City Talk: Radstone on road to recovery

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The Independent Online
Orders have begun to recover at Radstone Technology, a defence systems supplier, mainly of computer systems for missiles and Tornado aircraft. The company has been through lean times, falling to 37.5p, from the 125p it floated at in 1994. Thereafter, it almost immediately encountered problems, as the US underwent changes. Upheavals to procurement policy, followed by President Clinton's Budget impasse meant orders all but dried up. However, this looks to be changing. It has just won two contracts, each worth pounds 500,000. The first is to supply upgraded consoles for a mid- life refit of electronic systems on the United States Air Force AWACS fleet.

It has also notched up a new order for its slimmed-down French operation, to upgrade some systems on the Mirage F1 jet fighter. The deal will represent about 40 per cent of the budgeted order intake of the French arm. After a dismal spell, some interest could return to the shares.

Under New Labour, claims for the benefits of stakeholder society have poured forth. Yet results earlier from the Mersey Docks & Harbour Company barely merited any comment on the two-year-old strike by sacked dockers. The shares jumped 6.7 per cent, on a 60 per cent rise in profits to pounds 22m. The Government, with a 14 per cent stake, faces something of a conflict of interest. It has made it clear it has no interest in intervening in industrial disputes. Yet Mersey cries out as a subject for a solution - but there has been nary a whisper from the Government. The market is doubtless right to mark up the shares.

KBC Advanced Technologies (249.5p), the oil refinery consultancy and a recent stock market arrival, has posted its first set of figures since its flotation at 195p in March, for the six months to 30 June. Sales were up 28 per cent, to pounds 15.9m (pounds 12.4m), and pre-tax profit rose 34 per cent to pounds 3.6m. Earnings per share were 5.08p, up from 4.25p. Chairman Richard Davies said: "Our strategy of working more closely with our oil partners ... is proving to be successful." A recent Credit Lyonnais note rates the shares a buy and expects the company to turn in profits of pounds 8m in 1997 and pounds 10.2m in 1998.

Amey, the construction to facilities management group, has completed its acquisition of Amey Railway Holdings from its management last week. It paid pounds 3.5m in cash for the remaining 25 per cent stake. The house broker, James Capel, says the deal should be earnings enhancing, by 9 per cent in 1997, and 17 per cent in 1998. The shares may offer reasonable value, despite a rise of 22p this week, to 422p.

You can be sure of Shell, ran the old advertising slogan. But Shell Transport & Trading, the British arm of the Anglo-Dutch petroleum giant unveiled a bigger-than-expected fall in profits. On Thursday, Shell was one of the few losers in a day when the market soared through the magical 5,000 mark. The problem was the strength of sterling, it seems, which sliced pounds 117m off second-quarter earnings. Yet the irony of this development is clear. While its rival BP has all but rehabilitated itself in the eyes of investors after various debacles, could it be that the mighty Shell is due for a spell in the doldrums?

Another former high flyer coming under pressure in recent months has been Smiths Industries. One of the problems has been concern over the medical equipment supplies division, where sterling is feared to be wreaking havoc. The shares have been clobbered, suffering a slowdown against the market over the last 12 months. One key to any reappraisal will be its acquisition of Graseby, the quoted medical supplies business which offers tantalising margins of 20 per cent, and a successful integration of the company could yet provide a needed boost.