The Investment Column: A good time to join up with recruitment experts Michael Page

Robert Wiseman; Ubiquity Software
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The Independent Online

Share price: 347.5p (-2.5p)

Our view: Buy

Stock markets have rocked and prospects for the economy remain uncertain, but there is scant evidence that recruitment companies are feeling the pinch.

Yesterday, Michael Page International unveiled record gross profits - turnover less cost of sales - of £87.4m for the second quarter of its financial year. That is a healthy 28 per cent improvement on the same time last year.

The company, a specialist at placing accountants and middle managers, is doing nicely in America, continental Europe and at home. Only Australia, where "activity levels were lower than expected", disappointed.

Steve Ingham, MPI's chief executive, reassured shareholders that there is no evidence of a slowdown in the UK, declared the opportunities in continental Europe to be "tremendous" and said expansion continues in the Americas.

He was particularly pleased with MPI's performance across the three months as they included Easter, a traditionally slow time in the jobs market.

The company says that it is well placed for the rest of the year. City analysts, such as Ian Jermin at Bridgewell Securities, reckon MPI could well notch up profits north of £100m this year and £108m in 2007.

Profit-taking after the upbeat trading update saw MPI shares ease 2.5 to 350p yesterday, leaving them trading at 18.4 times this year's expected earnings. That compares favourably against its traditional rival, Robert Walters, which is trading at 18.4 times this year's expected earnings.

MPI's wide reach across different industries and countries should ensure future growth. Buy.

Robert Wiseman

Share price: 374p (-6p)

Our view: Hold

Last year proved to be a pretty miserable one for Robert Wiseman dairies, as rising raw material and energy prices hit the company at the same time that a mini-price war was getting underway in the British milk market.

With its distributors resolutely refusing to pass on any of the increases in its costs to their customers, Wiseman's margins inevitably came under pressure. And when things looked as if they could not get any worse, it lost one of its key contracts, to supply milk to Britain's fourth largest supermarket chain, Morrisons.

By the time it reported its interim results towards the end of last year, Wiseman's pre-tax profits were down some 22 per cent, and with cost increases looking unlikely to abate soon, this column warned investors away from the stock.

In the months since, however, Wiseman's management have silenced their critics, securing price cuts from their own suppliers to compensate for their rise in costs, as well as finally persuading the likes of Tesco and Sainsbury to put up their milk prices.

Although the company conceded two months ago that price competition was still tough, it has been busy launching new products, such as "extended shelf life" milk, to counter this. Speaking at the company's annual general meeting yesterday, chairman Alan Wiseman said results had been promising over the past few months.

Wiseman's only problem is that after a near 40 per cent rise in its shares over the past six months, its valuation looks full. While the company looks to be on the ascendancy, we believe new investors will find better times to buy.

Existing investors should hold.

Ubiquity Software

Share price: 24.5p (+0.5p)

Our view: Hold

Ubiquity provides telecoms companies with software that enables faster deployment of services that utilise both fixed and mobile infrastructure. The emergence of "converged" services like BT's Fusion phone provides Ubiquity with a huge opportunity. But Ubiquity relies on its larger customers actively investing in upgrading networks, and despite the hype over convergence that can be a slow and laborious process. Ubiquity said yesterday that it had won contracts with BT and Global Crossing which will spur revenue growth in the first half. Yet back in January, Ubiquity issued a profit warning as a result of a delay in signing contracts - presumably with those two companies. Hence the bullish first-half trading statement and projected revenue growth is more about catching up with expectations.

Ubiquity expects revenue growth to be substantially faster than the 40 per cent it recorded in the first half of last year. It also points to a strong pipeline of potential contracts with both new and existing customers. Yet until visibility improves and the company can point to significant recurring revenue growth, its share price remains dependent on winning large, lumpy contracts.

If converged telecoms services take off, Ubiquity will be well placed to take advantage. The shares look cheap and could pay off for brave investors, but at this early stage it might be worth waiting until visibility improves as the market matures. Hold.

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