Bahamas Petroleum. Sunday round-up. 04.September.2011

Punters favourite Bahamas Petroleum is rumoured to be  close to appointing former Hardman Resources boss Simon Potter as chief executive. Paul Crevello resigned last month for personal reasons and Steve Weyel, a non-executive director, has been supporting chief operating officer Paul Gucwa.However founder and non-executive chairman Alan Burns has been overseeing the appointment of a chief executive for the AIM listed Oiler. Simon Potter originally started at BP before moving to Australian based Hardman Resources, which was sold to Tullow Oil in 2006 for £580million. After leaving Hardman, he was chief executive at Arrow Energy International, which extracts coal seam gas across Asia, before joining Australian methane explorer Dart Energy.

Sunday Telegraph  tips Engineering group IMI who  manufacture industrial air-conditioning units, engineering for hydraulic systems and products for beverage and food dispensing. In the six months to June, revenues rose 12 per cent to £1.03billion and pre-tax profits added 8 per cent to £144.3million. The dividend, which will be paid on October 14, was 22 per cent higher at 11p. The shares have fallen from their July peak of 1,119p on downturn fears to 853p on Friday’s close – but the group showed resilience in the last recession. JP Morgan calculated that its operating profit margin fell by just 0.9 per cent on the back of a 16 per cent fall in revenue. The shares are now a buy.

Financial Mail: Midas.

Zetar makes confectionery and snack products – anything from Mr Men Easter eggs to Marmite-flavoured cashew nuts.

The company was set up in 2005, joined the Alternative Investment Market at 100p and quickly became a stock market darling, rising to almost 600p by March 2007.

In 2008, however, the business took a serious dip. It made an ill-timed acquisition, fell foul of market antipathy towards smaller companies in the wake of the financial crisis and lost a major customer when Woolworths collapsed. By April 2009 the shares had sunk to less than 100p and investors were worried.

But chief executive Ian Blackburn is nothing if not determined. He spent 15 years in the food industry before helping to found Zetar and over the past two years has worked tirelessly to put the business back on its feet and adapt to the new economic climate.

His team’s conscientiousness is paying off. Initially, Zetar was heavily focused on speciality confectionery – the types of chocolate products bought specifically at Christmas and Easter.

These days, the company has several strings to its bow. It works with Marks & Spencer, Tesco and other leading supermarket chains making own-label chocolates and snacks, such as yoghurt-coated raisins, chocolate lollipops and bags of salted nuts.

Most of these are at the premium end of the market, where profit margins are more generous. Zetar operates at the value end as well, with goods such as chocolate nuts and raisins, also sold under supermarkets’ own names. The company makes branded goods, too, including Reggae Reggae nuts and Fruit Factory fruit bars.

Mr Blackburn also has a number of licensing deals for chocolate products such as Barbie Easter eggs and Toy Story chocolate bars, and recently started working with well-known brands such as Branston, Sharwoods, Famous Grouse and Baileys, making snacks and chocolates with these flavours.

The company has a contract to supply souvenir gift packs of foods for the Olympics next year and has started creating commemorative boxes of biscuits.

Zetar has a reputation for innovation, launching 400 new products every year, some of which deliver lasting value, some of which sell out for a season and some of which fall by the wayside.

In the spring it made its first acquisition in three years, a small, Derby-based chocolate maker called Derwent Lynton. The deal was seen as an indication of management’s confidence and this was underlined when Zetar recently announced a maiden dividend of 2.25p for the year to April 30.

The payout was particularly noteworthy given that the 12 months to April were far from easy – the cost of cocoa soared, dried fruit and nut prices rose sharply and consumers tightened their purse strings.

Even so, Zetar delivered a 6% increase in pre-tax profits to £6.7million. In the year to next April, brokers expect profits to rise to at least £7.1million while the dividend is forecast at 2.5p.

Zetar is moving in the right direction and the shares, at 250p, are cheap. Buy.