TATE & Lyle has been reinventing itself for years, but nobody seemed to care. One of our oldest food companies whose brands include Mr Cube and Golden Syrup, its shares are no higher than they were 10 years ago.

So it was good to catch up with new chief executive Iain Ferguson and hear about Tate's gradual shift to new, higher-margin products.

An affable Scot who used to work for Unilever, Ferguson is not pushing Tate toward more consumer products. He believes its skills are in raw materials.

He has a whole crop of promising new projects, from Sorona, used to make polymer for clothes and packaging, to Xanthan, a gum used to thicken food and toothpaste, and Aquasta, a natural fish food.

Tate has been nurturing new products for a long time. Its artificial sweetener Sucralose was keenly awaited for years, finally arriving in 1996.

That timing was poor and Sucralose struggled to live up to high expectations. Its sales this year should be £68m with profits of £18m - useful rather than a company-maker.

But consumers' focus on healthy foods is brightening the outlook. Soft drink giants are using more Sucralose, which has zero calories.

David Hallam, at broker Williams de Broe, thinks sales could soar more than fivefold by 2008, with its profits shooting up to £158m. That is very much at the optimistic end, but the trend is promising.

The group needs new profit sources. Sugar profits will fall as Brussels cuts European Union prices, which are three times world levels. Tate imports cane sugar from the Caribbean, Fiji and Mauritius. Price cuts could hit profits, but EU reforms could take 10 years.

Tate's future depends on how fast it grows its value added businesses. They can earn 15% profit margins, against 5% on the commodity side. Ferguson hopes they will earn 70% of the total.

The immediate outlook is unexciting. The market expects pre-tax profits to slip to £217m in the year to March, then rise to £240m in 2005/6. At 352 1/2p, Tate sells at 10 times next year's earnings and under six times cash flow.

These modest ratings should slowly improve if Ferguson succeeds in bringing on the new profit streams. Meanwhile, the dividend yield is a chunky 5.5%.

Builders boom

AT a time when it is hard to spot a bargain, housebuilding shares are edging up while house prices slide. Why? Because builders themselves are taking steps to realise value.

First Berkeley Group unveiled plans to shrink the company and give cash back. The shares zoomed from £9 to 1290p.

Then Countryside Properties chairman Alan Cherry revealed talks to take his group private. It soared from 194p to 273p.

Are there more bids to come? Probably. Finance is available at around 6%. Housebuilders earn 25% pre-tax, and 15% to 18% net returns, on their capital.

Kevin Cammack, at broker Cheuvreux, says: 'There could well be more bids. The money is there and returns are still high.'

Managers sitting on valuable land banks could be tempted.

Bovis Homes has 10.878 plots with consent, plus 22,152 in reserve. At 594p, it sells at six times 2005 forecasts.

Crest Nicholson, at 365p, sells at seven times. Gerald Ronson has built his stake to 18%. A buyout would remove the Ronson threat or force him to counterbid.

The housing market looks tricky for the next six months. But a bid or two would cheer us all up.

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