City marks up Booker shares as profits rise: Food firm maintains dividend for fourth year

SHARES IN Booker, the food manufacturer and distributor, jumped nearly 5 per cent yesterday as the stock market digested the company's income attractions.

Booker maintained the dividend at 21.75p for the year. The shares rose 18p to 429p yesterday to give the stock a yield, ignoring tax, of 6.3 per cent. The market average gross yield is about 3.6 per cent.

It is the fourth year in succession that Booker has maintained its dividend. However, sentiment warmed to Booker yesterday because the payment was covered by earnings per share. In 1992 earnings were 19.3p against the 21.75p dividend, but in 1993 earnings rose to 28.1p.

Share price buoyancy was helped by a solid improvement in profitability for the year to 31 December.

Profit before tax climbed by nearly a third to pounds 86.9m from pounds 67.9m. Interest charges were lower because Booker reduced its borrowings out of profit-generated cash. Borrowings fell to pounds 125m from pounds 155m and gearing from 95 per cent to 71 per cent.

However, most of the growth came from better underlying profits as Booker - where senior management was beefed up last autumn with the appointment of Charles Bowen as chief executive - took a tight grip on costs.

Turnover in continuing businesses rose slightly from pounds 3.44bn to pounds 3.57bn but profits ran ahead further to leave operating margins at 2.88 per cent against 2.84 per cent.

Mr Bowen said the group had determined to improve cash flow, step up the level of management controls, and to increase the company's operational focus. He added: 'It is particularly gratifying to see we have generated sufficient cash to cover the dividend.'

Cover stood at 1.3 times for 1993. Mr Bowen said he would like to see this raised to between 1.7 and 2.3 times earnings per share.

However, on current prospects Jonathan Taylor, the chairman, said: 'Consumer confidence is fragile in the face of forthcoming tax rises in the UK and competition remains fierce.'