SABMiller too frothy for now

Uncertain chapter for Euromoney publishers; FKI's engineered a great comeback

The jury is still out on last year's controversial £3.6bn takeover of Miller by South African Breweries - but the market is already betting on a not guilty verdict.

There were some undeniably good results from the combined SABMiller yesterday. The group has an impressive spread of interests across the globe, and European brands including the Czech Pilsner Urquell and Miller Genuine Draft in Russia performed exceptionally well. Together with the benefits of currency movements (notably the strengthening South African rand), earnings in dollar terms were up a stonking 55 per cent in the six months to September. There was even optimistic noises on the troublesome central American soft drinks business, where the arrival of Pepsi has increased competition and taken the fizz out of profits.

However, the audacious merger stands or falls on the management's ability to put their talents successfully to work on Miller. This is a brand that has lost its way in the US, where it is number two to the mighty Budweiser, and volumes in the half-year were down 6 per cent. No sign of things getting better. Indeed, the company has warned investors it will take three years to turn things around. It has made a start by launching ad campaigns that talk up Genuine Draft's unique flavour or Miller Lite's low-carbohydrate attractions. There will also be efforts to incentivise managers and improve distribution. Many think the recovery is a shoo-in, but Miller is a heavier beer than Bud and drinkers' tastes may just have changed. In a flattish US beer market, SABMiller has plenty to prove.

If one is accentuating the negative, the slower growth affecting the mid-market in Russia may soon extend to the premium beer market SABMiller operates in. Then there is the company's dependence on the ex-growth South African market. And Miller's former owner, Philip Morris, still holds 36 per cent of the shares and may start to dribble them on to the market from 2005.

We were not believers in the merger at the time but we did miss a trick when repeating our "avoid" advice in April. Now on 14 times current year earnings, SABMiller shares look too expensive again.

Uncertain chapter for Euromoney publishers

Euromoney Institutional Investor, the publisher and conference organiser majority-owned by Daily Mail & General Trust, has found it tough to attract advertisers to magazines such as Institutional Investor and Latin Finance while investment banks have been in the doldrums.

Shareholders had hoped that the end of the bear market might change that but, after an uptick in sales in September, the next three months look like being flat or slightly down. It might take until the New Year, and new annual marketing budgets inside the big banks, for renewed inquiries to translate into sales. Analysts did a prudent pruning of forecasts and the stock fell 6.5p to 370p.

The conference business is already more verdant, though, as is the training unit, which conducts professional training for lawyers and bankers.

There's a new worry: with DMGT examining an audacious bid for the Telegraph newspapers, investors suspect it may sell down its stake in Euromoney. There are plenty of other assets (notably in radio) that DMGT would most likely sell first, but it is an uncertainty to be borne in mind.

The shares are back above where we said "hold" 18 months ago and the stock, though fully priced as a multiple of current forecasts of earnings, does have upside as the recovery develops. Hold.

FKI's engineered a great comeback

The word "diversified" hardly begins to do justice to FKI. The engineering group is a big sprawl of businesses. It makes thousands of products, from chains and conveyor belts, to hinges and wind turbines, to whole warehouse systems. It employs 14,500 people in 50 countries. And, bizarrely, it is currently conducting 67 strategic reviews.

Paul Heiden is 10 months into the job of chief executive and has asked managers at 67 divisions to, in effect, justify their division's existence within the group. FKI's future shape and direction will finally be elucidated by Mr Heiden in January, but don't expect fireworks, maybe just a nip and a tuck in the portfolio.

So the real story at FKI is the state of the global economy. The half year ended 30 September was weak, of course, and profits collapsed to £7.4m from £25.6m the year before. The shares fell 6p to 106p not because the figures were worse than feared but because Mr Heiden felt unable to be as upbeat on the future as some of his peers. Difficult but stable, was his assessment.

Mr Heiden has already "rebased" (i.e. cut) the dividend and managed to squeeze relatively more cash from across the group, thanks to a steady trickle of job cuts and other efficiency measures. So FKI is edging away from the abyss into which it looked last year, when it came uncomfortably close to breaking promises it had made to its banks.

We said the shares were not worth pursuing when we last wrote on them last October and they continued to fall until April. Now, though, the environment is much improved. FKI's factories are running at barely two-thirds capacity, so it can easily take on much more work. Sales growth, when it comes, can feed through very strongly to profits. Buy.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joe Cocker performing on the Stravinski hall stage during the Montreux Jazz Festival, in Montreux, Switzerland in 2002
musicHe 'turned my song into an anthem', says former Beatle
News
Clarke Carlisle
sport
Sport
footballStoke City vs Chelsea match report
Arts and Entertainment
theatreThe US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
News
Coca-Cola has become one of the largest companies in the world to push staff towards switching off their voicemails, in a move intended to streamline operations and boost productivity
peopleCoca-Cola staff urged to switch it off to boost productivity
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there