Bottom Line: Bidder may lurk under bed maker

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The Independent Online
TOM, John and Peter Clarke, the patriarch and two middle-aged sons of the family that owns 52 per cent of Silentnight, the manufacturer of beds and cabinet furniture, will have been chuffed by yesterday's 7p increase to 302p in the share price. The rise added pounds 1.7m to the paper value of their shareholding and valued the company at pounds 139m.

Their combined shareholding transforms what would otherwise be a solid if unexciting investment into a potential bid target. Even the Clarke family would find it difficult to resist a generous offer.

Mr Clarke senior no longer has any involvement in decision-making. John Clarke, however, is deputy chairman and his brother Peter remains a non-executive director.

The company has proved resilient to recession. Pre-tax profits of pounds 12m were only pounds 400,000 off the record made in the previous year, despite sluggish consumer spending in the UK and US. Trading profits grew by 2 per cent to pounds 11.9m as Silentnight increased volumes but experienced severe pressure on margins.

Bed sales have proved less vulnerable to the recession than other consumer products. Bill Davies, executive chairman, says people tend to buy new beds because their old ones are uncomfortable rather than because interest rates have fallen.

The net dividend was held at 8p on earnings of 17.1p, down from 17.8p, but earnings look set to top 20p next year, putting the shares on a multiple of 15 times prospective earnings. The company would like to peg dividend increases to any rise in earnings.

On this basis the shares should be bought, with the possibility, however remote, of a recommended bid for the family's stake thrown in for free.

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