Zetar

Buy-and-build confectionary and snacks group Zetar has churned out sweet results for the year to April and an acquisition since the year-end provides investors with even more to chew over.

Already becoming established as a leading niche producer of white-label chocolate products for UK supermarkets through its Kinnerton division, Zetar is in an excellent position to capitalise on the ever-increasing consumer interest in ‘healthier’ eating.

Last year the group expanded the confectionary division’s premium end with the acquisition of Salamander, a producer of fruit and nuts ‘enrobed’ in such coverings as Fair Trade chocolate or yoghurt. At its natural snacks division, Zetar also added organic dried fruit importer Humdinger to its existing fruit and nut business. Both arrivals have extended their product ranges and developed new products and will be beneficiaries of some of the £3m investment this year.

The post year-end acquisition of Britannia opened the door to the fast-growing, health-driven baked snacks and biscuits sector. Zetar’s chief executive Ian Blackburn says trading at loss-making Britannia should be much improved by Zetar’s ability to increase sales, but he admits it will ‘hold earnings back this year’.

Although Britannia will dominate in terms of management time this year, Blackburn has considerably strengthened the board to help push through the many plans to boost sales and increase synergies between divisions.

A barnstorming start has been made in the new year, with sales for the first 11 weeks of £12.4m versus the £7.1m last time. This has led independent broker Altium to upgrade 2008 forecasts to £7.2m pre-tax profit and 41.8p of earnings. Recommended by GCI at 335p in February last year, the shares have run out of steam a little of late but, considering the likely organic and acquisitive growth, we feel there is more to come. Add.