Shares: Trio set to distribute big gains

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The Independent Online
LATER this month should see the flotation by an offer for sale and placing of shares in Glass Glover, a contract distribution specialist. The group has achieved impressive growth despite the recession, at least at the level of operating profits, but the issue is also likely to be well received because of the buoyancy of the whole sector.

Share prices of companies including Tibbett & Britten, Christian Salvesen, Hays and to a lesser extent, NFC, have been shooting higher as investors realise that, despite their defensive qualities, they should do even better as the economy recovers. Glass Glover is likely to be floated at a discount to the demanding ratings on which the other companies' shares are standing. Among the reasons for this is the short history of the business under its current management. The new team took charge through a second management buyout in 1989 and changed the direction of the business to focus on contract distribution of ambient and chilled foods.

The flotation will clear debts, and the shares could then look a classy investment. Historic profits will be around pounds 3.5m in debt-free form, and the company should be well-placed to build on its achievement in raising turnover from pounds 45.2m to pounds 84.8m between 1989 and 1992, with operating profits over the same period rising from pounds 4m to pounds 5.5m.

Arguably the star of the sector is Tibbett & Britten, itself the result of a management buyout, which is a big player in the distribution of clothing for Marks & Spencer and also has a subsidiary that competes with Glass Glover.

Its shares have rocketed recently, as investors have reacted to its brilliantly timed acquisition of Silcock Express, one of Europe's leading businesses in motor vehicle distribution, with most of the leading car companies as customers.

Even fans such as John Lawson of stockbroker, Charterhouse Tilney, think the shares have run up enough for the time being. But the deal has been an eye-opener to observers who thought that Tibbett & Britten was a worthy but slightly boring operation.

It looks a cracker. The shares are unlikely to give up much ground and will forge ahead again as soon as there is hard evidence that Europe's recession and the downturn in the car industry have run their course. Last but definitely not least in my trio of shares to participate in the growing contract distribution market is Christian Salvesen (I am a big fan of Hays and NFC also but there is no space to write about them now). Salvesen is also a big player in the distribution market, with a marvellous customer list including Marks & Spencer, Sainsbury, Asda, Safeway, Kwiksave and manufacturers such as NorthernFoods and IBM.

There are two other factors that have sent the Salvesen share price surging from 255p to 377p since last July.

First is the management story. A new chief executive, Chris Masters, took over in 1989 supported by the highly regarded finance director, Brian Fidler. They have been focusing the group on its strengths, disposing of peripheral businesses and disentangling the group from some expensive earlier errors.

The other significant attraction is Salvesen's Aggreko subsidiary, which designs, manufactures and hires generating and temperature control equipment worldwide and which has grown from pounds 9.7m profits in 1989 to pounds 27m in 1991-92.

Analysts expect growth to continue for years to come at a rate of 20 per cent

(Photograph omitted)

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