Hazlewood looks like a long haul sub head

THE INVESTMENT COLUMN
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The Independent Online
It has been a tough few years for Hazlewood Foods, the food manufacturer with interests ranging from pickles and mineral water to ready-made meals for supermarkets. After an expansionist binge in the late 1980s, the company has been busily hacking off its unproductive parts. The strategy is to move out of commodity businesses and towards added value ranges. It is increasingly looking like a long haul.

Investors have seen the share price collapse from 199p in 1993 to 115p - up 8p yesterday - as the market got wind of the problems. But the company has not been sitting on its hands. A pounds 37m loss in the year to March was caused by pounds 56m of exceptional items relating to the sale and termination of loss making businesses.

John Simons, the former finance director who became chief executive in September has been wielding the axe. Thirteen plants were either closed or sold last year. The cost base has been attacked and the operations rationalised. In January it off-loaded its shellfish operations at a cost of pounds 47m.

Hazlewood now concentrates on four divisions: grocery, which includes bottling and bakery; delicatessen and meat; ready-made meals including the manufacture of pizzas and sandwiches for the major supermarket groups; and Harvest Foods, a tomato and potato producer and processor.

New markets are being sought. A chilled food distribution business is targetting forecourt retailers on petrol stations. A vinegar production facility now makes gin, vodka and rum for supermarkets.

The problem is that Hazlewood remains rooted in the commodity sector more than it admits. Bottling mineral water is hardly added value and neither is the pickles business. The company is also moving closer to the powerful supermarket groups while rivals such as Dalgety, ABF and Booker are moving in the opposite direction.

BZW is forecasting profits of pounds 37m next year which at yesterday's closing price of 115p puts the shares on a forward p/e of around 10. The low rating fairly reflects the risks.

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