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

PROMOTED VIDEO
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
News
i100
Arts and Entertainment
Taylor Swift performs at the 2014 iHeart Radio Music Festival
musicReview: 1989's songs attempt to encapsulate dramatic emotional change in a few striking lines
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Voices
Don’t try this at home: DIY has now fallen out of favour
voicesNick Harding, who never did know his awl from his elbow, is glad to see the back of it
Arts and Entertainment
Miranda Hart has called time on her award-winning BBC sitcom, Miranda
tv
Sport
Phil Jones (left) attempts to stop the progress of West Bromwich Albion’s James Morrison on Monday
I'm not worried about United's defence - Chelsea test can be the making of Jones and Rojo
Arts and Entertainment
Saw point: Bradley Cooper and Jennifer Lawrence in ‘Serena’
filmReview: Serena is a strangely dour and downbeat affair
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
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

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

    £350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

    Chief Financial Officer

    120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker