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Sidlaw wraps up profits

SHARES in Sidlaw, the packaging group, have been dud performers since they peaked at 350p in 1994, writes Richard Phillips. Thereafter, they fell sharply and have been trundling along at below pounds 1 for most of the past year.

However, the company could be on the mend. Final results last November were fairly good. The disposal of its oil services business accounted for most of the decline in sales from pounds 299m to pounds 151.7m. But profits jumped, from a meagre pounds 960,000 to pounds 4.8m. It was the first year of turnaround under new chief executive John Durston, who seems to be making his mark.

Sale volumes on continuing operations rose 4 per cent, although sterling's rise meant that the reported figures were down 2 per cent.

Since then, the shares have fallen back to 94.5p, from a high of 114.5p just ahead of the results. According to stock broker Greig Middleton, the company should make a pre-tax profit of pounds 6.86m this year, to produce earnings per share of 11.7p. That translates into a p/e ratio of eight. Some of the decline may be because Mr Durston stated he was on the lookout for acquisitions, and the company is well placed to do so, with a clean balance sheet and nil gearing.

The company is an attractive takeover target, in a sector where there has always been plenty of interest from continental groups. It is the seventh largest player in Europe. Most of its sales are into the confectionery, biscuits, snacks and crisps market. It is also the largest bread bag manufacturer, with about 30 per cent of the market.

The shares are trading at below a net asset value of 117p a share. The downside risk seems negligible, and the shares are trading at a discount to the market. Buy.

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