The Investment Column: Safety-first makes Durex-maker SSL a good buy

Burberry; Hilton Foods


Our view: Buy

Share price: 450.5p (+9.25p)

Everybody knows the benefits of using condoms, both from the point of view of protection against sexually transmitted diseases and stopping unwanted pregnancies. For the rather less racy, SSL International, which owns the Durex range as well as the Scholl footcare group, is also a pretty solid bet for an investment punt.

The argument is pretty simple: it probably does not matter about how bad any global financial downturn might be, people are still going to have sex, and such is the strength of the safe-sex message, few would consider not using contraception. The fact that during an economic downturn more people will be forced to stay at home as their disposable income falls is also good for SSL, as people are forced to think of their own entertainment. This is all good news for holders of SSL stock, who have seen the company's shares grow from 370p at the start of last year to today's value.

But for those not convinced by these arguments, the economics works too. Most of the group's sales are in Europe, allowing the group to take advantage of the strengthening euro. SSL's chief executive, Gary Watt, reckons that there are other reasons to be upbeat. Europe's population is growing older, but more healthily than previous generations, allowing more people to have sex for longer, so he says. The group is also increasingly targeting Asian markets, where populations tend to be younger.

The group does face risks that Mr Watt recognises. The group has closed its Spanish factory, relocating operations to India and Thailand, which is a concern. Although for investors losing sleep about stocks exposed to the credit crunch, this should come as a minor worry. The group has also made acquisitions in its Scholl division, which still need to be fully integrated.

Yesterday the group said it was on target to meet its 10 per cent profit increase. Brokers at Goldman Sachs said the statement "confirms that SSL offers strong operating profit growth with attractive and defensive categories in a difficult market environment".

Investors should be trying to find as many defensive stocks as possible at the moment. Buyers might find it difficult to find a safer buy than SSL. Buy.

Burberry

Our view: Cautious hold

Share price: 438.5p (+42.5p)

When an investor hears the word retail, there is a tendency to run a mile. And with good cause in many circumstances as the credit crunch takes its heat out on the high street.

The clothing retailer and wholesaler Burberry likes to think of itself as being a bit different. In a trading statement released yesterday, the company confirmed that it is on track, with a rise of 18 per cent in second-half sales. Of course, numbers from this period include the Christmas period, which all retailers hope to enjoy, but the company has 42 per cent of its overall business in the wholesale market, with most of its autumn and winter ranges for 2008 already sold, and up 10 per cent on the same period next year.

"Burberry continues to buck the trend in a very challenging environment: proof of how a brand turnaround can cushion the impact of a downturn," say watchers at Redburn, who reiterate a "buy" recommendation on the stock.

The firm has shown a strong overseas performance, with 20 per cent annual growth in US, although its Spanish arm, which contributes about 20 per cent of the company's sales, grew by only "1 or 2 per cent" last year, according to the chief financial officer, Stacey Cartwright. She acknowledges that the pressure on the retail sector is a black mark for the group, but describes its progress as "steady as she goes," arguing that the luxury retail market has not seen as big a downturn as the lower-cost areas of the sector.

Ms Cartwright points out other internal worries, saying that the implementation of the SAP software program in the group's IT system is still a risk despite the European stage already being completed. As a retailer Burberry is a very good punt; however, given that few investors have to be exposed to the sector, most buyers should think carefully about the stock. Retailers from every walk of life will have a tricky 2008, and it is unlikely that any will come out unscathed. Cautious hold.

Hilton Foods

Our view: Hold for now

Share price: 180p (+6p)

Meatpacking might not be the sexiest of sectors that might catch the investors' eye, but Hilton Food's maiden results as a listed group, announced yesterday, were pretty respectable, with an increase in revenues to £577.7m from £526.7m in 2006. Pre-tax profits were down nearly £2m, which the group put down to costs associated with its flotation last May.

All good so far, but as most investors know, foods inflation is soaring, and producers and those involved in the processing services are increasingly wary about their growth prospects for the year. "We've two decades of food deflation," says the group's chief executive, Robert Watson. "It's natural that prices will rise, but this is affecting everyone in the food industry."

The story that buyers of the stock want to know is that groups like Hilton Foods are able to pass these additional costs on to their customers and ultimately the consumer, but Watson says that he agrees with Tesco chief, Sir Terry Leahy, that the issue of food inflation is "over-hyped". He does say that the company is trying to pass on as much of its costs as it can, without making the group's produce too expensive. Investors may choose to wait to see if they are successful before buying stock. Hold for now.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea