The Investment Column: Market warms to Berisford

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The Independent Online
Things are starting to look up at Berisford, Alan Bowkett's Magnet kitchens and Welbilt ovens group, after a disastrous 1996.

A strike in the Magnet factory in Darlington has been sorted out and the systems problems in the US are also a thing of the past. Though the pain of the profits warning will linger, the company put on the style yesterday with a rebound in profits, which soared by 47 per cent before exceptional items to pounds 37m in the year to September. The figures were well above most City expectations and provoked a round of broker upgrades.

Analysts are now hoping that both Welbilt and Magnet can make headway in markets that are still fragmented and acquisitions are expected. Welbilt, which supplies ovens and grills principally to fast-food chains, increased profits by an underlying 6 per cent.

Though growth in the US market has slowed as the major chains rein back expansion plans, this has been compensated for by growth in other markets. Some $4m is being invested in a new technology centre which should speed product development and increase the pace of productivity and cost improvements.

At Magnet, which accounts for one-quarter of the business, profits rose by nearly 50 per cent after the disruption of the strike.

Underlying sales growth is ahead of the market average though much of this is coming from customers trading up to more expensive kitchens rather than higher sales volumes.

With only an estimated 7 per cent of the kitchens market, Mr Bowkett reckons there is scope for share gains as much of the market is still accounted for by independents.

Costs should also fall, though the plan to enter the bedroom and bathroom markets have alarmed some in the City.

With the shares jumping 11.5p to 181.5p and analysts forecasting full- year profits of pounds 42m, the shares trade on a forward multiple of just 9.

The rating reflects past poor performance but now looks good value.

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