Investment Column: Still worth sticking with Cookson

Only the brave should hunt out Whitehead; Civica stands out in tech sector and is worth buying

Bob Beeston, chairman of the engineering group Cookson, was effusive in his praise of his new chief executive yesterday. Nick Salmon is an international player, a strategic thinker, a details man and "an excellent leader of people".

Bob Beeston, chairman of the engineering group Cookson, was effusive in his praise of his new chief executive yesterday. Nick Salmon is an international player, a strategic thinker, a details man and "an excellent leader of people".

It is the latter that will matter most internally at a company bruised by the savage cost-cutting brought on by the economic downturn, but made much worse than for many rivals because of the debt-fuelled acquisition binge of Mr Salmon's predecessor. At least the departing Stephen Howard has fixed his mistakes, clinching a rescue rights issue to shore up the balance sheet, renegotiating the remaining debt and restructuring the group - halving group debt to £359m at the last count. With the sale of the precious metals division also in train (and analysts expecting a price tag of £90m), the group's risk profile should complete its move from red previously, to amber now, to green.

The precious metals disposal will also make Cookson a more coherent play on the global economy: no bad thing at this point in the cycle. 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, where Mr Salmon has extensive business experience. Sales in the division were up 10 per cent year-on-year in the first quarter and the trend is likely to have continued. The ceramics division, which is dependent on the steel market, has also been improving thanks to economic growth in the Far East.

This column tipped Cookson shares as a recovery play back in October, when they were 33.75p. They are also one of The Independent's tips for 2004, but have performed less well since the start of the year, up just a quarter of a penny at yesterday's 40.25p. However, with its markets strengthening decisively and a price-earnings ratio for the current financial year of about 15, it continues to look compelling value.


Only the brave should hunt out Whitehead

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. She left in March to run her own consultancy and the company itself, announcing annual results yesterday, calls her the "doyenne" of the recruitment industry.

But the doyenne has had a few blunders recently, notably the disastrous choice of Sir Ian Prosser as chairman of J Sainsbury, whose appointment was immediately rejected by shareholders. Bad news for Whitehead's reputation. Perhaps it is better off without her after all.

The company yesterday said aggressive cost cutting had helped it through a downturn in the economy, which put the brakes on recruitment activity. Companies have been laying off staff, not hiring, and Whitehead itself took hefty redundancy costs from sacking 25 per cent of its workforce. Sales were flat, but it is now in profit after a £20m loss in 2003, and has increased its market share.

Whitehead's fortunes are inextricably tied to the wider economy and business confidence, and its recovery lags their turnaround. That time may be about to come, and the company is seeing a pick-up in some areas, such as financial services. But confidence is fragile and still flagging in many parts of the economy. Until a more secure recovery takes hold, revenues will be scarce. At 264p, it is trading at around 10 times forward earnings - pretty cheap given its streamlined costs and sound positioning for an upswing. Lots of potential, but it is a risky one.

Civica stands out in tech sector and is worth buying

Civica, the software business supplying local authorities and police forces, beat expectations with maiden interims yesterday 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; a theme dear to the heart of Gordon Brown.

It announced a new contract win yesterday with the Kent police force to supply car number plate recognition systems - a good example of the type of business it is involved in.

It came to the market in March at 175p and the shares yesterday were 193p. For the six months to the end of March sales were up 19 per cent at £52.5m and profit before tax was up 12 per cent at £3.8m. Turnover rose across all three main areas of its operations. Software systems were ahead from £33.9m to £41.2m. Managed services, such as processingroad traffic penalty notices in the London borough of Southwark, was up from £5.3m to £5.6m, and Civica's consultancy business sales rose from £4.8m to £5.5m.

Civica shares are on a price earnings ratio for the current year of about 14. In a technology sector where many valuations are looking stretched, this stands out for its fairness. Buy.

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