Christian Salvesen Financial Results
IT CAME as little surprise yesterday when Christian Salvesen said its pre-tax profit fell 26 per cent last year. The slump had been well flagged. The trouble is the company can do little to improve the situation, since its fate is largely dictated by the health of the depressed manufacturing industries over which it has no control.
The sector generates about 40 per cent of the group’s sales, the bulk of them from the UK. By its own admission the company’s profits will probably fall in the first half of this financial year as there seems little chance of an early pick-up in the manufacturing sector, although it says the position could improve in the second half.
Yet there are some points in Salvesen’s favour, and its shares should not be written off. The company’s consumer and foods logistics business, which generates about 60 per cent of sales, looks robust under the circumstances, reporting flat profits last year and winning key new business from Asda and McCain.
Meanwhile, Salvesen shares deliver a healthy yield -7.6 per cent against last night’s close -well above most of its rivals and UK companies in general. Since the company has pledged to at least maintain its dividend each year, this looks unlikely to change. Yesterday it kept its total dividend at 6.6p, despite slumping profits.
There is also a possibility that Salvesen could become a takeover target. Although there are no obvious bidders, Exel of the UK, and TPG, the postal and logistics company of The Netherlands, might be interested in parts, or all, of the company. The shares have fallen 30 per cent since mid-November and the market does not seem to have factored the possibility of an early recovery into the share price.
