Zetar

Confectioner Zetar, up 38% since it was backed by Growth Company Investor in June, continues to recover some of the impetus lost late last year.

London-headquartered Zetar, which last month appointed former Sainbury’s finance director Roger Matthews as a non-executive director, has informed that sales swelled 6% to £56.8m in the six months to October. This is down slightly from the 10% increase the group enjoyed for the first eleven weeks of the year to 18 July.

But with Christmas and Easter falling in the second half of the financial year, the first half is historically weaker for Zetar. And subject to reasonable performances in those crucial festive periods, management say they are ‘confident’ of delivering growth for the full year.

As Christmas sales efforts build from the summer and continue up until early December, the current months normally see an increase in working capital and hence a rise in bank and total borrowings. However, an acute focus on ‘cash management’ helped shave these seasonally high levels of net debt from £30.5m to £28.3m by 31 October, better than the board’s original target.

Analyst Charles Pick at broker FinnCap regards Zetar shares, trading on prospective price-earnings ratios of just under 7 for the current year and 6.3 for 2010, as cheap, but points out that AIM-quoted food sector peers Finsbury and Glisten are both cheaper, albeit more indebted.

With the business continuing to prove itself, Zetar remains, despite its impressive bounce, cheap enough to provide further gains. Hold on.