The Week In Review: Vintage year for Majestic as profits growth flows

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The Independent Online

If Majestic Wine were a white Burgundy then 2003 would have been a vintage year. The wine retailer, which sells bottles by the case, notched up another set of record annual results - its 11th on the trot - helped by last summer's sunshine.

If Majestic Wine were a white Burgundy then 2003 would have been a vintage year. The wine retailer, which sells bottles by the case, notched up another set of record annual results - its 11th on the trot - helped by last summer's sunshine.

Majestic's sales grew almost twice as fast as the total wine market, and the company opened another 10 stores. It now trades from 115 sites, including three in France. With scope in the UK for at least 175 outlets, including eight more this year, its impressive expansion plans should ensure profits growth flows for years to come.

Its imaginative approach to choosing sites - last year saw openings in a former pine furniture warehouse and an old boozer - means that the main risk is competition from property developers. It is also looking at expanding in Ireland, although it wants to find a parcel of potential sites before committing to anything.

Majestic's strengths include better choice than the traditional high street off-licence and better service than the supermarket chains. Since we recommended laying down some shares a year ago they have soared in value by a third but the value still looks fair given the racy growth. Keep stocking the cellar.

HALFORDS

The retailer of bikes and car accessories, starved of investment under previous owners, is starting to make better use of the space across its 400 stores. It is moving into other product areas - "boys' toys" and outdoor clothing. The shares were "priced to go" when the company floated last month and, with a dividend yield of more than 4 per cent backed by very strong cash flows, they look as if they may have go-faster stripes.

HAYS

The buy case for Hays shares is that, because the recruitment business bears the high fixed costs of its chain of high street offices, any extra fees it generates as the UK employment market improves ought to feed swiftly through to profits. A trading update this week dented that case, but there is still scope for share buybacks, improvements in profitability and the valuation benefits of being a focused company rather than the conglomerate of old. Hold.

RAB CAPITAL

The only pure hedge funds company on the stock market, RAB Capital is a way of buying into this fast-growing and high-return area of the investment world - without having to stump up the six-figure sums required of individuals who invest directly in hedge funds. It is risky, but it does have a strong track record. Buy.

WORKSPACE

Workspace, which grew out of the old Greater London Council's industrial property portfolio, is London's largest small- business landlord. It owns £629m of factories, warehouses and railway arches converted into architects' studios, IT workshops and garages. It survived the business downturn with its record of uninterrupted profits growth intact and looks set fair for continued growth. Buy.

OAKDENE HOMES

It might seem perverse to tip a housebuilder when even the Governor of the Bank of England is trying to scare people out of property. But what happens if there is a soft landing rather than a housing market crash? Oakdene, which moved up from the lightly regulated Ofex market a few weeks ago, specialises in building on brownfield land in South-east England. Buy.

DEALOGIC

Dealogic's software allows investment banks to communicate with one another when marketing share issues, ensuring the deal is priced correctly. There is a new suite of internationally compatible products coming on the market, just as investment banks start to loosen purse strings drawn tightly during the bear market. This looks a good investment for the long term.

MONEYBOX

Companies such as Moneybox are rolling out convenience cash machines in bars and clubs where the on-screen message "Are you too drunk to mind a £1.50 charge?" is usually answered "Yes". Moneybox is the UK's second largest independent, with 2,700 machines, raking in fees from the customer and from their bank. It looks cheap compared to the value-per-machine put on other deals in this consolidating sector.

COOKSON

The disposal of its precious metals division will make Cookson a more coherent play on the global economy. The company's electronics division has turned the corner after its post-Millennium collapse. It makes parts used in the manufacture of printed circuit boards and has been expanding strongly in Asia. The ceramics division, which is dependent on the steel market, has also been improving thanks to economic growth in the Far East. Buy.

CIVICA

Civica, the software business supplying local authorities and police forces, beat expectations with maiden interims this week and looks decent value for intrepid technology investors. Although it focuses on the public sector, it is not dependent on the public spending cycle for its turnover. Its software drives various initiatives for efficiency improvements in the public sector. In a technology sector where many valuations are looking stretched, its share price stands out for its reasonableness. Buy

WHITEHEAD MANN

Without Anna Mann, the most powerful headhunter in the City, many have asked whether Whitehead Mann, the recruitment company she helped to found, will survive. Whitehead's fortunes are inextricably tied to the wider economy and business confidence, and its recovery lags their turnaround. The company is seeing a pick-up in some areas, such as financial services and there is lots of potential, but this is a risky one.

3DM WORLDWIDE

3DM Worldwide has developed a revolutionary moulding process that uses recycled material and makes a plastic as strong as steel. It has developed a web of relationships with associated companies, many of which share directors and investors, which is impossible to understand fully from the published information. These companies have licensed 3DM's technology and/or manufacturing techniques to develop super-strength plastic products, such as pallets, truck parts, yacht hulls, and even cheap housing, but shareholders will have wait for proof of its prospects. Sell.

The above are a selection from the daily Investment Column

A&L bank gets in shape

For the medium-sized mortgage lender Alliance & Leicester, conditions have been near perfect in recent months. Demand for home loans has been strong, at a time when the size of mortgages has been rising with the gravity-defying price of the average house.

Now, as concerns mount that this boom could be coming to an end, A&L can take comfort that the environment of rising interest rates will provide an opportunity to ease some of the pressure on margins on both loans and savings products.

The bank has done much to get itself in shape in the past two years. It is on track to deliver double digit growth in earnings per share this year and is cutting costs, including closing 46 underperforming branches.

Yet, A&L is operating in a fiercely competitive market in which its rivals' businesses are several multiples the size of its own. The profitability of its mortgage lending fell sharply in the first months of this year, reflective of the fact that A&L does not have the economies of scale needed when competing at the razor-sharp end of the market.

One major attraction for investors in A&L has been its generous dividend policy. The shares should yield 6 per cent this year. Another has been the perennial - if vague - hope that it will be snapped up by a larger bank. A&L's shares no longer trade at a premium to their sector, but they are not a compelling buy for anyone but an income-focused investor.

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