The Investment column: Hazlewood

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The Independent Online
AFTER FIVE years in transition, Hazlewood Foods looks dangerously close to delivering on its promises. Since 1994 the company has sold a raft of commodity foods businesses dealing in shellfish, potatoes and orange juice. Instead, it wants to concentrate on higher margin convenience sectors such as ready-made meals, sauces and sandwiches.

But the gains have been slow in coming through and in the past year Hazlewood's share price has fallen from 240p to 148p, up 0.5p yesterday to 147.5p. Full-year profits bore the scars of the most recent restructuring moves. Although underlying profits were only down 5 per cent to pounds 40m in the year, this was before pounds 20m of exceptional charges.

These included the cost of closing its Cambridgeshire meat-slicing factory and losses associated with the sale of a jams business. There were other negatives - a sharp rise in raw fish prices and the effect of poor summer weather last year, which depressed sandwich sales.

But most of the re-structuring is out of the way now, and the future looks rosier. Recipe sauces, in which Hazlewood has a 32 per cent share in the own-label market, are growing sales in double digits. Although the bad summer weather hit profits in the convenience business by pounds 5m, sales in sandwiches, pizzas and quiches have held firm.

Although it was not reflected in profits performance, like-for-like sales across the business grew by 6 per cent.

There are still some non-core businesses that could be sold, such as the greenhouse and packaging operations. But with Hazlewood's main markets growing strongly, only bad luck or management errors could prevent solid profits growth this year. Consensus forecasts are for a pounds 6m bounce to pounds 46m this year. This puts the shares on a lowly forward multiple of 10. That's too cheap.