The Week In Review: Bet on easyJet to fly higher

Andy Harrison, the new boss at easyJet must work out how to mitigate the effects of much higher fuel prices at the same time as coping with a ferocious battle for passengers in both the mature UK market and the increasingly competitive German arena.

Many expect consolidation of the low-cost industry around the two dominant players, easyJet and Ryanair, and long-term shareholders ought be able to imagine easyJet in a stronger position if a sustained consumer downturn prompts others to retrench.

However, a third challenge is to close the valuation gap between easyJet's share price and that of Ryanair. That can only be achieved by raising easyJet's operating margins from less than 4 per cent towards its rival's 20 per cent.

It will be a turbulent period, but the view through the clouds is lovely. The scope for expansion eastwards across Europe, the market to be stolen from the high-cost carriers, is huge. And then there is the possibility of a bid from Icelandair, which owns 16 per cent of the shares. Long-term buy.

LONDON MERCHANT

London Merchant Securities has a buoyant portfolio of £1.1bn of commercial property. But it also has a £219m investment portfolio, with stakes in early-stage technology ventures and companies serving the oil and gas industries. Now it is splitting the two businesses. The benefits of this move will accumulate over 2006, making now a good time to repeat our share tip of June 2002. Buy.

ARLA

Arla's milk position is secure, and its branded business is also growing rapidly, but rising costs will make the coming year difficult. Speculation that Arla Foods amba, the farmers' co-operative that owns 51 per cent of the company, may launch a full takeover bid should stop shares curdling. Keep in the fridge.

DE LA RUE

De La Rue is by far the biggest player in global currencies, but this is a mature market and there is only limited room for further growth. De La Rue also faces the inevitable decline in paper money on a worldwide scale as electronic-money transfers grow in prevalence. Still, it will be a long time yet before cash is no longer king and the company can continue to bolster its margins from its steady banknote business. Hold.

TOPPS TILES

Britons' obsession with home makeovers has helped Topps Tiles, the country's largest tile retailer, deliver stellar growth in recent years. Its latest results show pre-tax profit growth of 16 per cent, but it too is now being affected by the retail gloom and had to admit that like-for-like sales have begun to slide. Even so, over the long run, the company's growth prospects are well underpinned because the DIY market should continue to grow. Hold.

HOMESERVE

Homeserve is the company behind many utilities' own-brand insurance policies that protect homeowners if there is a problem with their gas, electricity or water. It has also expanded into the extended warranties sold by furniture retailers, housebuilders and vendors of electrical and electronic goods. The profit from these policies was £10.4m in the six months to 30 September. Hold.

DEBT FREE DIRECT

There is an alternative to bankruptcy for the thousands of people who have fallen into a spiral of debt. It is called an individual voluntary arrangement, or IVA, where your creditors write off a significant proportion of your debts in return for an agreed monthly sum over five years. Debt Free Direct is the best of the specialist IVA arrangers that have sprung up, and prospects are good. We advised buying the shares in January at 128.5p - since then they have gone up 69 per cent. Again, buy.

BREWIN DOLPHIN

It has been a great year for stockbrokers. Brewin Dolphin, one of the City's biggest firms, posted a 15 per cent increase in pre-tax profits for the year to 30 September, and gave its shareholders a 29 per cent dividend increase. There is also every reason to be optimistic about the coming 12 months. Buy

HOLIDAYBREAK

Holidaybreak is not just about boggy campsites these days. Thanks to the acquisition of two Dutch travel companies, 22 per cent of its revenues come from Benelux customers and the company just announced a 14 per cent leap in annual profits to £32m. The company faces an uphill challenge against prevailing consumer spending winds, but has a good dividend yield of 4.5 per cent. Hold on for the income.

The above are recommendations from the daily Investment Column.

After 2002, Jarvis is on the road (or rail) to recovery

It is surprising that Jarvis is still here. The rail engineering, road maintenance and facilities management business almost collapsed under a weight of debt and the fall-out from the Potters Bar rail crash in 2002, which happened while it was responsible for track maintenance.

Jarvis is concentrating now on two divisions: rail and plant, and roads. The former lays track for Network Rail and hires out mechanical equipment to the network's in-house engineers, who have taken over day-to-day maintenance. This is a cash generating business. There will be less work in the future, now that a big programme of track renewal is drawing to a close, and Jarvis is going to have to replace some of its ageing equipment. But there will also be fewer contractors working on track-laying, and Jarvis is hopeful of gaining market share. The road repair and white line painting business is running at a loss currently, but efficiencies will feed through to improved cashflows from here.

Any glitches or delays, and all Jarvis's careful financial plans could be left in tatters, but management - both the current chief executive, Alan Lovell, and Richard Entwistle, the chief operating officer set to replace him next year - are worth backing. Buy.

s.foley@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas