Solving the problem of control

The spring cleaning strategy announced last year was designed to appease frustrated shareholders and the SFR deal, after the sale of its stake in China Mobile and some residual assets in Japan, is further evidence that Vodafone is not willing to simply sit on its hands when it comes to non-core holdings. Sale of its stakes in Polkomtel, the Polish network, and Bharti Airtel, an Indian operator, are expected to generate another £1 billion, while its operations in Fiji, New Zealand and Australia, where its network has been merged with 3, could also be put on the block.

The biggest job left on Mr Colao’s to-do list is its 45 per cent stake in American network Verizon Wireless. A straight sale in the vein of the French exit is unlikely, with the United States a more attractive market and a sale lumbering it with an enormous capital gains tax bill. Instead, investors are hopeful of a resumption of dividend payments from the venture, which in turn could enhance Vodafone’s pledge to increase its own payout by 7 per cent per annum over the next three years.

Trading at less than 12 times this year’s earnings with a dividend yield of 5 per cent, Vodafone is not expensive. However, while the group’s full-year results in May could bring clarification of the Verizon dividend, they may also warn of trouble at its sizeable operations in the “Pigs” economies — the troubled ranks of Portugal, Italy, Greece and Spain. As such, hold until these concerns are dismissed.

Cranswick

Some will have enjoyed their first barbecue of the year at the weekend, which would normally get Cranswick’s shares sizzling.

However, the Sun went in on the pork group yesterday, its shares sliding 21p to 810p, after a cautionary trading update led to fears that more than 20 years of continuous sales growth could be put on hold.

The sausage maker is still on course to meet its full-year forecast but says that the past three months have been much more challenging than expected, with sales and volume growth slowing. Worse still, it is warning that next year will be more demanding than usual.

By most accounts the company had a good recession, with hard-pressed consumers opting to buy its pork products, which on average cost a third of their beef equivalent, to save on the weekly shop.

This trend is set to continue, but back then pork prices were falling, reaching a low in February, and now they are rising as farmers try to recover the rising cost of feed, largely made up of cereals and soya.

Cranswick historically has had a good track record of passing on these increases to its customers, which include supermarkets such as Tesco and Sainsburys, but the task is likely to prove more difficult this time around given the tough retail environment. Retendering for contracts has also been more competitive than usual, giving it little scope to improve margins.

To be sure, Cranswick is a well managed business that has invested wisely in its infrastructure to meet rising demand more efficiently, including a new abattoir and sausage facility in Hull and an expanded air-dried bacon plant in Leeds.

However, the market for food companies is tough and will not get any easier. At 12 times this year’s earnings and yielding about 3 per cent, perhaps it is best just to hold for now.

Alterian

It was a case of déjà vu for Alterian’s shareholders yesterday after the marketing software provider warned that it would not meet expectations for the second year running.

Investors may appreciate that signing deals late in the period is one of the defining characteristics of software companies. It is well known that buyers hold out until the last minute, knowing that a desperate salesman will drop his prices to win late custom.

But the feeling was that management should be doing more to mitigate the impact of this trend. Amid the frustration, David Eldridge, Alterian’s chief executive for the past 11 years, handed in his cards.

It could have been very different. Alterian’s warning was partly the result of bad luck. It had expected to sign a contract extension with an important partner immediately before its year-end, but this was delayed by substantial management changes there.

However unlucky, it happened and sales for the year to March 31 will now be 10 per cent below expectations of between £42 million and £44 million, reducing profits by about £4 million to almost half that of forecasts.

Alterian is otherwise trading fine and, should the miss be merely a matter of timing, the share price fall of 35¾p to 154p yesterday could prove to be a buying opportunity. But there is no certainty of a deal and the chief executive’s departure presents its own challenges. Sell.

Ithaca Energy

Big Oil may be up in arms about higher North Sea oil taxes, but smaller players, many of which will not pay taxes for years because of a build-up of losses, can now buy assets made uneconomical for those who do. Ithaca Energy, which will not pay tax for five years, benefited yesterday by buying a package of North Sea assets from Hess for $74.5 million and a small stake in three of its exploration blocks. It is a short-term anomaly but expect to see more examples.