Bottom Line: Plenty in store at Grand Met

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The Independent Online
WHAT a pity Grand Metropolitan's ability to extrude premium prices for its products cannot be applied in the City, where its shares languish on the discount shelf.

The fact that interim profits exceeded forecasts was due to most divisions returning figures pounds 1m- pounds 2m above predictions, and not to one great surprise. The shares swung from plus 8p to minus 11p, closing at 422p.

Green Giant, as expected, was wounded by last summer's bumper harvests in the US, and is likely to remain so until the first quarter of 1993/4. Of more concern on the food side is the softening of markets across Continental Europe, which are unlikely to be fully underpinned by a further revival of fortunes in the UK.

Faint rumbles from the plunge into recession in some European countries, particularly Germany and Spain, have also been heard at IDV, the burgeoning drinks empire. The rumble, however, is unlikely to prove much more than a mild bout of indigestion.

Burger King remains a success story, rolling out an underlying 13 per cent profits rise. The fledgling US purchasing agency has quickly bolstered margins, lowering food costs by a weighty 4 per cent.

It is hard to see a long-term future at Grand Met for the Pearle optical business, once profitability has been re-established. Buyers are already lurking.

Pubs, apart from the Chef & Brewer managed houses, will continue to irritate as beer volumes and property prices continue to fall.

Grand Met should make upwards of pounds 965m for the year. That implies a p/e of around 13, a 10 per cent discount to the market. Cheap on long-term prospects.

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