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The Investment Column: Logistical hitch at Tibbett

Logistics, or managing other companies' transport and distribution requirements, is not the go-go business it once was, a fact reflected in the near-halving in the share price of Tibbett & Britten from a high of 908p just over two years ago. The market, however, is not the only problem facing Tibbett.

Just about the time its shares were peaking, Tibbett was busy overpaying for Toleman, a car transportation business which dragged the group's existing Axial UK operation from a pounds 4.4m profit to a pounds 9.8m loss last year.

That turnaround in large measure explains the collapse in Tibbett's pre- tax profits from pounds 26.9m to pounds 12.1m last year. The market was well warned of the problem and the shares bounced 82p to 505p yesterday with relief that things were not worse.

Tibbett was clearly blinded by the promise of picking up the rest of Ford's UK business when it forked out pounds 15.4m for Toleman.

As it happened Ford, now 70 per cent of Axial UK's turnover, chose last year to shake up its manufacturing operations in Europe. Compounded by poor management and duff information systems, almost everything that could go wrong has done so.

The business is now said to be back on track for profits next year, but the rest of the group's operations are looking patchy. With turnover related to the consumer goods industries having risen from 50 to 55 per cent last year, Tibbett has increased its exposure to the cutthroat retail sector.

The Canadian business did well, but much of the growth in the other international operations outside Axial Europe came from acquisitions. Tibbett is now moving into the potentially exciting US market and is convinced it will succeed where Christian Salvesen failed a few years ago.

The company's management remains confident that there is still growth left in the logistics market, but the City may take some convincing about this. On a prospective p/e of 15, assuming profits bounce to pounds 23m this year, the shares now look high enough.