BTR dents debt and sharpens focus

THE INVESTMENT COLUMN

BTR is in limbo at the moment as the successful Alan Jackson era draws to a close and the market waits to see how Ian Strachan takes the pounds 12bn behemoth forward.

No surprise then that yesterday's pounds 330m disposal of the group's Tilcon building materials subsidiary left the shares, up 3p to 331p, more or less unchanged.

That said, analysts broadly welcomed the deal which, compared with forecast operating profits of pounds 29m this year, represented a good price for BTR. Minorco has a reputation for paying top dollar when it sees what it wants and it has been talking about expanding into the UK minerals market for some time.

The disposal makes a useful dent in debts which, thanks to the acquisition during the summer of the Australian Nylex minority, were set to match shareholders' funds. It also confirms the strategic drift of BTR towards a more focused manufacturing operation that will be further underlined if followed by the sale of Tilcon's US operations, Slazenger and other peripheral businesses.

That matters both because focus makes sense from the perspective of business strategy and also because the stock market more or less demands it these days, as the underperformance of other conglomerates such as Hanson confirms.

In the short term, BTR's shares are likely to be governed by two unrelated events - Hanson's results on Thursday and the closing off on 4 December of the arbitrage opportunity between BTR and Nylex stock that has kept the lid on the parent company's shares.

Further out, a company the size of BTR will continue to have difficulty doing other than track the state of the world economy. But it does have a number of factors working in its favour. It is a high-margin, cash-generative business with a justified reputation for adding value to acquisitions and the firepower, with pounds 1bn more to arrive from warrant conversions, to add to its portfolio.

The wild card with BTR is how well it tackles the opportunities arising in the Pacific Rim, a market it is better placed to attack after the Nylex deal. While investors wait to see how Strachan, China and pounds 1bn mix, a prospective yield a third higher than the market average will support the shares. Fairly priced.

Salvesen feels the pressure

Six years of moulding and trimming have at last put Christian Salvesen in the shape chief executive Chris Masters dreamed of when he joined in 1989. Manufacturing, including brick-making, has gone and the focus is now firmly on services, mainly contract distribution and generator hire. But since a profits warning early last year, the City seems to have lost confidence in the strategy. Even after yesterday's 14p bounce- back to 254p, the shares are down over a third on the peak of 398p hit in 1993.

The proximate cause of yesterday's rebound was better-than-expected figures for the six months to September. Pre-tax profits rose from pounds 41.1m to pounds 45m after a strong return to form of the Aggreko generator hire and temperature control division. Operating profits there jumped 21 per cent to pounds 18.2m and it seems that the problems two years ago in the US are behind it.

But Salvesen's other two activities are not exactly the picture of health. It is clear that distribution, where profits crept ahead from pounds 21.7m to pounds 22.3m, remains under severe pressure from its main food-retailing customers. The main prospect of growth comes in extending the mature "contract logistics" operation for food retailers to other industries. Swift, the industrial distribution business acquired 18 months ago, is expanding into continental Europe, where growth in industrial third-party distribution is running at around 20 per cent a year compared with 4 per cent for food.

Meanwhile, Salvesen has again been hammered in its pea freezing business by poor weather. This time the drought is blamed for the decline in profits from pounds 6.5m to pounds 4.9m and the business is on course for its third year of decline.

Profits of pounds 81m would put the shares on 13 times prospective earnings which are likely to be flat for the third year in a row. Fairly rated, with bid prospects limited.

Field's niches

bear fruit

Worries over soaring prices for paperboard held back Field Group's shares in the first 18 months after floating at 250p mid-way through 1993. But since the turn of the year, the UK's leading maker of upmarket cartons for consumer products has outperformed the rest of the stock market as the City has woken to Field's strengths.

Yesterday's halfway figures showing a 25 per cent rise in pre-tax profits to pounds 9.1m for the six months to 1 October continued the trend, nudging the shares another 6p higher to 319p. It is an impressive performance, given the pain being suffered by other packaging groups such as Rexam and Sidlaw.

Field has been able to shrug off soaring raw materials prices and avoid the most competitive areas of the retail industry by concentrating on fast-growing niches. Volumes were up 10 per cent in six months against a market that has grown only 2 per cent in the past year.

Investment is being stepped up to around three times annual depreciation of pounds 10m, increasing capacity by a fifth to support new orders. A big contract with BAT Industries could be worth pounds 10m a year over three years. Meanwhile, discussions are being held for a French perfume packaging acquisition.

Full-year profits of pounds 18.5m put the shares on a forward rating of under 14. Reasonable value.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor