Barclays sticks by bad debt figure

Goldshield; Fuller Smith & Turner
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The Independent Online

Matt Barrett, the boss of Barclays, was giving nothing away yesterday. Amid concern over the impact on the banking sector of the collapse of the US energy giant Enron, Barclays rushed out a third-quarter trading statement but excluded any reference to the matter.

Barclays is a more risky investment than the familiarity and longevity of its name suggests. It led the largest syndicated loan to Enron by European banks. Small wonder – it is a global colossus in the business of risk and reward, and its borrowers are as diverse as they are numerous.

It is hard to see Mr Barrett withholding details of Barclays's exposure were it severe. He indicated total provisioning in 2001 will be in line with existing forecasts of £1.1bn, implying bad debts of £600m in the second half. That doubtless includes the £87m liability shown up in Enron's bankruptcy filing.

Whatever the scale of any future one-off hit, there's no doubting Barclays' underlying strength. Revenues grew strongly at Barclaycard and the Barclays Capital investment bank. Quarterly net mortgage lending rose sharply, as last year's acquisition of the Woolwich bedded down. Overall operating income showed good year-on-year growth.

It all goes to reinforce the broader investment case of a bank that benefits from huge diversification, both geographically and operationally. It would take a big banana skin to trip Mr Barrett, who was warning last year that lending needed to be put on a more cautious footing. Barclays has experience in operating overseas, a valuable asset given that the Competition Commission has signalled its disapproval of consolidation led by any of the UK's larger banks.

Barclays' higher exposure to the recession-hit US affords it a lower valuation than peers such as Lloyds TSB and Royal Bank of Scotland. With a nasty knock from Enron priced in, risk-friendly investors should take the opportunity to buy into the wider Barclays story.

Goldshield

Popping pills in the post is not quite as easy a business at the moment as it was before the anthrax attacks in the United States. Goldshield has the misfortune to operate its mail order vitamins business from Florida, Maryland and New Jersey, the three main states in the anthrax scare. Sales have taken a knock, and the group has had to mothball marketing plans to keep profits moving ahead.

That is what Goldshield does best. Interim results, released yesterday, saw revenue up 54 per cent to £50m and pre-tax profit up 34 per cent to £5.5m.

Most growth is thanks to wise acquisitions, but underlying growth is in the high single digits, even against a mature market in the UK. The focus in the coming years will be on building the prescription pharmaceuticals side of the business in the US and, in the immediate future, sales of the injectable drugs received in an acquisition from Ireland's Antigen last month.

Goldshield operates in low-margin areas for a pharmaceuticals company, but is an expert at squeezing out savings. Group debt remains negligible and unlike most investments in the sector, it even pays a dividend. Although the stock, down 34p to 565p, is on a multiple of about 20 times forecasts of this year's earnings, it remains a good long-term bet.

Fuller Smith & Turner

The leisure conglomerate may have finally gone out of stock market fashion with the break up of Bass, but 156-year-old Fuller, Smith & Turner continues to wend its merry way as a London-focused brewing, pubs and hotels group.

Well, not so merry in recent times. An ill-judged venture into late night bars has had to be swiftly wound up, with £5.2m of losses on the properties involved. And the hotels business has been dogged by construction delays and erratic trading since the events of 11 September exacerbated a slowdown in tourism and corporate travel.

Profits in the six months to 30 September were £1.3m, compared to £10.4m last year. Analysts are expecting 39p of earnings in the full-year, putting the shares – which fell 12.5p to 435p – on a multiple of 11 times. That undervalues the experienced management team and the prospects for recovery.

With cash pouring in from the 235-strong pubs estate and the brewing business, which makes London Pride, the shares are worth tucking away.

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