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

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: Collections Agent

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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

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
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent