Unilever is off the map for now

Forth Ports; Alexon
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The Independent Online

Niall Fitzgerald must be wondering whether he was wise to include quite so many signposts along Unilever's Path to Growth strategy. The eight updates a year from the consumer goods giant may include more directions than a London A to Z but they are equally hard to navigate.

At first glance yesterday's first-quarter pre-close update from the company's chairman suggested the group, which is chasing 5 to 6 per cent growth for its leading brands, may have lost its way. In January and February sales of goods such as Hellmann's mayonnaise, Lipton tea and Lux soap increased by just 3 per cent, down from the 5.3 per cent achieved last year. The group expects underlying sales to be just 1 to 2 per cent ahead for the quarter.

This admission forced Unilever to deploy its best navigational skills and claim the slower sales fitted into the master route plan and that the group was on course to achieve its targets for 2002. Forecasts of first-quarter earnings growth of 25 per cent will certainly drive home the message that Unilever should meet its full-year goal of low double-digit earnings growth. A 1.5 percentage point improvement in the operating margin was also better news as was signs that the group's Bestfoods purchase was bearing fruit.

While the panic that hit the market six months ago over concerns about Unilever's exposure to North America abated with healthy full-year results in February, analysts would like to see more evidence the group can drive top line growth. An onslaught of product redesigns and brand extensions, scheduled to hit supermarket shelves from next month onwards, will help to inject confidence but until the market sees proof of a pick-up, investors should keep their foot near the brake.

The shares, down 4.5p to 578p, don't look expensive on a rating of about 16 times future earnings but there are nearly three years of twists and turns left on Path to Growth and plenty more room for the group to swerve off course. Stay clear for now.

Forth Ports

Forth Ports, the Scotland-based harbours business that was privatised 10 years ago, may sound rather dull but that is no bad thing in these uncertain times. Indeed its property development arm has some quite spectacular untapped resources to offer.

Despite the difficult general economic conditions, Forth delivered decent growth last year. Full-year turnover was up 10 per cent at £133.8m, while underlying profit before tax grew 8 per cent to £39.1m.

But here's the exciting bit. Forth has huge amounts of property around its three port operations in Edinburgh. Scotland's booming capital is desperately short of housing and needs "brownfield" development in urban locations.

At the city's Western Harbour, planning permission was granted last month for a massive development on Forth land, which will provide 3,000 apartments, 50,000 square metres of office space and 6,000 square metres of food retail. Forth puts a value of £600m on the completed development.

At Edinburgh's Granton harbour site, Forth is awaiting planning consent on a scheme of a similar size. Yesterday the company provided news on a third site in the city, known as Edinburgh Harbour, which it is working up into a proposal for another office and housing site.

Forth's Edinburgh property pipeline provides about 10 years of development. This is before taking into consideration the potential of the excess land of Forth's other ports, such as Dundee, Rosyth, Grangemouth and Tilbury.

The upside from these property ventures has already lifted Forth shares from 665p in December to close at a new high of 815p yesterday, up 20p. That puts the stock on a forward multiple of 13. This is not cheap. But they could be worth a punt on any signs of weakness.


Shareholders in Alexon, the retailer which includes the Bay Trading and Dolcis stores as well as the Dash leisurewear brand, have enjoyed a cracking run. A year ago the shares were trading at a frayed edged 67p. Yesterday they stood at a stylish 218p after a 10p dip on yesterday's results. The question of course, is whether they have any further to run.

There is no doubt that management has done a good job with what might look like a ragbag of smaller high street names. Profits for the year to 26 January more than trebled to £20.1m. Like for like sales across the group were up 9.3 per cent on the previous year with margins also ahead.

Bay Trading, the womenswear retailer, and Style Menswear, which includes the Envy chain, both did well. The disappointment was Dolcis, the shoe business, where losses grew to £600,000.

Going forward there should be more to come from Bay Trading, which is broadening its product appeal, while Envy has expanded into womenswear. Current trading looks encouraging, the company says.

On the upside the rating is still low. Deutsche Bank is forecasting pre-tax profits of £25.8m this year, which puts the shares on a forward p/e of just eight. The broker has a price target of 260p per share. But for those who have enjoyed a good run there is an argument for taking profits.