The Investment Column: Laird still riding on the crest of a wave

Nichols; 4imprint Group
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The Independent Online

Our view: Buy

Share price: 375.75p (+11.25p)

Laird Group can trace its origins back to the 1800s. One of its early achievements was the manufacture of the first ironclad ship to sail in US waters. It also built warships for the Royal Navy and was involved in heavy engineering, steel production and making railway carriages.

These days, such industries are now largely based in emerging countries, leaving the likes of Laird to focus on specialist niche markets. It is therefore of little surprise that today's Laird in no way resembles the company founded more than 140 years ago. The group now is focused on making electronic parts for the wireless industry such as antennae for mobile phones (housed in its technologies division) and doors, windows and locks (making up its security systems unit).

In recent years, Laird has been forced to relocate its production to where its clients are - that is low-cost countries such as China, Mexico and Malaysia. It plans to open a facility in Chennai, India, next year. As well as allowing the company to be closer to its markets, the move has greatly reduced its cost base.

This is one of the factors behind Laird's impressive performance of late. From posting heavy losses in 2002, the group delivered a profit of £34m last year. Yesterday, it unveiled a pre-tax profit of £28.5m for just the six months to 30 June, a 77 per cent rise on the previous year. Growing demand for gadgets such as mobile phones, notebook PCs and plasma display panels has also done its bit for Laird's technology business, which enjoyed a 59 per cent jump in profits to £24m.

Along with antennae, it makes devices which stop interference between the various different types of microchips contained in your average electronic product today. Laird expects growing demand for its technology as such products become more sophisticated.

The security systems side of the group performed less well. Here profits rose just 2 per cent to £13m. There is little in the way of cost savings from having these two disparate businesses under one roof apart from some small tax benefits. Nevertheless, Laird's management insist that they have no plans to split the company at present.

At current levels, Laird shares look to be a good bet. They trade at just 11 times forecast earnings for 2006 while the company boasts a free cashflow yield of 8 per cent. Over the past 12 months, the shares have gained around 25 per cent but have further to go.

Nichols

Our view: Hold

Share price: 232p (+3p)

Soft drinks maker Nichols has not been around for as long as Laird but it is no spring chicken. Founded in 1908 by the grandfather of the group's present chairman, John Nichols, its Vimto tonic became popular with the temperance movement of the time.

Today it is sold in 65 countries worldwide and is still going strong. Vimto helped Nichols deliver a 15 per cent rise in interim pre-tax profits to £2.3m yesterday. International sales of the soft drink did particularly well during the period in Africa and the Middle East. In this part of the world cordial is most popular during the Muslim holiday of Ramadan. Because of its high sugar content it helps to sustain those who observe the tradition of fasting.

However, Nichols is by no means a one-trick pony. The Merseyside-based company also sells Sunkist in the UK and recently acquired the Panda Pops range of children's drinks. It has re-launched them as a sugar-free range and this will be backed up by the brand's first ever TV and cinema advertising campaign in the coming weeks, specially timed to coincide with the school holidays. So far, the re-launch seems to have been well received.

Nichols shares, which were listed in 1968, are not the most liquid on the London market. This is because over half the company is owned by the Nichols family. Nevertheless, trading at 16 times forward earnings, with a yield of over 4 per cent, they are worth holding.

4imprint Group

Our view: Buy

Share price: 355.5p (+20.5p)

4imprint Group is something of a favourite of this column. The group designs and distributes promotional goods such as golf balls and coffee mugs with corporate logos on them in Europe and the United States. Yesterday, it once again impressed the City with a cracking set of figures.

Pre-tax profits for the first half of its financial year rose 31 per cent to £3.3m on the back of a jump in sales to £55m from £44m. Cashflows were strong, allowing 4imprint to raise its interim pay-out to shareholders by 30 per cent, to 3.25p per share.

The performance of the group's operations in Europe and the US exceeded the expectations of City analysts. For the full year, they have pencilled in the company to notch up a profit of £7.6m. With the shares trading at 16 times earnings, and no sign of growth letting up, they are worth buying.

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