Giant leaps in footwear and replica kits make Umbro a worthy hold

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The Independent Online

In Britain, the sports brand Umbro conjures up for many people the memory of their first football boots, shin pads and replica shirt.

But worldwide, the supplier of kit to the England football team is gathering a following as a sports and leisure brand with far wider reach than its English football roots.

A trading update yesterday said sales in Europe, which is suffering from sluggish consumer spending, continued to be difficult. But a strong performance in North and South America and Asia has offset some of the downturn.

Two thirds of Umbro's sales come from international licensees, which pay Umbro a royalty income on the sales they deliver. This model has helped it expand across the globe in what is a growing market. Sports apparel is growing at 2 per cent a year, while sports footwear is increasing by 8 per cent. In the US, where football is almost a minority sport, Umbro has been pushing its generic sports footwear brands, and has secured a major deal with the retailer, Footlocker. From being stocked in only 200 shops last year, it is now in 2,000 outlets, with potential for many more.

But Umbro is predominately a football brand, and after listing in May last year, it was dealt a blow from the loss of the contract to produce replica shirts for Chelsea. It did secure a severance fee of £24.5m, and the deal to produce shirts for Chelsea does not end until 2006. This is Chelsea's centenary year, when replica kits will be hot property.

Umbro has also signed a five-year deal to sponsor Glasgow Rangers, and has a smattering of other top UK football teams.

And of course, 2006 is also World Cup year. Being hosted in Germany, the greatest of all football contests will have prime time exposure with British fans. Umbro's contract with the England football team is runs until 2010, and it is likely that it will continue to be the national team's chosen supplier.

Now at 121p, readers who followed our advice and bought the shares soon after listing have already tucked away a 16 per cent profit. The shares are trading at about 11 times earnings. England never seems to do it on the pitch, but with regard to Umbro shares, keep possession.

John Wood has the energy to make its shares worth perservering with

With the oil price at record highs, oil companies have been desperate to get their black gold out of the ground as quickly and easily as possible. Good news for John Wood Group, consultants to the energy sector, whose engineers help the oil majors maintain and service their wells.

In a trading update yesterday, before its half-year results, John Wood said its well support division, which accounts for 25 per cent of its turnover, had seen good growth, continuing to expand in Russia and Africa.

But its gas turbines division is still struggling in the US. It services turbines that are used for power generation across a number of industries but the market is still recovering from a glut of supply in 2000.

John Wood's largest division, engineering and production facilities, is enjoying good growth. It advises energy companies on their major exploration and recovery projects, offering engineers to design rigs, drilling methods and other production technology. This division is expanding beyond its core North Sea base, and yesterday said it had won contracts in Nigeria, Australia and the Gulf of Mexico.

The group has had hit-and-miss earnings performance but now says it will beat expectations. The world's increasing power and energy needs, combined with ever-decreasing natural resources, mean that oil and gas companies are preparing to spend millions on finding new sources of oil. This should mean plenty of business for John Wood, although it is vulnerable to the volatilities of the oil price. The shares trade at about 14 times forward earnings, making them a worthy hold.

Hang on to Marshalls as it eyes fresh acquisitions

The consumer slowdown has dampened Marshalls, the paving slabs group. The company has hitherto capitalised on gardeners' passion for elegant paving and stonework. But now consumers are tightening their belts as mortgage rates are rising, and their appetite for new patios and drives - regarded as non-essential big-ticket items - has waned.

Yesterday's trading update revealed that after a healthy start to the year, retail sales were disappointing in the April to June period. That meant like-for-like sales fell 1.3 per cent to £170.5m in the first six months of the year.

But only half of Marshalls' sales is generated from home improvements. The rest comes from commercial and public landscaping projects. Sales here are ahead of last year and demand remains robust.

Cost savings, acquisitions and new business initiatives, such as the pilot Garden and Driveway Transformation Centre in Scotland, should also boost Marshalls' performance. In December it bought Compton, which makesgarages and greenhouses.

Marshalls is closing a drainage products factory in Halifax, West Yorkshire, with the loss of 77 jobs, and will take a one-off hit of up to £2m on the closure. But on the bright side, Marshalls is generating a lot of cash. Even though some of it is going towards the new pilot schemes, another return of cash to shareholders could be on the cards - unless there are further acquisitions this year.

The gloom in the retail sector will weigh on Marshalls' shares, but its public and commercial trade mean its stock is worth holding.

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