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.

News
people
News
people And here is why...
News
peopleStella McCartney apologises over controversial Instagram picture
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
PROMOTED VIDEO
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsWelsh town changes its name, but can you spot the difference?
News
i100
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
News
ebooksAn unforgettable anthology of contemporary reportage
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

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

Time to stop running

At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?