City File: Browned off

RANKS Hovis McDougall shares have woefully underperformed the market, with the bread wars against Associated British Foods savaging margins and profits. RHM is expected to reveal profits cut from pounds 150m to just pounds 95m in the year that ended in August.

But last week the shares rose on talk of higher flour prices and bid hopes. The bread business is not much fancied, but RHM still boasts decent brands that might tempt a buyer.

Even if bid talk is just idle chatter, the shares could well be oversold. RHM yields more than 10 per cent, and the brokers BZW reckon the dividend is safe.