Bottom Line: Christian appeases the lions

CHRISTIAN Salvesen discovered what the market expects from growth stocks the hard way. A profits warning in February pushed its shares from a 15 per cent premium to a 10 per cent discount overnight.

Losing the discount is proving rather harder, but producing results less awful than the market had feared is a good way to start. Yesterday's pounds 74.1m pre-tax profit, down just pounds 1.8m, on sales up 13 per cent at pounds 552.6m, was rewarded with an 8p rise in its share price to 255p.

The power hire staff taken on to push low-margin construction business in the US have now gone and the focus there has shifted firmly back to premium specialist contracts. That has meant a good start to the current year.

But as Caterpillar's attack on the market shows, specialist hire is unlikely to remain immune to competition - particularly as margins are still 20.2 per cent, despite the profits setback.

Strong in food, Salvesen's moves into industrial distribution took a quantum leap with the acquisition of Swift. This chipped in pounds 4.2m in its first six months, lifting distribution profits 13.1 per cent to pounds 39.8m.

There is undoubtedly room for further expansion in industrial distribution and in food distribution on the Continent. But 51 per cent gearing - albeit with comfortable 12.5 times interest cover - may constrain the ability to make a big move.

So, too, does share rating of about 13 times, based on forecasts of about pounds 80m this year. In the meantime, a 4.4 per cent historical yield, based on an 11 per cent hike in the dividend to 9p, is some consolation.

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