Paterson pays a price for loyalty

THE INVESTMENT COLUMN

Paterson Zochonis is in many ways an anachronism, a family-dominated company clinging to its long-held links with Britain's former colony in Nigeria. Its refusal to break the tie with Nigeria is a pity because in many ways Paterson has a real success story to tell.

The Nigerian naira has been declining for as long as anyone can remember, causing periodic alarms at the group which controls over 40 per cent of the country's soap and detergent market. The latest flurry was caused by a new bout of political turmoil in Nigeria, leading to acute foreign exchange shortages and a 20 per cent cut in production in the first half of 1994.

The well-flagged problems led to the 11 per cent drop in pre-tax profits to pounds 25.1m in the 12 months to May. Paterson is confident that January's budget has stabilised the situation, with production now recovering on the back of more freely available foreign exchange.

However, this stability has been won at the price of a 74 per cent devaluation in the naira, forcing the group to write off another pounds 23.2m of its assets in Nigeria. The steady erosion of its assets has reduced the importance of the former colony to which Paterson owes its origins to just 10 per cent of the group total.

Elsewhere Paterson has a good record. A minnow in a world of soaps dominated by giants like Unilever and Procter & Gamble, the Manchester-based group still manages to head the UK market with the 17 per cent share commanded by its Cussons Imperial Leather brand. More impressive, given that the ordinary soap market is on a steady decline, is Cussons' 24 per cent lead in liquid soaps, a sector currently growing at 25 per cent a year.

It is also rapidly securing its future in developing markets overseas. After half a decade and a pounds 10m investment, Paterson believes that it has turned the corner in Indonesia, where it is at last making profits. Meanwhile, Poland, where the group bought a local brand two years ago, has seen an even quicker turnaround.

A recent second Polish purchase and a new venture in India should cause few problems for a group with net cash and investments of pounds 113m. Profits of pounds 28m this year would put the non-voting A shares on a forward multiple of 11. The shares will remain lowly rated while enfranchisement is ruled out and the risk remains that the industry's heavyweights will one day trample on Paterson, as happened in Thailand last year. Hold.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project