The Investment Column: Rugby

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The Independent Online
SHARES IN Rugby, the UK's third largest cement maker, dipped below the 100p mark for the first time since March yesterday, continuing their downward trajectory, which is undoing a recovery from 72.5p last year. The fall yesterday followed a 38 per cent slide in half-year pre-tax profits to pounds 21.9m, which Rugby blamed on a "year of transition".

Rugby dampened confidence further still, saying little improvement was being seen in the second half in key UK and Australian markets, which contribute the bulk of profits.

To be fair, Rugby has had a year of major change. Chief executive Peter Johnson is re-focusing on core cement and lime operations. He is not promising mega-earnings today, but value tomorrow.

The US laminates business has been sold; some of its joinery businesses also went on the block in August and investment has been channelled into new cement plants.

Unfortunately, the flagship venture, a new facility right alongside its old Rugby plant, is coming in pounds 10m over budget at pounds 145m, and late. Remaining joinery and distribution operations in Europe and the US are set for disposal in the coming months.

Analysts expect full-year pre-exceptional pre-tax profits of pounds 52.6m and earnings of 5.6p per share. Some observers wonder whether the re-vamped business is being dressed up for sale, doubting Rugby's ability to expand into Europe and Asia. RMC is one possible bidder.

Banking on a bid is risky, however, and the shares, down 11.25p at 90.75p yesterday, look vulnerable to further falls.