The Investment column: Kenwood loses its market veneer

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The Independent Online
Kenwood Appliances, whose former chief executive Tim Parker left last year to run C & J Clark, remains a name to conjure with in the field of kitchen appliances. Sadly, the brand has lost its tarnish with the stock market. Floated at 285p four years ago, the shares have spent most of the past 18 months below their issue price and today languish at 210p, up 1p yesterday.

The company has been squeezed by sluggish consumer spending, high raw material prices and competition from the Far East. But Kenwood's fall from grace mainly stemmed from the rights funded acquisition of Ariete, an Italian appliance maker, in November 1994.

Yesterday's results for the year to 4 April, showing pre-tax profits up by 16 per cent to pounds 15.6m, suggests that at least some of the market's doubts were well founded. The figures were at the bottom of the range and Ariete's first full year was a pretty mixed bag, with very strong first-half sales falling away in the important second half, which includes Christmas, and plummeting by 23 per cent in the final quarter. Meanwhile, the UK remained difficult for much of the year, although there were signs of improvement nearer the end of the period.

One bright spot was the Mizushi start-up Italian air-conditioning operation, which had a storming first year that may eventually help offset some of the difficulties at Ariete. But this year looks like being another year of consolidation.

Kenwood is developing new products which should help counter pressure on pricing, while it is moving some manufacturing to a low cost factory in China. But a rising tax charge will slow earnings growth in 1996/97. Profits of around pounds 17.5m would put the shares on a forward multiple of just 9. Sentiment will not be improved by talk yesterday of another paper- funded acquisition, possibly in the US. High enough.