Outlook is sweeter for Tate & Lyle

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The Independent Online

Tate & Lyle, the starches and sweeteners group, has been through a torrid time but yesterday's full-year figures showed it is becoming a more predictable business. The company's increased confidence was reflected in a 3 per cent rise in the dividend - the first increase for a couple of years.

Pre-tax profits, before exceptionals and goodwill, jumped 43 per cent to £228m for the year ended 31 March - that figure includes £11m of non-recurring items. The company benefited from the disposal of the troublesome US sugar business and stronger performance from its European Amylum business, which is being successfully integrated.

The company, now led by a new chief executive, Iain Ferguson, is gradually becoming less of a price-taking commodity business. It has sold off the US sugar operation, which hit problems when the regulated market in that country collapsed. Non-core businesses have also been disposed of or closed. As well as the American disposal, another division heading for the exit includes the announcement yesterday of a Mexican business which is to close. The balance sheet is much healthier and net debt fell a further £168m to £471m.

Value-added goods now make up 52 per cent of group profits - from 20 per cent of sales. This includes speciality food starches, which are used in microwave meals.

Some £35m of cost savings have come through in Amylum (where Tate & Lyle bought out minorities) and there is a further £15m to come. The big uncertainties are the prices of sweeteners, which are yet to be set for next year, and the market for citric acid, which is proving difficult.

Tate & Lyle closed up 4 per cent at 326.5p, putting the stock on an undemanding forward multiple of 10. The dividend for the year is 18.3p a share, giving a yield of 6 per cent, which makes it a pretty healthy income provider with solid prospects. However, it is hard to see the shares moving further up until the uncertainties are resolved. A solid hold.

Jury still out on new managers at Courts

If ever a company needed to court some goodwill from its investors it is Courts, the sofas-to-electricals group with shops in 21 countries from the UK to Jamaica. A retail veteran - its roots date to 1850 - the company has no lack of showroom know-how. But that hasn't helped its key UK business, which sunk £4.8m into the red last year against a £7.6m profit the previous year.

This lack of spring prompted Courts to abandon its foray into electrical retailing in the UK and focus on bolstering its home furnishings offering. This was accompanied by the appointment of a fresh management team, including executives from Dixons and Arcadia.

Although Courts says underlying sales across its UK stores have leapt "significantly" since its new financial year started, a backlog in fulfilling orders of its swanky new Italian leather sofas could jinx customer loyalty in months to come.

Overall pre-tax profits for the year to 31 March were £14.5m against £9.9m the previous year. But this masked a weaker perfor-mance on a "clean" basis after subtracting profits from property sales and taking out negative goodwill that Courts had written back in.

Happily the group casts its net wide, so if one bit of its empire is weak, another is strong. The shares, up 2.5p at 215p, trade on a hefty p/e of 16. Avoid until the new team proves it can perform.

Johnson Matthey still has silver lining despite slide in platinum

Johnson Matthey is a surprisingly green stock - not many other companies can claim to cure cancer and save the world from exhaust pollution at the same time.

The company is a diverse group of chemicals, pharmaceuticals, metals and coating products. Its precious metals division, mainly platinum and its offshoots, has been suffering. Johnson yesterday said profits here fell 10 per cent last year as prices tumbled. The outlook for this market remains very subdued.

The company uses these metals to make catalytic converters that reduce harmful emissions from cars. As the clampdown on exhaust fumes continues, this business will grow further. Diesel vehicles are set to come under new environmental rules, which is good news for Johnson. There is a threat, however, in its US exposure, which accounts for 40 per cent of profits. The weakness in the dollar has hit profits and the slowdown in the US car industry is a concern. But strong sales in Asia have offset weakness elsewhere.

Precious metals aside, business is driving ahead. Johnson yesterday posted a 3 per cent rise in underlying profits to £192m, ahead of expectations.

Its pharmaceutical materials division, which provides fine chemicals for drug makersalso shows growth prospects. Profits were up 18 per cent this year. And there may be huge potential in Johnson's fuel cell technology, where it is developing new methods of powering vehicles through chemical reactions and electrical charges, rather than petrol. This, though, is likely to take at least five years to really ignite.

At 927p, Johnson is trading at about 15-times forecast earnings. That may seem pricey given that while the precious metals market remains difficult there are unlikely to be fireworks this year. But on a medium to long-term view, the shares look attractive.

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