Private finance initiatives may be controversial but they can certainly be lucrative. Carillion, a construction and support services group at the forefront of the Government initiative, unveiled its latest multi-million-pound contract this week.
The company, led by chief executive John McDonough, sealed an £880m mandate from the Ministry of Defence to redevelop, manage and operate a 43-acre site at Northwood, HQ of the Chief of Joint Operations, Fleet and Nato.
In February, Carillion's shares stood above 360p each. This week, they traded at around 314p, valuing the company at £881m.
According to the company's broker Oriel Securities, the shares are trading at around 14 times expected earnings of 22.6p for this year, and around 11.6 times forecast 2007 earnings. Set against a sector average of around 13 times 2007 earnings, that looks modest. Buy.
Royalblue showed its true colours in the first half of this year by delivering its best organic growth in a decade. The stock should already be well known within investment circles as it provides the Fidessa trading system and market data service used by traders across the globe. Buy
Nestor Healthcare is spinning off its struggling healthcare-staffing business into a newly formed company, Pinnacle Staffing Group, which will be separately listed on AIM. Nestor has won home-care contracts worth £10.6m in recent months and is expanding its out-of-hours activities into dentistry and pharmacy. These shares are well worth a punt.
Laird is now focused on making electronic parts for the wireless industry, such as antennae for mobile phones (in its technologies division), and doors, windows and locks (making up its security systems unit). From posting heavy losses in 2002, the group delivered a profit of £34m last year, and this week unveiled a pre-tax profit of £28.5m for just the six months to 30 June. Over the past 12 months, the shares have gained around 25 per cent, but still have further to go.
Nichols' Vimto tonic has been around since 1912 and, sold in 65 countries, is still going strong, helping the company to deliver a 15 per cent rise in interim pre-tax profits to £2.3m this week. The shares are not the most liquid on the London marke with over half of the company owned by the Nichols family. But trading at 16 times forward earnings, with a yield of 4 per cent, they are worth holding.
4imprint Group is a favourite of this column. The group designs and distributes promotional goods such as golf balls and coffee mugs with corporate logos on them in Europe and the States. This week, it once again impressed the City with a cracking set of figures. With the shares trading at 16 times earnings, and no sign of growth letting up, they are worth buying.
PZ Cussons is but a tiny soap bubble compared with giants of the detergent world such as Unilever. But with a large presence in booming developing countries such as Nigeria to offset its more sluggish, mature markets, this is a company that will keep growing. Buy.
Demand for the biodiesel that D1 hopes to produce is rising because of the sky-high oil price and its environmentally friendly qualities. However, the group is still in its infancy. It has no target date for profitability, and will most probably have to come back to the market for more cash before breaking even. This makes the company suitable only for the bravest of investors.
Car dealer Inchcape is planning to step up its international expansion drive over the coming months. It will focus on emerging markets and should mean that the group will spread its geographic reach from six core countries to 10 over the next five years. By the end of 2006, profits at Inchcape are expected to hit £200m. Five years ago they stood at just £60m. This phenomenal performance is reflected in the near fourfold rise in the value of its shares over this period. Investors can expect the growth to continue for some years.
Engineer Invensys broke into the black for the first time in five years with its full year results in May and has since made further progress. It posed a 55 per cent rise in first quarter operating profits to £45m and increased its margin to 7.5 per cent from 5.2 per cent. Invensys' valuation is inline with that of its peers and there is no reason to rush out and buy . But if you own the stock, keep it.
Spring Group seems to have turned the corner. Interim results from the recruitment group this week showed it has returned to the black. Profits of £2m easily beat City expectations. Spring trades at around 16 times earnings. That's in step with the rest of the sector, but around half its £77m market capitalisation is accounted for by the cash on its balance sheet limiting the potential downside in the stock. Buy
The above recommendations are taken from the daily Investment Column
Travis Perkins slims down and looks fit for the future
City analysts had expected Travis Perkins' interim results to show a 10 per cent drop in first-half profits. When the building materials group unveiled a slight rise in earnings this week, investors sent its shares soaring 5 per cent.
Travis, which trades through a network of 1,000 builders' merchants and has 179 Wickes DIY superstores, was hit by slowdowns in consumer spending and the housing market in 2005, and has been on a drive to reduce costs. This week, its management confirmed it is on track to achieve £55m of cost savings for 2006 - it has shed nearly 1,000 jobs in the past year. Unveiling a 0.4 per cent rise in interim profits to £110m, it also stressed that a gradual recovery in sales is on the cards for the second half of the group's financial year.
Although the DIY market remains subdued, growth is likely to accelerate. Meanwhile, the trend in the broader construction market looks positive, with expected rising numbers of hospitals, homes and schools being built over the next two years. This leaves scope for earnings upgrades at Travis and leaves its valuation, just 12 times' forward earnings, looking undemanding. Buy.Reuse content