The Week In Review: A poor prospect in view for power

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The Independent Online

Aggreko, the power equipment rental company, is trying to regroup after a truly grim 12 months which included the loss of its chief executive and two profits warnings.

The new CEO, Rupert Soames has announced a full strategic review to assess where the company goes from here. This will report in the first quarter of next year and is likely to focus on which markets the company operates in after a series of setbacks in the United States.

The strategic review announcement seemed to boost the shares which had already enjoyed a flurry of excitement as a result of the power blackouts in the US and the heatwave in Europe which helped Aggreko's air conditioning systems.

But the company points out that while those shortages lead to an increase in power equipment rental, it was short-lived. It was not enough, the company said, to change the underlying outlook which remains poor.

Part of this is due to the after-effects of the last American power shortages which hit California a couple of years ago. Those led to a huge increase in the manufacture of power equipment, much of which is still flooding the market and putting pressure on rental rates.

The rating on the shares looks a bit high for a company with some major strategic issues to grapple with. Avoid.


Bunzl, which distributes packaging such as plastic pots and spoons for supermarket deli bars, has been a consistent performer and last year entered the FTSE 100 index. Interim results show sales volumes in outsourcing, which accounts for two-thirds of Bunzl's business, rose by 7 per cent with operating profits up 11 per cent at constant exchange rates, showing Bunzl is keeping a tight lid on costs. At Filtrona, which supplies cigarette filters as well as ink reservoirs for printers, sales grew by 6 per cent and profits by 10 per cent at constant exchange rates. The strategy is for more of the same, with a programme of smaller, bolt-on acquisitions, largely of private companies. Share buy-backs should act as a support, making the stock a decent hold.


Persimmon, the UK's second biggest housebuilder, has been riding the back of the strong housing market. Margins in the first half rose to 19.4 per cent from 16.4 per cent on sales up only 5 per cent. Forward sales of £840m have already been achieved for the second half. The company swallowed rival Beazer a couple of years ago and it has been able to use the advantages of scale in procuring supplies and buying land. Persimmon now has a landbank equivalent to 4.7 years of building. Persimmon says it has plenty of room for improvement with some of its 24 regional housing units not producing the number of homes the group wants. The company says that, after a pause at the start of the year, the market returned to "normal" healthy conditions. The shares are worth keeping.

Metal Bulletin

Metal Bulletin, the specialist publisher and conference organiser, has had a grim time, with conferences hit by the war in Iraq and the Sars epidemic. The downturn in metals trading also affected the company, with profits collapsing dramatically. But maybe the green shoots of recovery are emerging. Gross margins rose by 2 percentage points as Metal Bulletin cut costs and moved more of its publication to e-mail. Other good news is that BCA Research, the bank credit analyst business, is also doing well. Market conditions remain challenging, the company says, but this could change. A speculative buy.

Bodycote International

The downturn in the manufacturing sector has led Bodycote International, the metal basher, to seek "self help" with major cost-cutting. In all 1,000 jobs have gone in 30 months, with a further 100 to go. The company, which coats and tests metals for the aerospace, automotive and power-generating industries, says manufacturing demand is not expected to recover until 2004. In the case of the commercial aviation sector, the forecast is for 2006. Bodycote reckons this will force rivals to merge or exit the heat-treatment market with Bodycote poised to pick up the slack. Bodycote sounds more confident than a year ago, during which time shares have doubled. Hold.

James Fisher

James Fisher's strategy of going after higher-value marine support services in an effort to cast off its shipping company label in favour of a services company tag is continuing to pay off. Its marine support services division performs various tasks for the MoD, including providing the Royal Navy with a UK submarine rescue service. The company has made considerable progress in turning itself around. It now gets about 39 per cent of its profits from the services unit, up from about 17 per cent a year before. The balance comes mainly from its tankships business, where it delivers fuel to major oil companies. The company is bullish on its prospects for the rest of the year. It is optimistic about marine services, which it believes will be its biggest division before long. Buy.


The municipal authorities that run water and sewage businesses in the US are strapped for cash as the economic downturn feeds through into reduced tax receipts. And that means infrastructure projects in the water industry are being delayed. Rotork, which makes industrial taps used in such water systems, says meeting profit expectations for the rest of the year depends on what happens in that market in the coming months, and investors should take that as a signal to trim shareholdings.


Tomkins, the old conglomerate, is trying to be a simple automotive specialist these days.

This is a tough market and half-year operating profits have fallen. Jim Nicol, the American chief executive, talks about honing the company's "lean manufacturing" process, which involves reducing floorspace, using technology more efficiently and making cuts in headcount. Savings have totalled £11m in the first half and are on track to hit £20m in the full year, ahead of the £18m expected. The company is also targeting the the so-called aftermarket. Another plan is to reduce the exposure to the US, which accounts for two-thirds of sales. The company looks on a more stable footing but with little upturn evident in the major markets there is no reason to buy now. Hold.

Slough Estates

Slough Estates, the industrial property company, has not had a recovery in rents and says there was still an imbalance between supply and demand. But it has good occupancy rates and low gearing which means it is poised to take advantage of an upturn. Encouragingly, the board has hiked the dividend by 6.4 per cent, which should give shareholders optimism. Hold.

Wellington Underwriting

Wellington Underwriting is having a good year. Lloyds insurers have been able to retain the high premiums in many lines of business which were kick-started in the wake of the 11 September attacks. At the same time, they have had very few claims on polices because of the low number of natural disasters and other catastrophes in the past year. Wellington last year restructured its business, stripping its volatile reinsurance arm out of its Lloyds business and creating a separate vehicle, Aspen Re. Wellington's core Lloyds business, which includes aviation, property and employment liability cover, and its US arm have performed strongly. Buy.

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