The Investment Column: ABF a haven for the nervous

In these times of market volatility, Associated British Foods is the kind of company nervous investors should find attractive. Well- managed, cash-rich and with a collection of stable businesses with good market shares, Garry Weston's company is the classic defensive stock. Interestingly, ABF tends to be a poor performer in late bull markets.

The shares have underperformed the market so far this year and were a shocking performer in 1987 ahead of the crash.

The reasoning is that, as bull markets gather pace, a safe stock like ABF starts to look a little boring. But over the long run, its attractions are undeniable. In the past five years the shares have risen from 210p to 481p, an outperformance of nearly 20 per cent.

Yesterday's figures were in line with expectations with full-year profits of pounds 850m bloated by a pounds 424m gain from the sale of its Irish supermarkets interests to Tesco earlier in the year.

Stripping out that figure, underlying profits from continuing businesses rose by pounds 35m to pounds 401m though the currency impact knocked pounds 39m from that total. British Sugar's profits fell from pounds 183m to pounds 179m.

Though currency factors will continue to dent the figures in the first half, the longer-term issue for ABF is how it will spend its pounds 1.5bn cash pile which earned a return of just 7 per cent in the year. The company did bid for parts of the Unilever speciality chemicals operations which were sold to ICI earlier this year. Mr Weston is also likely to be interested in Dalgety's food ingredients business, which is up for sale and could fetch pounds 300m.

The pounds 43m special dividend hints that more funds will be returned to shareholders though the City will be looking for deals to enhance earnings.

Of course, ABF has not been idle on the investment front.

It made 10 minor acquisitions, totalling pounds 60m, last year and invested a further pounds 250m in existing businesses. Emerging markets such as China, Indonesia and Thailand look promising areas for expansion.

On full-year forecasts of pounds 433m, the shares trade on a forward rating of 15. With the shares well off their summer peak, they look good value.