THE INVESTMENT COLUMN

Dalgety feeds hopes in the City

It is five months since Dalgety announced it was selling its Golden Wonder and Homepride businesses to pay for the pounds 440m acquisition of Quaker's European pet foods. The plan was to move away from snacks and sauces to concentrate on pet food, agribusiness and food ingredients.

The City liked the strategy but wondered whether the company could achieve its aim of raising pounds 300m from the disposals. That target looked much more attainable yesterday when CPC, the American food group that makes Ambrosia rice pudding and Knorr soups, agreed to pay pounds 180m for Dalgety's Golden Wonder Pot Noodle division. Final offers for the Homepride and Golden Wonder snacks businesses are already in and the company says it hopes to announce buyers for both by September.

The shares put on 4p to 445p in response to the news, but the City could be in for a disappointment. The prices to be obtained for the snack businesses are likely to be disappointing compared with pot noodles. The snacks market is competitive and neither PepsiCo, which owns Walkers Crisps, or United Biscuits, which owns KP, is likely to be interested. In sauces, a possible buyer is Unilever which has already bought the Colmans mustard and sauce business.

Progress in the pet foods business is already being made. Dalgety plans to save around pounds 40m by reducing administration costs in Europe, increasing efficiencies in manufacturing and extending some of the Spillers formats, such as foil packs for pet food, to the Quaker brands. The UK market for dog food has fallen recently, but Dalgety is more confident about prospects for Europe, where Felix cat food is the fastest-growing brand in the sector.

Dalgety has been impressed with the Quakers management and a string of new product launches is in the pipeline. The marketing spend will rise and the company should be able to make its budget count more in pet foods, where it reckons it can hold its own better, than it could in the snacks business.

Brokers Henderson Crosthwaite are forecasting profits of pounds 128m for the year to the end of June and pounds 140m for next year, which puts the shares on a forward rating of around 13. After a good run so far this year, the share price is unlikely to excite in the short term but should improve when the benefits of the Quaker acquisition begin to come through. Hold for now.

Howden raises

its head again

Howden, the engineering group based in Glasgow, has been keeping a low profile since its well-publicised problems in supplying a machine to tunnel under Denmark's Store Belt. That dispute knocked a huge hole in profits in 1991 and saw the shares tumble to 30p at one stage.

Since then, and in the teeth of the worldwide recession, the group has been steadily rebuilding profits and last year saw the trend continued. Yesterday the group revealed a pre-tax figure of pounds 30.6m for the year to April, a rise of 11 per cent on 1993-94 which becomes 17 per cent if the previous year's pounds 1.38m gain on the sale of property is excluded. Earnings per share went from 7p to 7.6p, out of which a final dividend of 1.81p takes the total payment 11 per cent ahead to 2.7p.

The figures were broadly in line with expectations, but the shares added 2p to 85p yesterday as analysts warmed to news of a strong order intake last year. After signs of sluggishness at the interim stage, the order book ended the year 14 per cent higher at pounds 444m.

Compared with turnover of pounds 438m last year, that puts Howden in a strong position for 1994-95.

Profits got a pounds 4.03m boost from acquisitions, on which the group spent pounds 24.9m, including related expenditure, in the past 12 months. The three big ones, Donkin in South Africa, FCD in the US and Burton Corblin in France, chipped in around pounds 1m each, with a number of minor buys making up the balance of the contribution from acquisitions.

All areas of the world raised operating profits last year, but in Europe, the main theatre of operations, the total continues to be restrained by difficulties in Germany. Losses at the Wirth subsidiary were cut from the pounds 3m-pounds 4m run up the previous year, helped by a pounds 27m tunnel boring machine contract, but order intake there has not been sustained.

The strength of the mark and general economic problems continue to cloud the immediate outlook in Germany.

The still small Asian region, where profits rose from pounds 1.6m to pounds 2.1m in the latest period, is a key area for growth. Howden is spending pounds 5m out of a total capital expenditure budget of pounds 7m this year on a factory in China to produce fans and heaters for the power industry and further moves in the Pacific area can be expected.

Profits this year should hit around pounds 34.5m, making the shares reasonable value on a forward multiple of around 10. Selling by institutions who took up last year's placing at 93.75p could restrain the price in the short run, however.

Acquisitions lift

Gibbs Mew

Shareholders in Gibbs Mew, the Salisbury brewer, have prospered since seeing off Brierley Investments' 200p-a-share offer in October 1992. The shares at 433p are showing a tidy profit, even after last July's rights issue at 340p and yesterday's 11p fall. That owes much to the arrival on the board of brothers Tom and John Hedderson, who have taken advantage of the big brewers' forced pub sell-off in the wake of the Government's beer orders to reorientate the company towards retailing.

Last year's rights paid for the pounds 12.8m acquisition of Centric, owner of 197 tenanted pubs in the Midlands, which nearly tripled the group's estate and was the principal factor keeping profits moving ahead in the 12 months to 1 April. The pre-tax figure jumped from pounds 3.06m to pounds 4.44m, with Centric chipping in pounds 2.3m on sales of pounds 6.81m.

That left profits from the core operations down from pounds 3.19m to pounds 2.66m, an underlying decline of pounds 750,000. The shortfall is blamed on infrastructure spending to expand the group's 20 pub managed estate, a dispute over discounts with "a large supplier of wet goods" and a shift away from low-margin, high-volume free trade customers for Gibbs' beer brands such as Bishop's Tipple.

The board is being strengthened by the latest in a string of recruits from Price Waterhouse, this time Sir Jeffrey Bowman, and Richard Martin, formerly with Allied Domecq, as non-executive directors.

The plan is to keep growing the retail side, particularly in the South- east. There are still said to be plenty of opportunities to pick up pub chains whose flotation plans have been frustrated. But Gibbs is clearly going to have to pay up: last December's acquisition of six managed pubs around the M25 came in at somewhere over pounds 500,000 per property, compared with around pounds 150,000 for the average Centric outlet.

After a pause in earnings growth last year, brokers Greig Middleton are expecting profits of pounds 6.3m in the current period to get them going again. But a forward multiple of 13 probably fairly discounts the near-term growth.

COMPANY RESULTS

Turnover pounds P/Tax pounds EPS Dividend

AromScan (F) 1.2m(70,000) -1.5m(4,000) -6.34p (1.29p) -(-)

Bromsgrove Industries(F) 113.8m(86.5m) 8.3m(6.6m) 7.82p (7.12p) 3.1p (2.8p)

Gibbon Group (F) 27.5m(25.7m) 2.05m(1.7m) 13p (10.9p) 4p (3.3p)

Morris Ashby (F) 32.7m(24.6m) 2.9m(1.8m) 18.2p (13.6p) 4.55p (3.8p)

Northamber (F) 178.5m(114.5m) 3.1m(669,000) 12.4p(3.1p) 1.2p(0.3p)

P & P (I) 171.7m(118.9m) 6.2m(2.7m) 5.3p(2.8p) 1.15p(0.95p)

Wilshaw (F) 45.9m(36.6m) 5.1m(3.25m) 3.84p(2.4p) 0.5p(0.35p)

(Q) - Quarterly (F) - Final (I) - Interim

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
News
peopleFox presenter gives her less than favourable view of women in politics
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
PROMOTED VIDEO
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
News
i100
News
news

Emergency call 'started off dumb, but got pretty serious'

Arts and Entertainment
Taylor Swift performs at the 2014 iHeart Radio Music Festival
musicReview: 1989's songs attempt to encapsulate dramatic emotional change in a few striking lines
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
News
ebooksAn unforgettable anthology of contemporary reportage
Voices
Don’t try this at home: DIY has now fallen out of favour
voicesNick Harding, who never did know his awl from his elbow, is glad to see the back of it
Arts and Entertainment
Miranda Hart has called time on her award-winning BBC sitcom, Miranda
tv
Sport
Phil Jones (left) attempts to stop the progress of West Bromwich Albion’s James Morrison on Monday
I'm not worried about United's defence - Chelsea test can be the making of Jones and Rojo
Arts and Entertainment
Saw point: Bradley Cooper and Jennifer Lawrence in ‘Serena’
filmReview: Serena is a strangely dour and downbeat affair
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

Chief Financial Officer

120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker