The Week In Review: GE security venture a winner for Smiths
Saturday 03 February 2007
Smiths Group shocked the City last month when it announced the sale of its aerospace division to General Electric for $4.8bn. It promised to return £2.1bn of the £2.5bn proceeds to its shareholders and said it was considering the creation of a joint venture that would combine its detection business with GE's homeland security operations.
The disposal makes sense given the appreciation in the value of aerospace assets. The news sent Smiths shares soaring - now up nearly 30 per cent in the last six months. But there are some risks. GE is paying in dollars for the business, which leaves Smiths shareholders exposed to any further falls in the value of the US currency. A one cent movement in the exchange rate moves the value of the deal by £12m, worth 3p on Smiths shares.
In comparison to the dramatic news from Smiths last month, this week's trading statement was a rather muted affair. In fact, the performance of the company's medical division was slightly disappointing. This unsettled some analysts, because the business is meant to be the most stable and predictable part of Smiths. Take profits, but don't abandon the company altogether given its track record of delivering value.
The last time this column featured Britvic, the soft drinks maker had just announced a profit warning. Nevertheless, we urged investors to buy into the stock, arguing that the worst was behind the company and that it was undervalued. We were right to do so - the shares have gained 35 per cent since our May tip. This week, the drinks group issued a bullish trading statement at its AGM. It said that total revenues had risen 4.8 per cent in the 12 weeks to 24 December amid solid growth in both fizzy and non-fizzy drinks sales. Hold.
Hay fever affects 15 to 20 per cent of the population of Britain. Those who want to prevent the symptoms need to take treatments that require up to 50 injections in a year. Allergy Therapeutics is working on a formula that requires just four injections a year. And its Pollinex Quattro drug against hay fever caused by ragweed (the main cause of allergy in the US) has received the green light from the US Food and Drug Administration to go into late-stage clinical trials. Buy.
Carluccio's, the Italian restaurants group, is flourishing. The group's trendy eateries boasted this week of a 22 per cent jump in sales for the 16 weeks to 14 January. Although there was no update on margins, analysts expect them to have remained steady despite higher energy costs, rates and labour costs. Since September, the start of the company's new financial year, it has opened two new restaurants and three more are due in Manchester, Walton- on-Thames and Covent Garden. While the group's format has been a hit in the south-east of England, it is far from certain that it will enjoy similar success across the whole of the country. Now is a good time for investors to take profits.
The next 12 months are crucial for GW Pharmaceuticals: 2007 is the year when it hopes to secure both regulatory approval from the European Union for its key Sativex treatment and sign a partner for the drug in the US. The biotech can expect sales of a few hundred million dollars in Europe once Sativex is approved. This week's full-year results from GW showed it has a cash pile of £19m, so there's plenty of money to fund its development. With the newsflow due from GW in 2007 in mind, its shares are worth a punt, though they remain risky.
Travelzest describes itself as a specialist travel company. That means it offers holiday deals that you are unlikely to find on the high street for people who want something more than two weeks in Spain sunbathing next to a pool. So if you fancy touring Vietnam or Cambodia or would like to go on a naturist break to Croatia, the AIM-listed group can fix the trip for you. For the year to 31 October, pre-tax profits rose to £404,000 from £58,000 in the previous year. The figures comfortably beat City expectations. Hold.
Galliford Try's hybrid business models enable it to plough the cash generated by its construction operations into its housebuilding unit, which enjoys far bigger profit margins. Increasingly, the group is focusing on the affordable housing sector, where it has carved a niche for itself. With Galliford's management track record, the group's shares are well worth holding on to despite their 50 per cent increase during the last 12 months.
ContentFilm has transformed itself from a film production company to simply an owner of TV series and films. Today, Content owns more than 6,000 hours of TV, 800 feature films, including cult classics such as The Crow, and can comfortably say that its results this year will meet expectations because a substantial proportion of its revenues have already been contracted. Hence, it is pretty much a certainty that its pre-tax profits will reach £3m in 2007 and rise to £4m in 2008. Given this earnings visibility and the discount at which Content trades relative to rivals, its stock is worth tucking away.
There was more bad news for GCap shareholders this week. It came in the form of the latest Rajar listening figures. They showed that the radio group's flagship station, Capital FM, has well and truly lost its top spot in London to Chrysalis' Heart FM. For the fourth quarter of 2006, Capital's audience share in London stood at just 4.7 per cent - equal to the record low the station reported in the third quarter. A year ago, Capital and Heart were neck and neck with audience shares of around 6 per cent. Since then Heart FM's share has risen to 7.1 per cent, giving it 1.85 million weekly listeners, while its rival's has slumped to just 1.46 million. In January, Capital appointed Fru Hazlitt, former Virgin Radio boss at SMG, as managing director of its London operations. However, as yesterday's Rajar figures show, she faces an uphill struggle to turn the business around. Avoid.
Kingston Communications shares touched 1,579p during the dot.com boom in 2000. It is pretty safe to say that they will never get anywhere near that level again. However, in recent months the stock has enjoyed a modest rally as the Hull-based group has gone on the acquisition tail in an attempt to try to reduce its dependence on its traditional landline business. This week, Kingston made yet another purchase. It bought Mistral, an internet service provider to small and medium sized businesses in the UK for £19m. City analysts applauded the group's latest deal. Buy.
There is record demand for private jets. It comes from multinational corporations and a new class of super-wealthy individuals for whom jetting off to an exotic destination is becoming an increasingly normal way to spend the weekend. It is, therefore, not surprising to hear that business is booming at Air Partner, the world's biggest air charter broker. The company's first half earnings will be better than those seen in the previous year. In 2006, Air Partner made a record profit of £5.1m. This is expected to hit £5.5m in the current year. As long as the global economy remains buoyant there is little to get in the way of continued growth. Hold the shares.
The above recommendations are taken from the daily Investment Column.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Where should I invest my savings?
Questions of Cash: Why didn't Thomas Cook tell me my flight was cancelled?
Buyers beware of new-build home headaches
A student's guide to financial survival: You don't have to drown in debt at university
How to save money: UK is crashing down the European league table for putting money away
- 1 Lego breaks out of the toy box and heads for the gallery
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Piers Morgan attempts to save the Union by promising to go back to the US if Scotland votes 'No' to independence
- 4 Tyler, The Creator says having new U2 album automatically downloaded on his iPhone was 'like waking up with herpes'
- 5 Grandmas keep accidentally tagging themselves as Grandmaster Flash on Facebook
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
George Galloway on Scottish independence: The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Scottish independence: Britain faces 'constitutional crisis' at next election
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony