The Week In Review: Torotrak may be gearing up, but is going nowhere

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The Independent Online

Torotrak is gearing up, if you'll pardon the pun, to put a prototype of its revolutionary gearbox into a major car manu- facturer's latest model for further testing. Which is good progress, albeit no better than planned, and the reason that these highly speculative shares shot up by more than 20 per cent in one day this week.

Torotrak's Infinitely Variable Transmission is a gear system for automatic cars that adjusts to the most efficient level, improving fuel economy and making for a less clunky drive.

But while the statement accompanying results from the company this week was as upbeat and optimistic as ever, the results themselves were a very long way short of the forecasts published by the company's broker, Evolution. The shares ought to have gone down, in all honesty.

Revenues from consultancy work for its development partners was down compared with the previous six-month period. The company says it is being paid in kind, with useful hardware, but Evolution is not forecasting any corresponding fall in costs.

The true believers will argue that the technology will win out in due course, and it only has to be adopted in an off-road vehicle or two for the company to soar into profit. True, but lower revenues mean an earlier date when the cash runs out. We said avoid last year at 75.5p. Now, sell.


British Land's interests are split between office and retail property, with retail accounting for 52 per cent of net asset value and offices at 43 per cent. Broadgate, home to some of the City's biggest investment banks, is the most valuable single site. The value of the portfolio is more than 20 per cent higher than a year ago as booming retail spending kept shop rents high. But supermarket rents have recently proved disappointing, and with retailers expecting tougher trading from now, it could be that retail property prices go south. Take profits.


Tomkins started out in 1925 as a maker of buckles and fasteners. These days it is mainly a supplier to the automotive industry and a manufacturer of air conditioning. The dollar, in which it makes 65 per cent of its sales, is sliding. Demand for its products from the new car market is weak, at the same time as raw materials costs have rocketed. Tomkins' markets are unexciting at the best of times. Now, they are perilous. Avoid.


Signet Group is the jewellery company behind the Ernest Jones and H Samuel chains across the UK, but the main focus of its operations is across the Atlantic, which why the slide in the dollar has been such a pain for Signet shares. It could be a tough Christmas in the UK, and in the US Signet has not been able fully to pass on the rising costs of gold and diamonds for fear of losing customers in a highly competitive market. The shares are going down, not up next year.


Consumers are rejecting deep-fried fast food so the outlook for Enodis, which makes industrial cookers and refrigerators for the fast food industry, looks precarious. The fast food industry has begun investing in chilled foods and "non-frying accelerated cooking" technology. This remains small fry for Enodis compared with the old-style grease machines, but its new products ought to reap rewards after 2005. Hold.


Results from Imagination Technologies missed forecasts this week, but this was disappointing rather than a disaster. The point about Imagination is its growth potential. Its designs software for use in microchips which power the latest electronic devices, be they mobiles, PDAs, car navigation systems or digital TVs. It has 24 chip designers using its technology. Most of the devices in which it is embedded are only now coming to market, so royalties are coming soon. Buy.


Care UK runs nursing homes and offers home helps to local authorities, and is starting to find that councils are putting out to tender wide-ranging contracts that combine the two. There is much still to go for in this area. Also, in a joint venture with Afrox, it has set up treatment centres which will conduct operations under contract with the NHS. The risks are of delays to new contracts or clinical slip-ups at the new treatment centres. Hold.


United Drug is a wholesaler of medicines to pharmacies, mainly in Ireland, and a contract distributor for the pharmaceuticals industry as well. The Irish government controls drug prices, which are up for review next summer, when it could well follow the UK in imposing a cut. United would share the pain with the drug makers, but it can absorb the odd setback. The stock looks a touch expensive, but there is little on the horizon to worry about. Hold.


The wind is firmly in Investec's sails after a major clean-up at the South African financial services group, which is listed in both London and Johannesburg. It has sold its business in Israel, radically cut back its operations in the United States and reduced its focus on investment banking where earnings are more volatile. The main thrust now is to grow the UK and Australian businesses, with private banking driving profits. Buy.


Accident Exchange loans out BMWs and Mercs to drivers who have had their own posh cars bashed into and sent to the garage through no fault of their own. The company then claims the money back from the other driver's insurer. This is a young company, ahead of schedule on the growth plan it set out at the time of its flotation in May. It has recently won business from DaimlerChrysler Retail and Glasgow Audi, taking the company into Scotland for the first time. Worth a punt.


The South African mining company Lonmin is one of many whose results are suffering from what one broker charming calls "dollar mange". The company is no dog. But it does sell all its products - platinum, palladium and rhodium - in dollars, whose value is tumbling on fears over the US deficits. At the same time, Lonmin is having to pay for the running of its mines, and the wages of its miners, in the much stronger South African rand. It could get taken over, and for this only the shares are worth holding.

LCI shares look a good bet

There has been a backbench rebellion over the prospect of shady US gambling outfits concreting over England's green and pleasant land in order to build gaudy, Las Vegas-style casinos that threaten to turn us into a nation of alcoholic, wife-beating, slot machine-obsessed desperadoes. It has played right into the hands of UK gaming companies.

Ministers backed down and capped the number of "supercasinos" at eight, removing the threat to the three quoted casino operators who lack the experience and finance to compete for the development of supercasinos.

So Stanley Leisure, Rank - the owner of the Grosvenor chain - and London Clubs International (LCI) look likely to be beneficiaries of the Gambling Bill. The trio can now focus on what they do best: smaller casinos, which will be allowed up to 150 slot machines.

LCI, a pure casino operator, already has reasonably large premises that could take more slot machines. Rank, however, runs smaller bingo halls, whose traditional punters might desert to the casinos. While these halls could well be converted, the Government is also worried about the proliferation of smaller casinos and further limitations could ensue.

Stanley's position looks the most precarious, with an estate of small venues and its hopes pinned on winning supercasino licences in Leeds and Birmingham, where it has built what it hopes will be a qualifying resort. LCI shares look a touch expensive, but are the best bet in the sector.

Rank also owns the Hard Rock Cafe chain and a film-processing unit, which are both a drag on earnings, but it is worth holding for its casino expansion potential. Stanley's strategy has been consistently wrong, so avoid.

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