Rutland finds the way to riches

The Investment Column
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The Independent Online
There is more than a sense of deja vu about Rutland Trust, the mini-conglomerate headed by Michael Langdon. Using the old Kellock Trust factoring group, Mr Langdon set out nearly 10 years ago to take majority stakes in fundamentally sound businesses which had lost their way financially or strategically. The aim was, as it remains, to sort them out, add value and sell on at a profit.

Although Mr Langdon fiercely resists the suggestion, it is a way to riches which led nowhere for a host of similar groups after the 1980s stock market boom faded. But while the likes of Abaco, Ifico and most notably Cannon Street Investments fell by the wayside in the aftermath of the crash and the slump, Rutland remains and, indeed, appears to be prospering. Pre- tax profits of pounds 4.9m for the six months to June, down from pounds 6.86m before, look respectable enough after stripping out the pounds 1.98m gain from business sales and at the earnings line a 44 per cent advance was impressive.

Groups such as Rutland clearly rest on their ability to turn round businesses, rather than the internal logic of their make-up.

The sale of part of soft drinks business Benjamin Shaw more than repaid the initial pounds 5.7m investment in less than five months. The money from that sale and Leasecontracts, a contract hire group, was recycled into acquiring a majority stake in Thamesport last year for pounds 52m.

Thus far, Thamesport is delivering the goods. It is set to reach its target throughput of 200,000 20-foot equivalent containers this year, up a third on last year, with the 250,000 level expected to be reached early in the new year.

The icing on the cake is that pounds 60m of capital allowances will ensure that the main Rutland businesses will pay no tax for the foreseeable future, hence the growth in underlying earnings per share.

Full-year profits of pounds 11.9m would put the shares at 59p, down 1.25p, on a forward multiple of 16 after more than doubling since the middle of last year. Compared with forecast earnings growth in the high 20 per cent range that is still reasonable value.