THE INVESTMENT COLUMN : Buy-back to offset Reuter's pounding Job takes on role as Reuters's comforter

Reuters' chief executive, Peter Job, must have been taking the long view yesterday when he said he did not see the strength of sterling as a problem. But in the short term at least, currency problems are undeniably a worry.

Pre-tax profits for the six months to June were down 3 per cent to pounds 333m, and the pound - which yesterday reached an eight-year high against the mark - was fairly and squarely blamed. Although the company wouldn't put a figure on the damage done by sterling, it said profits were up 12 per cent at a comparable exchange rate, which in effect means the strong pound took a pounds 50m bite out of Reuter's profits.

Reuters can do little except sit it out and hope for better times. Shareholders may be well-advised to do likewise, especially since yesterday's announcement of a pounds 200m share buy-back over the next 12 months. Rob Rowley, finance director, says Reuters has pounds 1.1bn in cash he does not want to accumulate further.

A plan last year to give investors pounds 613m via a special dividend formula was scrapped after the Government shelved related tax benefits. Mr Rowley would not be drawn on whether further cash will be returned to shareholders after this year.

Buy-back or no, there are tough times ahead for Reuters, with the prospect of a slug of additional expenditure over the next few years to combat the threat of the millennium computer time bomb. The company isn't giving estimates for the cost of the problem yet, which could cause a global computer meltdown if software systems fail to recognise the date at the beginning of the year 2000. Mr Rowley does promise more detailed explanations about the scale of the threat at a seminar for shareholders later this year, though. In the meantime, a "millennium compliance programme" has been set up.

Leaving aside millennium and currency gloom, Reuters is still a market leader, and is continuing to enhance its existing product range. The 3,000 series, for example , combining up-to-the minute price information with historical data on shares, bonds and the foreign exchange, has sold well since launch last year, and further developments to the product are being applied. A domestic version has been established in the UK equities market, and a US model is planned.

If the pound continues to make life difficult for the company, there is always the possibility of lifting product prices. These have been held broadly constant for the past five years, but if currency worries persist, it may be something the company will look at.

Analysts downgraded their forecasts by about 5 per cent after yesterday's results. Current year forecasts for pre-tax profit are around pounds 680m, with about pounds 760m expected next year. That puts the shares, down 11p at 598.5p, on a forward p/e of 21. Worth holding.

Clark looks to regain sparkle

The stock market in its present mood will forgive almost any shortcoming, and cider-maker Matthew Clark and its chief executive Peter Aikens were given an easy ride yesterday.

The results of a disastrous year for the group saw profits slip by 4 per cent to pounds 40.6m, despite turnover ahead by a hefty 26 per cent to pounds 571m in the 12 months to April. The first full-year of Taunton Cider helped hide some of the problems, but a slump in market share from 41 per cent to 37 per cent tells its own story.

The figures confirmed Clark's strategic blunder. The surge in demand for alcopops might explain a standstill in the recent strong growth of demand for cider, but it cannot excuse a 13 per cent drop in the group's sales in a market where total volume fell just 3 per cent last year. The price war with its bitter rival Bulmer's provided a better excuse for a drop in margins, but there is no doubt that Matthew Clark is paying for a serious underspend on promotion at a critical time.

This year it will beef up advertising spend from pounds 2m to pounds 9m, including pounds 6m on Blackthorn cider, making it one of the UK's top half-dozen promoted drink brands, and pounds 2m on Diamond White. But the company was not pretending that things will get better quickly, business development director Peter Huntley admitted yesterday.

Much depends on the outcome of the government inquiry into taxation on high strength drinks like premium ciders, on a continuing truce in the price war and on how quickly a resumption of advertising spend leads to a fresh growth in sales. Results may not come through for one or two years yet.

Profits from non-cider brands (Strathmore mineral water, Stowells wines, Stone's Ginger Wine and Miller Draft beer) equalled cider profits last year, and the wholesale drinks business is doing well. Analysts expect them to outperform cider again in the current year and help maintain group profits at around pounds 40m.

The shares, which hit 700p a year ago, rose 4p to 246.5p yesterday, where they stand on eight times prospective earnings of 31p. Some time in the next 12 months they will be cheap, but the moment has not yet arrived.

Bullough profits by slimming down

Bullough, the mini-conglomerate, has been through the wars of late, mainly due to its troublesome former subsidiary Atal, a French furniture manufacturer. Atal was ditched in January, along with its annual losses of pounds 5m, as part of a widescale restructuring which has seen Bullough's 27 main subsidiaries slimmed down to 15 over the past nine months or so. The relief was palpable yesterday.

Results showed pre-tax profits soaring from pounds 4.23m to pounds 11.1m in the six months to April. The stock market applauded with a 2.5p rise in the shares to 95p, still a long way short of the 190p high struck in 1995.

The comparisons were muddied by the disposal programme, but a 62 per cent rise in underlying operating profits to pounds 8.81m reflects a strong performance from the retained businesses.

The main impetus came in a pounds 2m turnround from a pounds 1.6m loss at the refrigeration division. In a deceptively simple move, Bullough dumped pounds 2.8m of loss- making contracting business and replaced it with pounds 1.8m of profitable manufacturing work.

The performance at heating also demonstrated management's abilities. Divisional margins leapt from 13 to 17 per cent, boosted by bringing Trianco, acquired at the end of 1994, up to the level of existing operations. Aided also by growing demand from local authorities and the housing market, profits rose 45 per cent to pounds 3.25m.

Bullough has four growing businesses with leading or close to leading positions in many of their markets. Clearly, freed from fighting fires, the management, led by chief executive Gordon Bond, is starting to prove its ability. With gearing likely to be below 10 per cent by the year-end Bullough will be ready to hit the acquisition trail by early 1998.

Meantime, full-year profits of pounds 18.5m would put the shares on a forward multiple of 9, 1 point below their forecast yield. Good value.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Guru Careers: Financial Director / FD / Senior Finance Manager

Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

Recruitment Genius: Junior / Apprentice Sales Executives - OTE £50,000

£11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen