The Week In Review: Think ahead and avoid Provident Financial

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The Independent Online

Provident Financial, the doorstep lender, has had a rough time over the past 12 months. With the UK consumer credit bubble finally reaching its inevitable climax in 2004, the group has not only struggled to grow its core domestic business over the past year, but has seen its second-hand car business, Yes Car Credit, collapse.

Add this to a Competition Commission inquiry into the UK home credit market - which at worst threatens to impose price caps on companies such as Provident - and it is not hard to see why its share price has been on a downward trend.

Since we advised investors to sell this stock 15 months ago, the shares have fallen by more than 13 per cent, and while Provident's international operations are in better shape, we believe there will still be better times to buy.

A healthy yield of more than 5 per cent is the one good reason why shareholders who have held on so far should stay put. But for new investors, avoid.

GEORGE WIMPEY

There was a time when George Wimpey's UK business was a drag while its US operations were red-hot. The opposite is true now. The US housing market is in trouble, with some analysts predicting a crash, after a series of interest rate rises killed off the housing boom. While there is much scope to improve UK margins the US worries mean the shares are a hold.

NORTHGATE INFO

Northgate Information Solutions had an eventful 2005. The Buncefield explosion in December severely damaged its headquarters but revenue still leapt by 62 per cent to £332.7m as it benefited from its SX3 acquisition in Northern Ireland. Northgate is targeting organic revenue growth of between 6 and 7 per cent this year and is also likely to make acquisitions. Buy.

BLOOMS

Garden centres are in the pink, at least as far as shareholders are concerned. First there was an extended takeover battle for Wyevale, then its new owner, Sir Tom Hunter, started building a stake in Dobbies. These events have thrust Blooms of Bressingham, a wallflower of a stock, into the spotlight, though its broker, Teather & Greenwood, this week cut its pre-tax profit forecast to £800,000 from £1m. Avoid.

GREENE KING

Greene King has done well out of the World Cup after installing 460 extra television screens across its pubs since January. The company posted a 25 per cent rise in pre-tax profits to last year, with revenues up 16 per cent. Next year's smoking ban in England poses risks, but we still believe the stock is worth buying.

ASOS

Final results at online retailer ASOS showed investors escaped being burnt by the Buncefield fire - which wiped out its headquarters - although the company is still waiting on a slug of its insurance claim. The good news is that customers were not put off by the disruption - turnover still rose by 39 per cent and profit before tax by 61 per cent. It will be as ASOS attempts to bulk up that the problems come. Avoid.

TOREX RETAIL

Torex Retail has been one of the most acquisitive companies in the past two years and has now splashed out nearly £50m on its key British rival Retail-J. The price paid has caused consternation, but Torex has admitted Retail-J's electronic point of sales system is superior to its own. With a strengthened balance sheet, a key competitor removed and no acquisitions on the horizon for at least six months, investors should hang in there. Hold.

BEGBIES TRAYNOR

Around 85 per cent of Begbies Traynor's revenues come from corporate insolvency and recovery work, where the company has invested heavily, and the corporate finance and financial investigations arms. Administering individual voluntary arrangements should also continue to deliver growth, with personal debt reaching record levels globally. Buy.

MICHAEL PAGE

Prospects for the economy remain uncertain, but there is no evidence recruitment companies are feeling the pinch. Michael Page International this week unveiled record gross profits - turnover less cost of sales - of £87.4m for the second quarter of its financial year, and says it is well placed for the rest of the year. Buy.

ROBERT WISEMAN

Last year proved to be pretty miserable for Robert Wiseman dairies, as rising raw material and energy prices hit the company at the same time as a mini-price war in the British milk market. Two months ago, however, Robert Wiseman said that while competition was still tough, it has been busy launching new products, such as "extended shelf life" milk. The company looks finally to be on the ascendancy, but new investors will find better times to buy. Existing investors should hold.

UBIQUITY

Ubiquity Software provides telecoms companies with software that enables faster deployment of services that utilise both fixed and mobile infrastructure. The emergence of "converged" services such as BT's Fusion phone provides Ubiquity with a huge opportunity. Investors should hold this stock.

Worth taking a punt with Standard Life flotation

The biggest float of the year will get under way on Monday as Britain's third largest life insurer, Standard Life, completes its transition from a mutual company to a PLC.

Just a few weeks ago, this looked to be terrible timing. With the FTSE 100 down more than 10 per cent since its April highs, Standard's chief executive Sandy Crombie was forced to slash the flotation price range. But after a strong run last week, the market is down only about 4 per cent from its recent peaks - much less than the 12 per cent by which Standard cut the bottom end of its float range.

Although Standard suffers from being overweight in some of the less profitable financial sectors, such as UK pensions, its margins have been improving since the management began its overhaul of the business two years ago. And while it looks unlikely to match the margins of its rivals without a significant shift in its business mix, its strong market share combined with a rock-solid brand give it every chance of turning things around.

For those who received free shares, it is a no-brainer to hang on to them for the first year. Even for those who are not customers, Standard looks well worth a punt. Buy.

The above recommendations are taken from the daily Investment Column.

s.shah@independent.co.uk

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