The Investment Column: Kenwood

KENWOOD APPLIANCES is in a pickle. It needs to manufacture in low-cost countries to compete with cheap imports, but the allure of the Kenwood Chef, the largest contributor to sales, is that it is British- made.

The troubled company, which also makes toasters and fat-fryers, has been restructuring to tackle the importers who are aided by the strong pound. Almost half of manufacturing is now located in China. By the end of next year the group headcount should be 1,400, against 2,350 last year.

While Kenwood posted a half year loss as expected yesterday, it is confident of returning to profit in the full year as the restructuring bears fruit. UK sales were up 9 per cent in the half year, helped by the launch of new food processors and the continuing popularity of the Chef. The group also said that Italy and South Africa, which suffered sharp declines in sales because of weak consumer confidence, were showing signs of recovery. Colin Gordon, chief executive, says the success of the new UK products bodes well for their launch overseas, which will be accompanied by a price- cutting campaign. That should help Kenwood arrest the 20 per cent drop in exports to pounds 10m, or 16 per cent of sales.There also remains scope for property sales and further outsourcing of manufacturing, though the Chef will continue to be British made.

This may vindicate the 17 per cent investment and board seat taken by Active Value, which is reputed for shaking up basket cases. But there seems little reason to buy the shares, flat at 67p, ahead of firm evidence of recovery overseas.