The Investment Column: S&N dividend brings some cheer

Weapons detection sales keep Smiths on target - Eastern promise makes Laird a good long-term buy

With brands such as Foster's, Kronenbourg 1664, Strongbow and John Smith's lined up on the bar, you might think Scottish & Newcastle - the leading brewer in the UK - would be every investor's best drinking buddy.

With brands such as Foster's, Kronenbourg 1664, Strongbow and John Smith's lined up on the bar, you might think Scottish & Newcastle - the leading brewer in the UK - would be every investor's best drinking buddy.

But a cocktail of acquisitions and disposals over the years has left it badly co-ordinated and incoherent. Tony Froggatt, who came in as chief executive in May 2003, only now seems to be sobering up the company.

He introduced much-needed cost cutting in the UK, closing its historic Edinburgh and Newcastle breweries and taking out tiers of management. The results suggest that the hangover is clearing. Profits for the half-year were up 8 per cent, with beer and cider volumes in the UK up 3.5 per cent. The cost savings are now expected to be £60m a year, up from the £45m originally signalled.

The UK - and much of Western Europe - is a mature market for beer, and S&N can only try to flog more of its existing brands to build market share. With Foster's, for example, it has developed a super-chilled version, and it is also launching a wheat version of Kronenbourg to compete with Hoegaarden. Money saved on production and supply is being ploughed into marketing and advertising.

There seems little, though, that S&N can do to stop the pricing wars of UK supermarket chains. Euro 2004 did boost sales but the need to offer heavy discounts to supermarkets wiped out most of the gains. The beer market in France is proving even more fiercely competitive.

Other markets are emerging. Newcastle Brown Ale is a big hit in the US, and S&N is growing in Eastern Europe. BBH, its joint-venture with Carlsberg, is the market leader in Russia, but profitability is being sacrificed to gain market share.

And while sales are predominately in the UK and France, rocket-like growth is difficult. On 2005 forecasts it is trading only at 12 times earnings, but growth still looks stale. With a yield of 5 per cent, it will be attractive to income investors, rather than growth investors.

Weapons detection sales keep Smiths on target

They can be good for business, these terrorist alerts. The latest threats on both sides of the Atlantic have prompted another ratcheting up of security measures to deter an attack - and should mean more investment in the bomb and weapons detection systems sold by Smiths Group's newly created "detection" division.

Smiths is that most unfashionable of creatures, the conglomerate, with operations making and servicing aeroplane parts, selling medical equipment, and also including diverse engineering businesses. Unfashionable maybe, but it ought to provide some highly desirable returns for shareholders now that it is firing on all cylinders again.

The growth in detection sales of 20 per cent in the financial year just ended was impressive after a wobbly start. But most pleasing of all the detail in yesterday's trading update was the prediction that the aerospace division will return to growth next year. It has suffered in the civil aviation downturn of the past four years, when parts have been stripped off grounded aircraft rather than purchased new from Smiths.

An upturn in civil aviation, together with greater spending on the US air forces, will mean turnover and profit growth in aerospace from now, after only flat sales in the year just closed.

So the outlook is bright, with only worries over a declining dollar pushing Smiths shares down 13p to 714.5p yesterday. An Independent tip for 2004, the stock is up 8 per cent since the start of the year and is still very much a buy.

Eastern promise makes Laird a good long-term buy

The combination of relocating major parts of its manufacturing to low-cost Asia and the vigorous pursuit of acquisitions while prices have been bombed out has paid off handsomely for Laird Group, the engineering company whose diverse products include electromagnetic shields for the electronics industry and locks for windows.

It announced a first-half profit up 26 per cent yesterday. As well as the cheaper Far Eastern labour reducing costs, Laird's sales have also benefited from the company being closer to its customers in the growing telecoms and electronics market in the Far East.

The figures were well above forecasts and would have been higher were it not for increases in commodity prices, which the group had to absorb, and the weak dollar. Laird shares jumped 8 per cent to 299.5p in anticipation of the strong trading performance continuing in the coming months.

Laird has pushed in the direction of higher technology, higher margin businesses in recent years and is hopeful that shedding its plastics division will increase long-term profit even further. It is also still on the hunt for acquisitions - and can be trusted to deliver quality ones.

With a likely dividend yield of 3 per cent this year, the shares are not notably cheap but look attractive for the long term.

Sport
Thiago Silva pulls Arjen Robben back to concede a penalty
world cup 2014Brazil 0 Netherlands 3: More misery for hosts as Dutch take third place
Sport
Robin van Persie hands his third-place medal to a supporter
Van Persie gives bronze medal to eccentric fan moments after being handed it by Blatter
News
Ian Thorpe had Rio 2016 in his sights
people
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
News
scienceScientists have developed a material so dark you can't see it...
News
Monkey business: Serkis is the king of the non-human character performance
peopleFirst Gollum, then King Kong - now the actor is swinging through trees in Dawn of the Planet of the Apes
Arts and Entertainment
Blackman: Landscape of children’s literature does not reflect the cultural diversity of young people
booksMalorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
News
Soft power: Matthew Barzun
peopleThe US Ambassador to London, Matthew Barzun, holds 'jeans and beer' gigs at his official residence. He says it's all part of the job
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
Gavin Maxwell in Sandaig with one of his pet otters
peopleWas the otter man the wildlife champion he appeared to be?
News
Rowsell says: 'Wearing wigs is a way of looking normal. I pick a style and colour and stick to it because I don't want to keep wearing different styles'
peopleThe World Champion cyclist Joanna Rowsell on breaking her collarbone, shattering her teeth - and dealing with alopecia
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

Anyone but Argentina – why Brazilians don’t love their neighbours any more

The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

The Open 2014

Time again to ask that major question - can Lee Westwood win at last?