Anglo Irish worth keeping on deposit

Allders; Richmond Foods

Rising jobless figures and slowing growth took the shine off Ireland's economic miracle yesterday, but Anglo Irish eyes, at least, are smiling. Dublin's small business banking upstart, Anglo Irish Bank, has been growing at a phenomenal rate but has now positioned itself well for the tougher times to come.

The company is no unwieldy high street bank, but rather focuses entirely on providing loans and banking services to small businesses, a lucrative niche during the decade of the "Celtic Tiger". Pre-tax profit growth in the year to 30 September was a roaring 46 per cent, bringing in 194.8m euro.

The chief executive, Sean FitzPatrick, was able to boast that the growth has been achieved without giving up margins, and expressed his confidence that the fundamentals of the Irish economy, including low eurozone interest rates and the demographic changes that have swollen the working population, will underpin long term growth.

Short-term, there are obvious worries. Ireland's economic growth, as measured by gross domestic product, was down to 9.2 per cent in the second quarter of the year, from 12.7 per cent in the first. Being in the business banking niche has swelled growth on the upswing; it could leave AIB exposed as the economy cools.

So AIB stressed it has used the buoyant conditions of the past few years to good effect, building up the bank's assets and diversifying with a move into the UK – which now accounts for 37 per cent of the bank's loan book. Certainly, the 20 per cent dividend rise looked prudent to the point of miserliness against 41 per cent earnings growth. It also topped up provisions for bad debts.

The shares will be held back as investors use them as a play on the Irish economy, so there may be better times to buy but, up 24p to 260.5p in London, the stock is worth holding.

Allders

How have sales been this month at the home furnishing chain Allders? Has there been a satisfactory performance from the seven stores it has opened in the past year? Legitimate questions, you might think, but ones which the management refused to answer yesterday, when they presented the City with results for the year to September.

The historic figures were pretty good. Like-for-like sales growth was 6.4 per cent, while pre-tax profit rose 6.7 per cent to £14.4m. But there was nothing to suggest that the company will be able to shake off its historic under-achievement any time soon.

It has set ambitious targets of increasing its selling space by 40 per cent in five years, and doubling operating margins. The store openings are proceeding apace, but it was slightly alarming that management refused to tell analysts whether the new outlets were performing in line with their internal projections. Many are sceptical, too, that a giant new store, close to Marble Arch in London, will be the hit management need it to be, since its Oxford Street location is more usually associated with clothes shopping than with the homewares which are an important part of the Allders mix.

Sales in October were widely known to have been poor, but the trend since then was kept a secret. All that was said is that, like-for-like, sales since 1 October are just a miserly 0.1 per cent ahead of last year.

Allders shares have been volatile this year amid speculation it could get taken over. Minerva – the property group it has partnered in its flagship store in Croydon, south London – has been building a stake, and House of Fraser is said to have mulled a bid. Neither look plausible enough as bidders to make Allders shares, up a penny at 159.5p yesterday, worth betting on. And, at 12 times Seymour Pierce's forecast of earnings in the current year, they are not cheap. Sell.

Richmond Foods

Richmond Foods is finding ice cream pretty more-ish. Not sated by last year's acquisition of Associated British Foods' ice cream business, it bought Nestlé's UK business, too. All this makes it the country's biggest ice cream manufacturer, supplying Tesco-branded ice lollies, kids' favourites like Fabs and Fruit Pastilles lollies, and sophisticated bars such as new Smarties choc-ices.

And the benefits were on show yesterday, when Richmond posted pre-tax profits of £5.0m, before exceptional costs associated with the acquisitions, up 33 per cent.

In the short term, the sinvestment case is based on the hope of cost cutting after the acquisitions, with £4m savings promised next year as production is concentrated at Richmond's Leeming Bar site. In the process, a net 220 jobs will go and a restructuring charge of about £1.5m will have to be paid next year.

After that, it will be a matter of using the benefits of scale to improve distribution, launching new products, and boosting the quality of the lollies and ice cream tubs. The well-trusted management appears to have got that side of things licked, with a plan to introduce new ice creams tubs next year, and then move on to conquer the choc-ice market in 2003.

Ross Warburton, the chairman, is confident that ice cream consumption has less, in the long run, to do with the weather than with the quality of life. The Swedes eat three times as much as Britons, and he believes there is plenty of growth to go for. The market is growing at around 3 or 4 per cent a year.

Richmond Foods has better prospects than that. On a 2002 p/e of 11 times, falling to perhaps 7 times 2003 earnings, the shares – down 7p to 202.5p – are good value.