The Week In Review: Kingfisher set to fly higher on the back of soaring profits

Ever since Kingfisher let its general retail fledglings Woolworths and Superdrug fly its conglomerate nest, the newly focused do-it-yourself retailer has been singing from an international hymn sheet.

Ever since Kingfisher let its general retail fledglings Woolworths and Superdrug fly its conglomerate nest, the newly focused do-it-yourself retailer has been singing from an international hymn sheet.

Although its heartland remains the UK and Ireland, its shops span eight other countries from China to Spain, contributing 40 per cent of group sales and growing faster than the domestic business.

Two years ago it took control of its French business, Castorama, becoming the world's third-biggest pure DIY shopkeeper behind the US giants Home Depot and Lowes. The deal gave the group combined buying power of some £7bn, helping it to squeeze better deals from its suppliers. It aims to save £1bn this way over the next five years. This should underpin big profit growth even if increased competition and higher interest rates in the UK hold back the customer numbers.

This week its retail profit for the first three months of the financial year smashed forecasts, soaring by 18 per cent to £145m. The group's shares are valued at a premium to those of their UK retail peers, having gained 10 per cent since we tipped them in September. They should have further to go, particularly if one of its US rivals comes shopping for a UK business.

SPEEDY HIRE

Speedy Hire lends saws, drills, cement mixers, ladders, pumps, whatever, to the UK's army of small tradesmen from its network of 286 depots. There are challenges ahead: its focus is switching to more capital-intensive areas, such as the hire of portable accommodation and power generators. But these are opportunities for growth and current trading is strong, with private sector clients reporting strong order books. Unless there is a sudden change in the economic environment, Speedy shares are worth buying still.

JOHNSON MATTHEY

Fuel cells, which turn hydrogen into power, are the technology of tomorrow, and Johnson Matthey, which makes parts for experimental fuel cells, is enjoying enhanced revenues.

Its main business for now is catalysts, chemicals used in things like emissions-reducing catalytic converters for cars, where figures have been disappointing. But global car production is improving, and in two years' time there will be tough new rules on emissions from heavy-duty diesel vehicles, which should drive demand.

JM is also increasingly supplying ingredients to pharmaceuticals manufacturers, particularly the growing producers of generic drugs. The shares are worth tucking away.

AWG

AWG, the owner of Anglian Water, is promising to be "boringly predictable". Good. The company tried to become an infrastructure manager for other utilities and took its expertise to countries from the Czech Republic to Chile, but has had to sell out of these foreign operations at a considerable loss.

Another headache is the refinancing of the core water business by AWG in 2002 when it took on billions of pounds of debt. It remains to be seen whether a new regulatory regime - which comes into force next year - will favour this approach. Avoid.

COBRA

Cobra Bio-Manufacturing makes DNA, genetically modified viruses, cells and proteins which hopefully will form the basis of revolutionary biotech medicines. Unfortunately, its main area of expertise has been in supplying material for DNA-based vaccines, whose development has proved disappointing. With biotech companies perennially strapped for cash, Cobra saw its fewclients ditch these development programmes.

The company has proved an over-optimistic forecaster in the recent past and investors should wait before they can see it really is on course to break even once more next year.

FYFFES

While bananas are not the only fruit that Fyffes ships around the globe, they are its most important product. There has been much relief that banana prices have held up in Europe despite the enlargement of the EU, which it was feared would drive down costs further in this low-margin business. This is still a risk, but is priced in to the shares. With healthy eating moving up the agenda, demand for fruit is not going into reverse, and the shares, with a dividend yield of just below 4 per cent, are worth holding for the long run.

UMECO

Umeco looks after the little things for aerospace and defence contractors such as Rolls-Royce. It makes sure companies have enough nuts, bolts and rivets for their big projects. This supply outsourcing is increasingly common across the industries in which Umeco operates.

With some judicious acquisitions, it has been strengthening its relationships in the US, and had been able to report a modest increase in turnover despite the continuing recession in aircraft manufacturing. Umeco should be able to reverse its profit decline this year and a pick up in the industry should feed through from next year. Tuck away some of the shares.

SCI ENTERTAINMENT

The computer games developer SCi Entertainment has been enjoying very strong trading indeed: its Conflict games have continued to sell well, while the Italian Job is still appearing in the games charts more than two years after its launch.

SCi outsources both development and marketing and negotiates distribution deals with a guaranteed minimum sales figure. With a growing franchise in Conflict and excitement surrounding Galleon, launching this month, the shares are a buy.

Brewin fate uncertain

The fortunes of the United Kingdom's myriad small stockbrokers are inevitably tied to the health of the equity markets that their business is focused on. It is little surprise, therefore, that after months of gloom, Brewin Dolphin is basking in some sunshine.

Brewin, which mostly caters for comfortably off individuals through its national chain of advisory offices, says that investors' renewed optimism has helped profits rise more than five-fold.

The broker has also gone to considerable lengths to lick itself into shape to cope during the tougher times. Costs have been stripped out and Brewin has built up its discretionary arm, where it can charge substantial fees for making investment decisions on behalf of its clients.

The company also dabbles in corporate broking, and has taken advantage of a surge in the numbers of small and medium-sized companies seeking a stock market listing.

The one big drawback for prospective shareholders of Brewin is that it is among the firms being investigated by the Financial Services Authority over the collapse of the split-capital investment trust sector during the bear market. As both a broker to several trusts and an adviser piling clients into certain split capital investments, Brewin may find itself in the firing line with 20 other firms over allegations of mis-selling.

The financial impact of such a situation is hard to quantify. Brewin has reserved more than £2m to cover possible claims and for legal costs, but that could turn out to be inadequate. The FSA's rulings on splits could also be years rather than months away.

Based on a valuation of its various parts, Brewin is not expensive. However, it is hard to see how Brewin can shake off uncertainties over splits in the foreseeable future. Avoid.

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