Bottom Line: One for the stags

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The Independent Online
A pounds 72.3m PRICE tag for Ruberoid, Tarmac's waterproofing business, means that Neville Simms has achieved his pounds 300m disposal target. But at 150p a prospective p/e of 14, cheaper than both the market and the optimistically priced construction sector, shows how keen Tarmac has been to unload Ruberoid.

Looking ahead, more appropriately, to 1994, a return to a modest surplus from Ruberoid's contracting division should ensure profits of a little more than pounds 8m, putting the shares on a multiple of nearer 12. Even accepting that monopolies considerations would have made a trade sale difficult, Tarmac has fallen over itself to make sure the float gets away.

Whether investors should jump at the chance to pick up shares at such a big discount is less clear- cut.

On the face of it, a swing from a pre-tax loss of pounds 13.3m to a profit of pounds 7m represents a significant improvement.

But strip out discontinued interest payments to Tarmac and reorganisation costs, and the rise in operating profits from pounds 5.2m to pounds 7.8m is less dramatic.

The construction industry that Ruberoid serves is on its knees and will be for the foreseeable future.

Worryingly, contracting, with its dire record, accounts for more than half of the company's sales and, while everything has its price, an initial upward correction in the share price is unlikely to be maintained. This is one for stags, not bulls.

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