Bottom Line: Bitter chocolate

WHILE Tie Rack's French problems are due to the recession, Thornton's are a classic example of a company that failed to anticipate how different it can be abroad. Having spent pounds 8.6m of the proceeds of its float - and much investment since - establishing a French operation, the confectioner has now been forced into an ignominious retreat, closing about half its shops at a cost of pounds 13m, including pounds 5.4m of goodwill previously written off. That left it with a pounds 4.8m pre-tax loss, compared with pounds 9.2m profit last time, although it was confident enough about the future to hold the dividend at 3.65p.

The City was warned about the problems in May, but investors were unnerved by the company's warning that there was still 'significant uncertainty' over costs of the restructuring, and the shares were marked down 7p to 157p. It is also unwilling to predict how quickly the French losses - up from pounds 960,000 to pounds 1.7m last year - will be stemmed.

In Britain, the picture is slightly better. Like-for-like sales in company-owned shops rose 4.8 per cent and Select, the new upmarket range, has taken 7 per cent of sales in its first year. But the pounds 1.3m cost of Select's development and restyling its Continental range meant operating profits dipped from pounds 11.4m to pounds 11.1m.

That should not be repeated this year, and France could break even, leaving profits at about pounds 11.5m. That puts the shares on about 13 times earnings, higher than Cadbury Schweppes where the risk of disappointment is far less.