The Investment Column: Risk makes Dixons one to avoid

Amec gets back on track but shares are too pricey; Plenty of growth left in iSoft despite recent surge

Dixons Group looks a little misnamed these days. The flagship electrical retail brand is not what it was, and hardly describes a company that has shops as far afield as Hungary and the Czech Republic.

Dixons Group looks a little misnamed these days. The flagship electrical retail brand is not what it was, and hardly describes a company that has shops as far afield as Hungary and the Czech Republic.

Rising rents and sliding prices have forced the group to close one-third of its Dixons branded stores in the UK during the past couple of months; sales from its remaining 214 sites now account for just 5 per cent of the company's turnover.

In the UK, the group also owns PC World, Currys and The Link. Yesterday's full-year results highlighted The Link as the star performer - with like-for-like sales up 10 per cent. But it is also the smallest of the company's four brands, so the meagre 2 per cent sales uplift from PC World had more impact.

Soaring demand for plasma and LCD television sets provided Currys, which is the group's biggest division, with 379 sites, with a boost over Christmas, taking like-for-like sales to 4 per cent for the financial year.

Which leaves Dixons. Like-for-like sales at Dixons fell 5 per cent last year, and after even stripping out the effect from the 100-odd sites the group has closed, sales would still have been negative.

There were few clues about how Dixons intends to improve the performance of what is, nominally at least, still its core chain. It is trying its luck with larger stores, called Dixons xL, situated in "off-pitch" space in town centres. But it is early days and the company hasn't found the right formula yet.

The decision to hand back £200m of cash to shareholders leaves the group with plenty to play with to expand in Europe. But it will be a while yet before its European stores are contributing enough to offset the risks to UK consumer spending. With those risks rising with every interest rate rise, there is every reason to remain cautious about Dixons' prospects. The shares, up 3.5p at 162.75p, are cheap relative to the sector - but with reason. Avoid.

Amec gets back on track but shares are too pricey

Life isn't getting any easier for Amec, which is trying to push itself up the construction industry food chain. It has been shedding low-margin bob-a-jobs in favour of highly skilled niches in road maintenance, and in oil and gas processing plant design and construction. The self-styled "project management and services company" was again asking the City to nudge its forecasts down a little yesterday, as its North American industrial customers continue to be able to demand cheap prices.

At least the UK and continental European businesses have been improving to take up some of the slack. And the worst performing, lowest margin bits of the US construction business are already being shut down, at a cost to profits this year of £26m. There was also the disposal yesterday of Amec's French regional construction business for £14m.

The value of future orders for the remaining businesses was £3.2bn at the end of April, up from £3.0bn at the start of the year.

So the company continues to move slowly in the right direction, but does not yet seem to be finding stellar growth in the areas it has chosen. This may come, but new contracts to help in the rebuilding of Iraq will take a while to affect the profit line, if they ever do. And the group continues to have relatively high debts for its size.

At 270p, on 10 times this year's earnings, the shares are not cheap enough to be enticing.

Plenty of growth left in iSoft despite recent surge

IT IS the holy grail of health care: doctors better clued-up about their patients; automatic referrals for tests ahead of a meeting with a consultant; immediate information on the nearest or soonest available specialist; electronic patients records so consultants don't need to start from scratch when taking on a new case. Wouldn't that make a difference to how the public perceives the National Health Service?

Well, it is coming soon to a doctor's surgery near you. The NHS has just finalised five vast new contracts for IT services to improve efficiency, and iSoft, the mid-cap software company, has won business in three of them. The victories, and the merger with its long-standing rival Torex, have transformed iSoft and turned it into one of the sector's most interesting long-term investment prospects.

The company already had a strong position in the NHS, and the worry was that iSoft would lose as much business as it would gain as IT upgrades are concentrated with the five new regional contractors. This does not seem likely now, and iSoft was yesterday setting out the extra work it will do in specialist areas such as accident and emergency and maternity.

It is also muscling in to the health services of other countries, especially in the Far East, which are looking to the UK for ideas on how to procure more efficient IT systems. The company promised accelerating profits growth in 2006 and 2007.

We recommended our readers buy iSoft shares back in November 2002, when they were 196p, and yesterday they were back to within pennies of a record, up 30p to 415p. The company's success in the NHS has validated its core electronic patient records software, and should give investors confidence that substantial growth is available. Buy.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins win the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor