Associated British Foods (ABF) is nothing if not contrarian. Having for years kept cash on its balance sheet when the City wanted it spent, the family controlled conglomerate is gearing up with gusto – a year into a credit crunch that treats debt with disdain.

Yesterday, the owner of Allied Bakeries, British Sugar and Primark said that net debt for the 12 months to September would be “substantially higher” than last year – about £800 million, against forecasts of about £600 million. Next year’s profit forecasts were nudged lower to account for higher interest charges: an estimated £72 million, almost double the burden of two years ago.

ABF believes that there is nothing to worry about: the extra spending is going into medium-term projects that it argues are essential for the group’s longer-term health. These include a new warehouse for Primark in Northamptonshire, investment in beet sugar in northern China, expansion at Illovo, its African sugar venture, and a new cereal bio-fuel plant in Hull, part of its joint venture with BP.

The new Primark warehouse seems sorely needed. John Bason, ABF’s finance director, says that the existing distribution chain is “full to the gunnels”, given strong trading across the budget fashion business. Like-for-like sales rose by 2 per cent in the second half of its financial year, which implies a 4 per cent gain in the fourth quarter. Its first store in the Netherlands is due to open before Christmas.

If there is a disappointment, it is that margins have remained stubbornly flat. Neither does the recent strengthening of the US dollar – which will increase Primark’s sourcing costs – suggest that they are about to improve. Broadly, however, recent currency moves should work in ABF’s favour: about 20 per cent of profits are drawn from the Americas. The group also detects signs that commodity price inflation is beginning to level off. For now, increased energy and beet costs are likely to hamper profits from sugar, which, despite the reform of the European Union’s pricing regime, remains a source of concern.

At 794½p, ABF is trading at 14 times 2009 earnings, which, while relatively expensive, is much in line with the historic premium to its peers and reasonable, given projected double-digit earnings growth. However, caution over the near-term demands of ABF’s investment programme – at a time when the likes of Tate & Lyle have passed their capex peak – suggests that the shares can be no more than a hold.

Raven Russia

AIM-listed property funds may be out of favour – their shares have fallen 36 per cent since the start of the year – but those focused on Russia especially so.

Take Raven Russia, a developer of warehouses around Moscow and St Petersburg, which has dropped nearly 17 per cent since last month’s conflict in the Caucasus. The subsequent slide by the rouble – Raven collects rent in the Russian currency – has added to its woes.

But as yesterday’s first-year figures reveal, Raven is trading to plan. Net income rose strongly to $48.4 million (£27.6 million) – implying a yield on the cost of its properties of 13 per cent, the construction and pre-letting of its development portfolio is on track, and net asset value per share ticked up 3 per cent to 119p – an advance that no UK-focused rival would be able to match.

Raven’s rationale is to tap into the burgeoning demand for warehouse space in a country where the vigorous expansion of its consumer economy has left it undersupplied. That imbalance remains, as does the gap between its financing costs and income yield which enables it to pay out such a large slug of its earnings in dividends. On a forecast 7p payout for the full year, Raven yields nearly 10 per cent at last night’s 73p.

Even with next year’s planned move from AIM to the main market, it is difficult to see what will improve sentiment on the shares, and narrow their 39 per cent discount to net asset value. Notwithstanding increased political tensions, the summer’s slide in commodity prices – a big contributor to Russia’s recent GDP growth – has not helped.

Raven may be doing the right things – including buying out its property management adviser to bring considerable cost savings – but is likely to remain unloved. Pass.

Glisten

Glisten targets health-conscious consumers – it holds the licence to make WeightWatchers-branded savoury snacks – but it is the food producer’s share price that has got conspicuously lighter: down nearly 40 per cent from last year’s peak. That appears harsh for a company that, as yesterday’s full-year figures show, has increased adjusted earnings per share by 15 per cent and produced underlying sales growth of 11 per cent and which has maintained operating margins at exemplary levels – some 10.9 per cent, nearly double those of its peers.

Not that the figures were faultless. Sales at Glisten’s fruit and cereals snacks division rose just 3.5 per cent, hurt by distribution problems with an overseas customer, which it now claims to have resolved. A lag in recovering raw material price increases from customers has also constrained profitability. A broad spread of customers (the top five supermarkets account for less than 15 per cent of Glisten’s sales) and continued trends towards healthier eating should provide resilience.

However, having grown vigorously by acquisition over the past six years, Glisten’s short-term focus on organic growth (net debt is £25 million) offers less excitement. Meanwhile, the relative illiquidity of the shares will continue to work against it. Even at 263½p, or eight times earnings, the shares are best avoided.

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