The Investment Column: Carillion is still building value

Technology fund IP2IPO offers risk and rewards - Overambitious Hemscott is best avoided for now
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The Independent Online

The construction company Carillion is enjoying good times. That is hardly surprising as it specialises in the Private Finance Initiative, through which this government has pumped billions of pounds.

The construction company Carillion is enjoying good times. That is hardly surprising as it specialises in the Private Finance Initiative, through which this government has pumped billions of pounds.

Yesterday Carillion reported an 8 per cent rise in annual underlying profits to £54.7m, before exceptionals that dragged the bottom line into the red. The company - which was de-merged from Tarmac in 1999 - said that 2005 had started well. All of that lead to a hike in the dividend, to 7.5p.

The company's order book stands at £5.0bn, with further "probable orders" of £2bn. Carillion expects to reach financial close on the Queen Alexandra Hospital, Portsmouth, worth £1bn, in the first half of this year.

Carillion had £154m cash on its balance sheet, £40m of which was used yesterday to buy Planned Maintenance, a private building maintenance business. As well as building stuff, the company then looks after buildings and that is where the likes of this acquisition come in. Analysts said the purchase price was "reasonably full" but agreed that Planned Maintenance looked a decent business.

"They [Planned Maintenance] have customers like Deutsche Bank and keep the trading floor going, so it's quite hi-tech, highly skilled work," said John McDonough, chief executive, somewhat fancifully.

As far as disposals are concerned, Carillion said that these - after Carillion France and Crown House, which were sold last year - are over. It also called a halt to the practice of selling its equity stakes in PFI projects. "We will only do it in future if we get a deal that is demonstrably better than holding on to it," the company said. On its rail business, Carillion said UK investment in rail enhancement projects and renewals is expected to be £3.3bn in 2005, of which it expected to get over 10 per cent. The shares, at 240p, have done well but are still worth buying.

Technology fund IP2IPO offers risk and rewards

Investors with a taste for risk and who want to tap into the latest money-making opportunities in new technology need look no further than IP2IPO, an investment fund that seeks to commercialise business ideas from British universities.

The company's share price has soared since its float last year but it should be able to go on in the coming years and achieve further successes.

Already in its first full year of operation, IP2IPO has successfully floated three companies that it invested in, which are all trading at share prices above their initial float price.

Its annual results yesterday showed that it had made an aggregate investment of £739,000 in the three companies that it had floated. It now holds quoted shares worth £24m, having received £1m in float proceeds. As well as aiming to increase the asset value of the investments it holds, the company also generates revenue from the provision of advice to companies it invests in.

IP2IPO reported revenues of £1.2m for 2004 compared to £220,000 in 2003. It made a pre-tax profit of £322,000 compared to a loss of £583,000 while it had cash balances of £34.8m. At 717p, the shares are a risky bet but one worth taking. Buy.

Overambitious Hemscott is best avoided for now

Hemscott has had something of a renaissance in recent years. The financial information group has gone for broke in the US, where it bought two financial data groups in a complex deal that handed control of the company to the private equity firm Veronis Suhler Stevenson.

The acquisitions of CoreData and bigdough.com mean that two-thirds of Hemscott's revenues come from across the pond. The deals helped the company, which looks after corporate websites for the likes of British American Tobacco and BT Group and has its own subscription investor newsletter, to treble the size of its database.

The big idea is to sell its souped-up financial information to its enlarged customer base. This also spans hedge firms, public relations firms and governmental bodies as well as investment banks and private investors.

All well and good, but the danger for Hemscott, which is still on the acquisition trail, is that it tries to run before it can walk. The company has not made a profit during the past three years.

Yesterday it revealed annual losses had widened to £1.6m from £1.1m, although its pro forma revenues shot 37 per cent higher to £8.8m. Its shares, up 1p to 49p, have yet to top the 55p that VSS paid for its majority stake and until Hemscott can assure investors it hasn't bit off more than it can chew, look unlikely to do so. Avoid for the next 12 months.

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