Cadbury could still be a sweet one

Standard Chartered is a banker for the long term; Low & Bonar culture change gets results
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The Independent Online

Any Wispa fans out there will know just what Todd Stitzer, Cadbury Schweppes's new chief executive, is on about when he describes 2003 as "revolutionary not evolutionary". The aerated chocolate bar joined Cadbury's Caramel in that great refrigerator in the sky as part of the confectionery group's massive overhaul of its business.

Cadbury has promised to save £400m a year by axing 5,500 jobs and closing up to 25 factories by 2007, saving £400m a year. Its most ambitious restructuring programme in two decades, the plan came after Cadbury swallowed chewing gum-to-cough sweets maker Adams in its biggest ever deal.

All this while the group suffered a lack of fizz from its huge North American soft drinks business, melting demand for chocolate during the hottest summer in Europe on record, and a plummeting US dollar.

Little wonder then that yesterday the group reported a 30 per cent fall in full-year pre-tax profits to £564m. That figure did include £229m of exceptional items, relating to the costs of integrating Adams, firing 1,300 staff and revamping IT systems. Excluding goodwill and exceptional charges, profits were just 1 per cent lower - better than hoped.

There was good news from the group's confectionery operations, which enjoyed their best ever year in the UK thanks to the relaunch of its core Dairy Milk range. Sales of its Dr Pepper and 7 Up brands in the US also gathered momentum throughout the year. With key brands such as Snapple still below par, there is more to go for.

Although the City would have been pushed to have been more negative about the group 12 months ago, its shares surged ahead, benefiting those investors who followed this column's advice and hung on. Even after that recovery, the stock still trades at a sizeable discount to its peers. Given the scale of the restructuring mission, risks remain, but so far so good. Worth a nibble.

Standard Chartered is a banker for the long term

Stare into the crystal ball, 30 years into the future. You might see consumers in India, China and Africa frittering away their salaries on credit cards, even before they have been paid into current accounts. Then you might see the happy shoppers returning to houses they are paying off with a mortgage.

In the search for revenue growth currently consuming the banking industry, one obvious place to find it is in countries where billions of people are rapidly gaining in wealth. Standard Chartered is in pole position to exploit this demographic explosion, already having more than 10 million customers in Asia, Africa and the Middle East.

Its largest market is Hong Kong, where it made $257m (£143m) of operating profits from consumer banking in 2003. Overall, Standard Chartered's pre-tax profits rose 22 per cent to $1.54bn in 2003. Hong Kong gives the bank a head start in the race to grow in China, where its nascent business will turn into a powerhouse in the future, it hopes. India's rapidly growing middle class is also a major target for the next few years.

There are obvious political as well as economic risks to a company which operates in volatile parts of the world. Standard Chartered shares, at 927.5p yesterday, also trade on a demanding multiple of 18 times 2004 earnings. Last June, at 750p, we advised investors to keep the shares. We still believe that for those prepared to stick around for the long term, its rating is justified. Hold.

Low & Bonar culture change gets results

Each time this column has written on Low & Bonar over the past few years, the plastics and floor coverings company has had a different excuse for disappointing results. There have been rising raw materials costs, the strength of sterling, foot and mouth, and the weak global economy.

Of course, these don't help, but there comes a time when a company should question an internal culture that excuses such underperformance. That time came last year for Low & Bonar, and we are pleased to report that yesterday's results for 2003 were ahead of City forecasts, showed the strengthening cash position of the group, trumpeted the successful integration of a floor tiles business, and set out an unexpected 80 per cent increase in the final dividend, which had been savagely cut last year.

Clearly the management is no longer fire-fighting and is confident on the future. Demand for its products such as artificial grass (used on Manchester United's training pitch) is growing fast while there are improving margins in the plastics division, which makes a range of products including bumpers and dashboards for posh cars. More acquisitions in floor coverings are expected.

The shares, at 90p, are on 12 times 2004 earnings. Hold.

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