City File: Warburg back to winning form

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The Independent Online
A YEAR ago the mighty house of SG Warburg was looking a little tarnished, as it revealed a sharp drop in half-year profits and some uncharacteristic write-offs. But Wednesday's interim figures will show Britain's largest merchant bank bouncing back.

Neil Baker at Credit-Lyonnais Laing has inked in a trebling of Warburg's profits to pounds 158m, en route to a record full- year total of pounds 295m. He says the group has done extremely well in its trading activities - not just equities but bonds and gilts as well - on the back of a glorious bull market caused by low interest rates.

Will the good times continue? Friday's market correction cannot have been good news, but less than half Warburg's profits come from the UK. At 890p, the shares look well valued but could receive a nice boost on Wednesday.

AN UNUSUAL prospectus arrives in the post. It is for Swithland, the Leicester-based motor trader and finance group that owns Gordon Banks Promotions, through which the one-eyed former England goalkeeper arranges hospitality packages and cultural events. The prospectus shows that while the company's profits have been rising steadily, cash flow has been falling and money was flowing out of the company in the most recent half year. At the same time, the group predicts that earnings per share this year will triple.

Everything has its price. But the 81p that Swithland's backers, Ionian Corporate Finance, and brokers, Harris Allday Lea & Brooks, are asking appears far too high.

IT SEEMS that George Simpson has finally been released from his British Aerospace contract to take up the chief executive's job at Lucas. 'All that is left to be sorted out is fine-tuning the delicate details so that everyone can walk away from this cleanly,' says a source.

An investor bought a large chunk of Lucas shares early on Friday, leaving a positive glow on the stock for the rest of the day. A 4p rise to 175p was one of the few bright spots on an otherwise dreadful day in the markets.

The automotive and aerospace components company put it down to a couple of recent meetings with analysts. Analysts put it down to the 'George effect'. Lucas has set 18 November as the deadline to announce a new chief executive. Expect news sooner.

NIKKO Securities is having a go at Allied Lyons. Its analyst, Patrick Kirkby, reckons that the group's Hiram Walker drinks side is looking pretty poorly in the light of bearish statements from Grand Metropolitan's IDV and Guinness's United Distillers.

It addition, Hiram, whose brands include Ballantine's and Canadian Club, has a below-average profits record and low exposure to the more dynamic drinks markets of the Far East and Latin America. Looks like time to sell.

THE METABOLIC pathways are all looking sound at Amersham International, the health sciences group that uses radioactive materials to make carbon-tracing products. Its interims this Wednesday should show a bumper return, with pre-tax profits of about pounds 16m, up 62 per cent on the same period last year. Earnings per share are expected to rise by 45 per cent for the full year.

Amersham's life sciences division has been hit by recession in Europe but helped by a boost in Japan. The healthcare business has seen continued growth from sales of Ceretec, its brain-imaging agent, and Metastron, which is used in the treatment of prostate cancer. But a hefty gain from currency hedging and exchange rate movements will also push up profits. Here is a stock that positively glows in the dark.

A FEW years ago, staff at BP joked that they would 'wallop the scallop'. These days, with Shell so far ahead, the friendly banter has virtually stopped. Shell's third-quarter results this Wednesday should show replacement cost profits of pounds 850m, up 7 per cent on last year and well over double those unveiled by BP last week.

Even so, Shell may have a few things to learn from the mean regime at the Yellow and Green. Its aggressive cost-cutting programme launched earlier this year will have to deliver real benefits, given the company's rating and yield.

With a share price that is soaring in inverse proportion to the price of oil, the scallop risks being a victim of its own success.

PITY the leisure team at Smith New Court, which raised its forecast for Manchester United just before the club was ousted from the European Cup competition. But the sharp drop in the share price looks like an over-reaction. Sure it has lost an estimated pounds 12m of revenue, but it still leads the Premier League and seems almost certain to be back in Europe next season. Look at the price drop as a buying opportunity.