Not that Hewden's interim figures were poor - far from it, a 22 per cent improvement in pre-tax profits to pounds 19.7m in the six months to July was an impressive performance against a backdrop of sagging demand and weakening prices. Earnings per share jumped 21 per cent to 5p, allowing the 49th successive dividend increase since flotation in 1968 - it rose 9 per cent to 0.75p.
Achieving that in the circumstances is further testimony, if any were needed, of the quality of its management and the wisdom of ploughing on with a heavy investment programme throughout the recession when others, and logic, dictated a reining in of expenditure. Hewden has spent more than pounds 200m over the past three years so it can be excused a planned easing off in the second half. The result of that continued programme has been increased market share and, more importantly, the most modern, highly specified fleet in the business.
That said, chairman Sandy Findlay was as candid as ever yesterday about prospects for the rest of the year, suggesting only that full year profits will be ahead of last year's. Following a rise in first half profits of a fifth, the implication of a very poor second half is clear and justifies the recent retreat of the shares from their all time high of 158p.
One of the reasons the City has kept faith with Hewden, long after abandoning hope with its peers, is that even when trading is tough its cash flow has been strong. During the half, it rose to pounds 42.6m, 15.4p a share and well up on a year ago.
Assuming trading continues poor though the second half, and profits only match last year's pounds 34.8m, the shares now stand on a forward price/earnings multiple of 13. Even after the recent retreat, and with little yield support, that is high enough.
Bank of Scotland causes anxiety
Bank of Scotland disappointed the market with interims at the bottom of forecasts and the shares closed 7p lower at 240p.
Attention focused on squeezed margins and rising costs. Throw in continuing uncertainty about the bank's recent acquisition of Perth-based BankWest for pounds 437m, and the anxiety was understandable.
There are certainly plenty of reasons to err on the side of caution.
Bank of Scotland announced a 23 per cent rise in pre-tax profits to pounds 261.6m for the half year to August, this against pounds 213.2m last time, but that was largely based on a fall in debt provision to pounds 65.3m from pounds 109.8m. The market had been expecting profits of up to pounds 280m.
Worryingly, operating expenses grew 16 per cent to pounds 343m from pounds 296m. Many of these costs, however, were incurred by the Bank's highly successful finance house operation NWS which is recruiting heavily.
Margins were squeezed, going down from 2.8 per cent in the second half of 1994 to 2.6 per cent for the first half of 1995.
The Bank has expanded its market share, especially in the mortgage market, but has been forced to raise much of its funds in the relatively expensive wholesale money markets. That growth in market share led to a 15 per cent improvement in assets from pounds 32bn to pounds 36.8bn.
Another disappointment was provided by the interim dividend, up 15 per cent to 2.45 pence per share - rather less than the City was hoping for. On the other hand, the payout was covered a healthy four times, more comfortable than Bank of Scotland's peers.
The bank's conservative dividend policy means it will never be much of a yield stock.
The yield stood at 2.4 per cent for this year, a stingier payout ratio than even its parsimonious rivals. On a price/earnings ratio of 9.4 this year, however, against a sector average of 10, the shares are reasonable value on earnings grounds.
Grampian is back where it belongs
Grampian Holdings sits more easily in the Diversified Industrials category where it has returned after two years masquerading as a pharmaceutical. Fortunately for shareholders, the switch is unlikely to change the company's rating.
Grampian has never been in the business of producing pharmaceuticals for people anyway. All its products are strictly for the animals, including new vaccines for cattle with coughs and diarrhoea, which should start to pay back at last next year after a seven year period which cost between pounds 5m in development costs.
For the time being the performance from pharmaceuticals remains slightly disappointing, thanks to licensing delays and now increased material costs and margin pressures in Australia.
For the next year or two, the star performer will be the transport division which is running a close second to pharmaceuticals in profit contributions this year. Grampian has a useful niche in the disposal of waste from building sites, which should escape the Chancellor's landfill taxes, but the fastest growth is in specialised warehousing where Grampian is set to expand south from its strongholds in Scotland and the north. Its 25 per cent stake in Edinburgh Woollen Mills should provide a useful source of capital if the plan to float it goes ahead next year.
The shares rose 5p to 149p yesterday, but analysts are not rushing to raise their forecasts which stay around pounds 10.7m for the full year and pounds 11.8m next for an unexciting prospective price/earnings ratio of 13.