The Investment column: Highland still has a hangover

The warm glow to be had from Highland Distilleries' magnificent Famous Grouse, Macallan and Highland Park whiskies has been sadly lacking from the company's share price in recent years, which has sagged from a high of 451p at the beginning of 1994 to yesterday's close of 346p, down 1.5p on the day.

A glance at the five-year trading record indicates why that should be. Highland has been a dismal performer in financial terms with earnings per share bouncing around between 20p and 22p since 1993. Yesterday's half-year figures to February provided little evidence that things are materially on the mend, with earnings up a pedestrian 4 per cent to 12.5p.

That of course is the more meaningful measure than operating profits up 41 per cent, which benefited from the inclusion for the first time of a full six-months contribution from Macallan, bought last year in a less than amicable tussle for control of one of Scotland's classic malts. As forecast, Macallan chipped in pounds 5m of profit but the financing costs of the deal wiped out most of the benefit.

According to Highland's urbane chief executive, Brian Ivory, trading remains difficult, especially in the UK, where most of Famous Grouse's sales are made. Actually, the Grouse did extremely well against a still contracting home market, increasing sales volumes by 1 per cent in the six months to December, compared with a 6 per cent decline for Bell's and a 26 per cent collapse for Teacher's.

Single malt sales are enjoying good growth, but Highland suffered last year from its defiance of what Mr Ivory described as the "mid-winter madness" of his competitors, with price reductions of up to pounds 5 a bottle on some rival Scotches.

On the basis of forecast profits this year of pounds 45m , Highland's shares currently trade on a prospective price-earnings ratio of 16. Enjoy the product and leave the shares to others.