually it hopes brands will account for 75 per cent of its grocery business.

We tipped the shares when they floated at 215p. But at 326p, the shares are trading at nearly 12 times earnings, making them look fairly priced for now. Hold.

ULTIMATE LEISURE

Ultimate Leisure, the owner of 31 nightclubs and late bars in the north of England, yesterday said competition in the sector was taking a heavy toll. Profits for 2004-05 are expected to be "materially less" than last year. Drinkers have had a growing multitude of outlets to go to, and customer numbers have dropped. Its property assets are valued at around £65m, but new sites are proving too expensive to find. Takeover speculation is rife, however. For this reason - and this reason only - hold on to the shares.

ANITE

Anite, the software and IT systems company, has suffered from an acquisition binge and is now selling assets to focus on the telecoms, travel and public services markets. It this week revealed it had reversed its losses of 2004, although two projects whose costs are overrunning are dragging down the group. Telecoms, however, holds much of Anite's potential. It produces dummy networks for mobile handset manufacturers on which to test their next generation equipment. Anite still has significant risks, but it is recovering well. Buy for the long-term.

MOUCHEL PARKMAN

Mouchel Parkman this week announced it had won another contract from Rochdale Council, taking its current order book past £1bn and adding to a collection that also includes the maintenance of the M25. With most of its revenues for the current year already in the bag, and potential for new contracts on the London Underground and elsewhere in the UK rail industry, it continues to look one of the best-placed companies in its sector.

HARDY UNDERWRITING

Hardy Underwriting is one of a clutch of Lloyd's of London insurers that has been screaming out for a buyer for at least the past 12 months. Omega Underwriting, which has had one offer rejected, may return for another go, and rival bidders may well emerge. Now is probably not the time to be eyeing up Hardy for a long-term investment as rates in marine and aviation insurance appear to have peaked. But for a quick bet on a successful takeover, there may still be some upside in the shares.

ICAP

The world's largest inter-dealer broker, Icap is in a strong position to grow both market share and profit margins. Markets for swaps and derivatives are improving on 2004 and Icap this week reported a good start to its fiscal year. Increasing volumes and developing new products will help it offset margin erosion. Emerging markets such as China provide opportunity to expand. But given the sharp rise in the shares in recent months we would not chase the stock at current levels.

BURBERRY

Burberry, the upmarket clothing label, may have lost some of its exclusivity in the UK, but its association with chav culture does not stretch far. Worldwide, Burberry is a classic British luxury brand, and the company this week said it was trading well across the business. Burberry's shares are, as you might have guessed, not cheap. But it is diversifying away from the UK, and GUS, which owns 66 per cent of Burberry, is selling its stake later this year, increasing liquidity. Hold.

UNITE

Unite, the largest provider of student accommodation in the UK, said in a quarterly trading update that business was in line with expectations and reservation levels for the 2005-06 year were a "healthy" 78 per cent. We recommended the shares at 232.5p, and since then, shares have gone up 30 per cent as the company nears its target of becoming profitable this year. Unite still has plenty of potential, with its growing number of beds a year, but the shares look fully priced for now.

BIOFUELS CORPORATION

Biofuels Corporation turns vegetable oil into diesel, which can then be used either as a pure substitute for conventional diesel or, more commonly, it is blended with regular diesel. Given the concern about global warming and carbon emissions, Biofuels is in a great market. With fears about delays in the opening of its plant put behind it this week, and evidence of the company signing up its first customers, the shares are worth holding.

New French chief executive has got his work cut out

With Birds Eye frozen peas, Dove soap, Flora spread, Hellmann's mayonnaise, Knorr soup, Lipton tea, Surf washing-powder, and Slim-Fast, almost every aisle of the supermarket houses Unilever products.

Five years ago, Unilever had more than 1,600 brands. A plan to reinvigorate sales has led to the sale of 1,200, and this week, the group sold its upmarket fragrance business for $800m.

The disposal programme, which was part of Unilever's five-year 'Path to Growth', halved Unilever's debts, but the 'growth' part of the plan resolutely failed.

Enter Patrick Cescau, its new chief executive, who has made some improvements in the first quarter of 2005. But over the next five years, the company is not expecting to outperform market growth of between 2 and 4 per cent.

And the company is still facing a consumer-spending downturn across most of the eurozone and the United Kingdom.

Undeniably, Unilever has strong brands, and its Pro-activ products, for example, which reduce cholesterol, are selling strongly.

But at 551p, around 15 times 2005 earnings, the shares look fully valued, given how much work Unilever and Cescau still have to do.

The above are recommendations from the daily Investment Column

cash@independent.co.uk

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