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

PROMOTED VIDEO
Extras
indybest
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
News
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Life and Style
Pick of the bunch: Sudi Pigott puts together roasted tomatoes with peppers, aubergines and Labneh cheese for a tomato-inspired vegetarian main dish
food + drink
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
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

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape