The Week In Review: The cost of a healthy lifestyle
Saturday 15 April 2006
Can things get any worse for Northern Foods? In the wake of last month's profits warning from the food producer, its shares have continued to lose ground and are at an all-time low.
Northern seems to be under siege from all sides. Sales are under pressure because of changing eating habits. Consumers are shunning the group's sausage rolls and quiches for healthier alternatives.
On the cost side, conditions are also difficult. Northern is up against rising energy prices: it cooks the majority of its foods and has been hit by soaring utility bills. Worse, it has been unable to pass on these costs to food retailers.
Pat O'Driscoll, who 18 months ago was parachuted into the company with a mandate to carry out reforms, now finds herself in an unenviable position. Last month, she launched a strategic review, the conclusions of which will be made public alongside annual results in May.
Things are likely to get worse before they get better at Northern Foods. Sell.
W S ATKINS
If readers had bought £1,000 worth of W S Atkins shares on 1 October 2002, their stake would be now be worth more than £17,300. Shares in the engineering consultancy continued their meteoric rise after the group put out a bullish trading statement this week. Analysts now forecast pre-tax profits of about £70m for the year to 31 March 2006, up from £60m last time around. Take profits, but don't abandon the stock entirely. It trades at an undeserved discount to peers.
Ardana's announcement that its testosterone-replacement cream has passed an intermediate clinical trial was good news for many men, and the firm. It has a number of other drugs in the pipeline, the lead among them being Teverelix, a compound that has the potential to treat a range of conditions, including prostate cancer and endometriosis. Ardana is one of The Independent's stock tips of the year. Given the positive news, it remains very much a buy.
The electronics distributor Abacus has made its second acquisition of the year. Swallowing the profitable French-based company Axess Technology makes a lot of sense and sees Abacus become Europe's fourth-biggest player in its sector. Buy.
There seems little doubt that Bioquell has the technology to eradicate hospital superbugs such as Clostridium difficile and MRSA. But hospitals are not clamouring over one another to get their hands on Bioquell's technology. Until it starts getting major orders for its technology, the stock is best avoided.
Walker Greenbank broke into the black this week for the first time in six years. The designer registered full-year pre-tax profits of £2.6m compared to a loss of £800,000 in 2005. In the wake of the figures, analysts were forced to sharply upgrade their earnings forecasts, while directors are believed to have piled into the market. Buy.
The old advertising adage says that sex sells and SSL International's latest trading statement boasted of a 5 per cent rise in annual sales, helped by a series of new sex related products and some clever advertising. Takeover rumours have been behind the jump in the stock since the start of the year. A bid is a possibility but there are no guarantees and the shares are at a premium. Avoid.
The Kaye family, who were behind Garfunkel's and Ask Central, are on the way to another fortune from the restaurant business. Their latest venture Prezzo, an AIM listed Italian chain, has served up stellar annual figures - a rise in pre-tax profits from £4.1m to £6.4m with a 68 per cent jump in sales to £37m. Buy
Investing in football clubs has been a one-sided encounter over the years, with the misses currently giving the hits a sound thrashing. The latest results from Newcastle United did little to reverse this trend, with declining television coverage and a lack of European competition making a £6m dent in revenues. Sell.
Cash flows tell St Ives' profits story in black and white
Times are tough for the printing group St Ives plc. Intense competition is taking its toll on profits at the printer of Vogue, GQ, The Economist and the latest Harry Potter book.
Much of the damage is being done by privately owned rivals that have drastically cut prices to win new business. St Ives has announced a 24 per cent drop in pre-tax profits to £15.6m in its interim results. These figures were made worse after the group was forced to place work with rivals after it had to temporarily shut its US operations in Florida because of Hurricane Wilma.
St Ives still enjoys impressive cash flows, however. These make it an attractive prospect to private-equity players awash with money to invest.
In the first half of its financial year, the group generated £32m of cash flow from its operations. Of that total, £17m was spent on new equipment to make the business more efficient and the rest went towards cutting debt and paying dividends to shareholders. Buy.
The above recommendations are taken from the daily Investment Column
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