Investment Column: Wassall battles to please City

Wassall is doing its best to learn from the disastrous recent performance of other conglomerates, such as Hanson and BTR.

This year it raised pounds 462m from the flotation of 100 per cent of General Cable, the US copper wires operation it bought in 1994. Some pounds 199m of the resulting pounds 277m gain is reflected in the latest half-year results, which explains the huge jump in half-year profits. But underlying profits are still up a handy 21 per cent to pounds 29.7m.

General Cable was a piece of conglomeratisation in the best possible sense of the word, with margins jumping from next to nothing to around 9 per cent during the three years of Wassall's ownership. The group followed up the sale with a pounds 150m cash handback to shareholders.

It is hard to see what else it can do to satisfy the City, yet Wassall's shares have underperformed the FTSE All-Share index by close to 30 per cent since the General Cable purchase. Now the market is fretting over how the group will spend its acquisition firepower, put at around pounds 500m.

The Far East, where Wassall has a Singapore quote through its York trailer axle business, must be a candidate for expansion and eventual flotation, once a locally recruited chief executive is in place.

Dilution caused by the cash could see profits slip from pounds 55m this year to pounds 46m next, putting the shares, up 3.5p at 327p, on a forward multiple of 17. Hold for further action.