Bottom Line: Slow haul for TDG

THE 8p fall in Transport Development's shares yesterday to 227p was a surprising reaction to the haulier's maintained 3p interim dividend. With TDG continuing to lose more on the swings than it gains on the roundabouts, an improvement in the payout looks unlikely for years.

The volume-sensitive plant hire and transport businesses are predictably picking up. But all the improvement was wiped out in the first half by continuing tight margins from distributing product for customers ranging from Mars to Williams Holdings. The division's return on capital of less than 5 per cent is uninspiring.

The net result was flat operating profits of pounds 17.3m ( pounds 18m), a better measure than the jump in pre- tax profits from pounds 3.5m to pounds 17m, which reflected the high cost of getting out of peripheral businesses last year. Earnings per share were 7.62p (1.66p loss).

TDG's problem is that, in a highly competitive industry and a low inflation environment, price rises cannot be expected to come to the rescue. Profits will only increase through higher volumes and lower costs, a slow process.

NatWest Securities forecasts profits of pounds 33m this year, giving earnings per share of 14.5p and a prospective p/e ratio of 16. A yield of 5.2 per cent is above average, but with no growth prospects it ought to be.