Pipeline of good numbers

SHELL

1,937p -32p

PERNOD RIC.

152.59 -8.30

WHAT a difference a few years makes. Back in 2004, BP was riding high and arch-rival Shell was mired in controversy about its overstatement of reserves.

While BP's acquisitions of Amoco and Arco were bearing fruit, and Lord Browne at the helm could apparently walk on corporate water, Shell was snarled up with the regulators on the reserves controversy.

Shell's share price was spinning downwards and top executives were being booted out the door.

Fast- forward, and BP has been brought low by environmental and operational disasters from Alaska to Texas.

It has just reported lower second-quarter profits, and its own boardroom bloodletting has seen Browne and head of refining John Manzoni quit the company, while Shell seems to sail serenely on.

The latter yesterday announced Q2 profits up 20 per cent to $7.56 billion (3.69bn) and six-month profits up 17 per cent to $14.48bn. Its quarterly divi in dollar terms is up 14 per cent.

Shell had its production problems in the latest quarter, mainly in Nigeria, the latter sometimes resembling a riot from which a country occasionally breaks out.

But Shell's problems were light compared with BP's production difficulties from the Thunder Horse platform in the Gulf of Mexico to Alaska.

More to the point, it is the eighth consecutive trading quarter in which Shell's profits - at an underlying 3.36bn - have outstripped City expectations.

In terms of drawing lines under the fiasco of a few years back, which included a ditching of its delphic dual listing and a streamlining of its management structure, Shell could not have done much better.

It is still not the most dramatically clear communicator in the oil business, but few would argue with the numbers.

It is a testament to the turnaround under chief executive Jeroen van der Veer and his team that the City once again expects Shell to turn in good numbers. It is no longer surprised that it does.

PERNOD Ricard's decent sales figures in its latest trading year show it has integrated Allied Domecq satisfactorily, and further sales and volume growth are likely.

Apart from the panoply of good brands that the French group got from Allied, it also got a broader and enhanced distribution network.

Pernod also has the geographical spread to offset problems in any given country, such as the political coup-induced worries in Thailand.

Thailand's problems, which have tumbled over into the economic and business field, contributed to Asia's volume growth for Pernod being held at under 3 per cent. But it gives a false picture; the region remains a Scotch whisky tiger. If Thailand is excluded, volume growth in Asia is still over 10 per cent.

While Pernod will hope the recent duty-cutting on Scotch imports to India eventually turns that country into an El Dorado for whisky exports, it also continues to do well in the US and Europe (although Spain continues to be problematic for all major whisky groups).

Pernod, the second biggest wines and spirits company in the world, has the financial muscle to plough money behind its 15 main "strategic brands", which include Ballantine's, the Glenlivet, Martell and Stolichnaya.

Like its big rivals, it knows that it can play a double-handed game: capitalising on the desire of consumers to trade upwards to premium brands in its more established markets like Europe, while exploiting the desire for western product-induced cachet in new markets like Brazil, Russia, India and China.

It is a pleasant strategic cocktail.

THE sub-prime lending crisis is spreading its shadow over financial markets again.

Markets have been here before and thought they had faced down the gloom, but now it has arisen again just as we enter the UK banking results season.

The fear is that we may suffer a credit crunch, with the American contagion spreading to British banks and their corporate and consumer lending. If it does, will the current buoyancy of equity markets prove to be fool's gold? Will banks stop lending private equity money to fuel the M&A market that is a key platform in current equity levels?

The Footsie was rattled by the prospect yesterday, blue-chips losing 3 per cent of their value.

Hyder Consulting's order books at record levels

SMALL BUT BEAUTIFUL

CIVIL engineering consultant Hyder Consulting's order books are at record levels with trading proceeding as planned.

Chairman Sir Alan Thomas said: "Trading conditions remain strong in all our key territories."

Results from RPA Quantity Surveyors, acquired in April, were in line with expectations. Thomas added that the company, which has a market capitalisation of 180 million, continued to look for new acquisitions and expected to announce the completion of some in the coming months.

Last month, the company revealed it had already secured nearly 60 per cent of its target revenue for 2007-8.

Thomas said: "The current trading performance, contract wins and order book continue to give the board confidence for the year ahead."

At the presentation of annual results last month, Hyder revealed a jump in profits before tax, after exceptional items, of 60 per cent to 13.3m, on the back of a 19 per cent increase in revenue to 203.1m.

The company has won a number of significant new contracts since the year-end including a number of prestigious projects in the Middle East and Australia.

Standard Life sheds 6.2% as insurers drag broader market lower

SCOTS STOCKS

A HEAVY drag on the FTSE 100 index yesterday was the insurance sector, after Legal & General posted first-half profits that failed to excite the markets.

The news dragged Standard Life down, closing 19.5p or 6.2 per cent lower at 295.5p

Scottish & Southern Energy also fell despite the energy provider saying it had made a good start to the current financial year and was on course to meet its dividend targets.

The shares closed 7p lower at 1,453p.

British Energy was one of the few risers, up 2.5p at 485p.

Turning to the smaller to medium-sized companies, Invocas gained 7.6 per cent after the individual voluntary agreement provider indicated underlying market conditions had continued to improve since the start of the current financial year. It added it was confident of reporting further progress in the year ahead. Invocas shares closed 9p up at 127.5p.

Clyde Process Solutions steamed ahead after it said MAC Equipment was performing well and in line with the company's expectations since its acquisition in April.

The company added the integration was progressing positively. The shares closed 5p ahead at 122p, a gain of 4.3 per cent.

Pearl wants a friendly word

RUMOUR OF THE DAY

PEARL Assurance, which owns the largest interest in rival Resolution, plans to hold talks with Resolution's management over its planned merger with Friends Provident, a source close to the matter said.

Pearl focuses on consolidating life insurance funds that no longer write new business, as does Resolution. It now owns 10.3 per cent of Resolution.

The source said unlisted Pearl, founded by entrepreneur Hugh Osmond, considered the merger with Friends a strange move and said the group thought Resolution had other options.

"Pearl would like to talk to Resolution's management about this merger. The merger is puzzling," the source said, adding: "We are ruling nothing in, and we are ruling nothing out."

Torotrak

ONE TO WATCH

33p -2.25p

Scotsman says HOLD

TOROTRAK develops "infinitely variable transmissions".

This gearbox technology replaces, in larger applications, the traditional automatic transmissions, while its smaller units are used in lawn mowers instead of the traditional hydrostatic systems.

Although the better performance and energy savings have been proven, the challenge is in turning this into commercial returns. When the company came to the market in 1998, it forecast massive penetration of the premium automotive market, which simply did not materialise.

There is now a new management team, with Dick Elsy as chief executive, who has strong experience from his previous role as product development director at Jaguar.

Torotrak now has a joint venture with the US giant MTD, with 30 per cent of the US's "outdoor power equipment" market.

Elsewhere Torotrak is involved in three active licencees for off-highway products - tractors - generating reasonable consultancy income.

Nevertheless, the automotive market remains the group's key long-term prospect. To this end it is involved in prototype engineering programme with a major Asian original equipment manufacturer testing Torotrak's technology. The company also has a development deal relationship with Aisin, one of the world's largest automatic transmission manufacturers.

Re-financed by a recent 5 million share placing, the development of a multi-faceted market profile with an "important" portfolio of partners is an encouraging prospect.

• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

GSK

1,247p -28p

Broker says BUY

SHARES in GlaxoSmithKline dropped back yesterday despite Evolution Securities continuing its "buy" recommendation and 1,620p price target. The broker said the company appeared to be implementing a substantial cash return to shareholders, and it added that, depending on the outcome of the US Food and Drug Administration's Advisory Committee meeting next Monday regarding the Avandia drug, the shares should rally further.

Reckitt Benckiser

2,601p -87p

Broker says HOLD

RECKITT Benckiser eased yesterday after HSBC repeated its "neutral" stance on the household products group, although the price target went up to 2,900p from 2,800p. On Wednesday, the group posted better-than-expected net profits of 216 million for the three months to 30 June on net revenue up 6 per cent to 1.3 billion. The firm also posted like-for-like growth of 10 per cent.

VT Group

601p -22p

Broker says BUY

VT GROUP fell yesterday despite Evolution Securities reiterating its "buy" recommendation and lifting its price target from 640p to 800p for the company that has signed a joint-venture deal with BAE to make two aircraft carriers for the Royal Navy. The broker said that, while the detail of the joint venture was pretty much as expected, a major difference was the 380 million exit price VT secured.