The Week In Review: Halfords promises to step up another gear
Friday 06 April 2007
Forget the 426 stores Halfords has already clocked up in the UK and Ireland. Watch it go as it taps its expansion accelerator. It has shrunk its stores to open mini "neighbourhood" Halfords and is also building a national chain of cycle shops under its Bikehut brand.
It reckons there is scope to expand into Europe, where spare car parts are big business in countries such as the Czech Republic. It opens its first store in Prague this summer and sees the potential for up to 50 more in other towns across central Europe.
So far it has just two standalone Bikehut outlets - in Brighton and Putney, London - but it reckons it could easily open 50.
A trading update this week showed that like-for-like sales in the year to 30 March surged 6 per cent, which was better than expected. Some of this growth is down to its inclusion of mezzanine floors but even so Halfords is a business firing on all its cylinders. Buy.
HSBC for once has some good news: the Chinese authorities have allowed Britain's biggest bank to incorporate in the country, making its goal of doubling branches in China easier to meet. Unfortunately, compared with its continuing problems in the US, this is barely a straw in the wind. Given the US uncertainties, this remains one to avoid.
Severfield-Rowen, which makes steel frames for big property developments, has made a profit in every year since it was founded in 1977 apart from a one-off deficit in 1992-93, a year when the UK economy was in deep recession. Last year was no exception: pre-tax profits for the year to 31 December, 2006, soared 54 per cent to £30m. Sales rose 24 per cent to £295m. Take profits.
HAIKE CHEMICAL GROUP
It is little wonder that HaiKe Chemical Group is doing well. The bulk of the company's earnings come from refining crude oil into gasoline and diesel in China. Demand for its output easily outstrips supply and should do so for years to come as China's economy continues to expand. Trading at seven times forward earnings, buy the stock.
Evolution Group surprised many when it acquired rival stockbroker and fund manager Williams de Broe in June last year. But the deal added £1bn to funds under management at the broker, taking the total to £2.2bn. According to this week's annual results, Evolution made a profit of £2.2m in 2006, and this figure is expected to rise to £5m by the end of the year. That's good going. Hold.
Speedy Hire shares have nearly doubled over the past two years. Since this column last tipped them - back in May 2006 - they have added 40 per cent. Despite these gains, now is no time to think about baling out. The latest trading statement from the building equipment rentals group shows there is no sign of growth in the business slowing - sales for the first 11 months of its year soared by 34 per cent. Hold.
The school supplier-to-home shopping group Findel now has a decent internet presence and this week's pre-close trading update revealed that more than 40 per cent of the division's sales would be online this year. Product sales are 5 per cent ahead of last year and it has grown its customer base to 1.5 million. Two acquisitions unveiled with the update will take Findel into two new markets: supplying products to independent schools and supplying wheelchairs to the healthcare sector. Good value.
Michael Page shares roared 3.4 per cent higher to a fresh all-time high this week. The reason? Steve Ingham, the recruitment group's chief executive, summed it up perfectly: "In all countries, without exception, we are currently experiencing strong levels of client activity." The shares now trade at around 20 times earnings, compared with an average of 16 times for peers. But as market leader, Michael Page deserves its premium. Buy.
Just over six months ago Armour Group, the home and in-car electronics companies, put out a dire set of annual results. In the wake of these figures Armour shares stood at just 39.5p. This column took the view that the group's chairman, Bob Morton, would not allow it's underperformance to go on for long and urged readers to buy. This week's interim results from Armour showed we were right. The figures revealed a 44 per cent jump in earnings before interest, tax, depreciation and amortisation (Ebitda) to £3m thanks to a solid performance by all divisions. Hold.
SCOTTISH & NEWCASTLE
Shares in the UK's biggest brewer have been rising steadily since the end of March, gaining on speculation that trade rivals, Heineken SABMiller or Carlsberg, were eyeing up the company. However, brokers have now poured cold water on the takeover heat. Both ING and Dresdner Kleinwort have downgraded the stock and say a takeover is unlikely. Sell.
Shares in the Warrington-based manufacturer of cables used for aircraft, consumer electronics and agricultural machinery this week took a knock on the back of its guidance that it would miss forecasts for the year to 1 April as a result of high copper prices and a weak US dollar. But prospects for all of the company's divisions, particularly the power-cords business that is set to benefit from new products such as Apple's iPhone, are good. A recent contract win with Rolls-Royce should underpin its momentum. Buy.
The mid-sized housebuilder Bellway is to stay out of the consolidation fever gripping the sector, if it can help it. The company says it does not need a tie-up - it has just landed a £1.2bn deal with Leeds City Council, to develop 5,000 new homes and community facilities. Bellway's convincing point is that bigger isn't always better. While Persimmon is a well-regarded company, profit margins at Barratt, Taylor Woodrow and Wimpey are all significantly below the 19 per cent reported by Bellway at its last results. Buy.
The above recommendations are taken from the daily Investment Column
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