SABMiller could leave bitter taste

Growth for PHS is looking lukewarm; Spread betting firm IFX has the odds in its favour

The £3.6bn acquisition of Miller by South African Breweries last summer looks to have gone flat. It may be that SAB underestimated the scale of the challenge it faces in improving the image of the American beer group's brands, and its internal management and its sales and distribution networks.

Here is another piece of evidence. SABMiller's management made a presentation at the CSFB beverages and tobacco conference this week and showed "recognition of an extended timeframe in the Miller turnaround story", according to Ian Shackleton, the highly rated CSFB analyst who was there. "The company now believes it will take two to three years, as opposed to its previous 18-month expectation," Mr Shackleton wrote yesterday.

It does now seem clear that Philip Morris, Miller's previous owner, had not been a particularly careful one. The Miller beer brands, including Genuine Draft and Miller Lite lost market share last year in the US, the world's most lucrative beer market. If the most recent results of Budweiser's parent company are any guide, it seems it has lost more ground to the King of Beers this year.

South African Breweries had long been looking for a big acquisition to dilute its exposure to South Africa, where a weak currency and its own dominance of the market had made investors nervous. Ironically, the strength of the rand since the Miller deal should mitigate the financial effect of the problems in the US.

There have been genuine gains from launching Miller products in South Africa, for example, and more than £30m of annual cost savings are not to be sniffed at either. But the worry is that SABMiller's plans for a "far reaching business overhaul" at Miller, to be set out in May, will be more challenging and more prone to setbacks than previously thought.

On top of this there are fears, rejected by the company, that new competition laws in South Africa could force it to sell assets, and over the continuing weakness of SABMiller's central American markets.

This column was a sceptic when the combined SABMiller launched and investors should stay cautious. Avoid.

Growth for PHS is looking lukewarm

The water cooler is – so they say – the place for office gossip or discussion of last night's TV. Certainly, growing numbers of companies are having coolers installed, and PHS has been quick to tap this market. Its Waterlogic business is a significant contributor to the group's 22 per cent growth in operating profits for the year to 31 March.

It's an impressive growth rate, but not as high as the market had been led to expect, and there were some downgrades yesterday. PHS provides a host of mundane services to business, many of which are under pressure. Tropical plant hire is a luxury many cash-strapped office managers have decided they can do without. Plastic crate hire to expanding businesses moving office has dried up in London and the South-east. And even the core Washrooms business has suffered weakening margins, with high-margin sanitary disposal business growing more slowly than low-margin air freshener supply.

Yesterday's update was another of the small negatives accumulated by PHS. The bears cite its declining rate of organic growth – and the group's caginess in setting out exactly how much growth relies on acquisitions. There is also a growing valuation differential with Rentokil Initial, which is a less risky and higher yielding investment available on a smaller multiple of earnings. Sell PHS.

Spread betting firm IFX has the odds in its favour

Few short-term private traders actually buy or sell shares these days. They prefer contracts for difference, a simple derivative product, or spread betting as a faster, cheaper and more efficient way of playing the stock market.

If this is a growth area in a bear market, the medium-term prospects are strong indeed. Which is one of the reasons IFX Group looks interesting. It offers foreign exchange, commodities and derivative trading to institutional trading desks and private individuals, and also now owns the Financial Spreads spread betting outfit.

The volatility of markets in recent months has served it well. Clients are tempted to speculate in these conditions, and there are also higher margins to be had when prices are swinging wildly. A trading update yesterday confirmed it could hit market expectations despite a wobble in the last few months of 2002, when markets were subdued.

IFX is winning new clients, and now has £58m deposited with it in trading accounts. It also has £19m of its own cash in the bank, making its market capitalisation of barely £30m look stingy, when you consider it made profit before tax and goodwill of around £3m in the year to 31 March. At 107.5p, the stock is worth a gamble.