Bottom Line: Sidlaw in a new package

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SIDLAW'S annual results revealed less than usual about the group's potential, for they included only a month's trading from the pounds 79m acquisition of Courtaulds' packaging businesses, which has altered the balance of the business.

The acquisition has changed Sidlaw from primarily an oil services group with a packaging offshoot to mainly a packaging group with an oil services division.

On that basis, the group's shares look cheap. Hoare Govett's forecast of pounds 18m pre- tax profits for the year to 30 September 1994 would give a p/e ratio of just under 14 - a near-20 per cent discount to other packaging companies.

The sector's rating reflects the recovery potential in an industry hammered by recession. Although Sidlaw's new businesses are primarily in Continental Europe, where recovery is lagging, they are in food packaging, which is fairly resilient.

Its oil services business adds to the quality of earnings as it is driven by long- term, stable contracts.

This year's 5 per cent rise in pre-tax profits to pounds 11.1m was respectable if uninspiring, but all eyes will be on the first interim figures to include a full contribution from the new packaging businesses.

The shares will probably mark time until then, but are a solid buy for the longer run.