The Investment Column: Good prospects for ED&F Man

What on earth do sugar refining and asset management have in common? Well, ED&F Man, the agricultural products and financial services group, for a start.

The City turned its back on this highly unusual combination of businesses when the group floated in 1994 and the shares remained in the doldrums until the start of this year.

However ED&F Man has gradually won over sceptical investors. Yesterday, shares hit an all-time high of 229.5p, 49.5p higher than at flotation and 12p up on the day, on the back of a strong set of first half results. Before one-off disposal gains, pre-tax profits for the six months to September rose 51 per cent to pounds 39.7m.

So why combine cocoa and sugar with brokerage and fund management? In ED&F Man's case, the answer is expertise in futures markets. The company not only processes and distributes agricultural products, it also trades in them. And its financial services arm specialises in futures and options.

This business has had a cracking six months. Brokerage profits leapt 52 per cent to pounds 7.9m due to frenetic market activity. And, with both funds under management and product range growing rapidly, asset management looks in good shape. Profits here almost doubled to pounds 15m.

On the agricultural front, things don't look bad either. The group rid itself of its troubled cocoa processing facilities, netting itself a pounds 21.5m windfall gain in the process. Its recent molasses purchase should help boost profits in the coming months.

And the group's Australian sugar refinery, which lost pounds 10m last year, looks on course to return to the black following a merger with another refinery.

Broker BZW forecasts current year profits of pounds 95m, putting the shares on a p/e ratio of under 10 for the full year, falling to around 8.5 for the year ending March 1999. A prospective yield of more than 6 per cent also looks attractive. Given the bright prospects at ED&F Man, the shares look good value.