Cookson engineers a recovery

Tools hire company still picking up speed; Austin Reed pins hopes on revamp
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The Independent Online

Cookson, you will remember, is the engineering conglomerate whose rescue rights issue last year went down to the wire, whose plunging share price threatened to scupper the £277m fund raising. It got the money, though, and while it took nine months for the shares to climb decisively back above the rights price, the company seems to have pulled itself out of a cycle of decline. New data from the electronics industry sent Cookson shares soaring in heavy trading yesterday, and CSFB, the Swiss broker, was making the case for taking another look at the stock.

Cookson's main division (and the cause of its dramatic fall from grace after an acquisition spree at the peak of the technology bubble) makes electronics components, parts used in the manufacture of printed circuit boards. This division is currently running at around break even, after savage cost cuts, and any upturn in manufacturing orders should swell Cookson's profits immediately.

Well, the latest industry data shows just such an upturn. The "book to bill" data measures the ratio of orders to sales for the last three months in the US. It is a sort of leading indicator, since if there are more orders than current sales, the industry is set fair for growth. This week's figures show that, in August, the ratio moved to 1.14 from 1.04 in July.

The performance of the electronics division is the swing factor for Cookson, since the ceramics business (which makes materials used in steel smelting) is already recovering and the smaller precious metals division depends on the vagaries of jewellery sales and metals prices.

Cookson has not only cut its debt (from a crippling £750m at its worst to about £350m) but also restructured it, so there are less onerous conditions on cash flows to be met. With trading improving and further restructuring to cut out the loss-making electronics factory machinery division, the momentum now seems to be behind Cookson. The shares, which have doubled since March, have further to run.

Tools hire company still picking up speed

Members of the UK's army of small tradesmen get tooled up at Speedy Hire. Because they are increasingly deciding to hire, rather than buy, their small tools, the company is growing fast. It lends saws, drills, cement mixers, ladders, pumps, whatever, from a network of over 250 depots across the UK.

A trading update yesterday showed the business continues to accelerate, with like-for-like income per depot up 9 per cent in the first five months of its financial year, compared with an 8 per cent rise last year. Margins at the newest depots have been a touch disappointing and insurance costs are holding back profit, too. While some analysts had been hoping they would be told to raise their forecasts for the year at this stage, that may still come later in the year. The share price reflected the hope of upgrades, rising 17.5p to 395p.

Speedy Hire believes the move towards hired tools will allow it to expand the number of depots to 400, and as well as opening some from scratch it is also on the look out for acquisitions. It said yesterday that it had bought two more for £1.3m in cash. Acquisitions pushed the total sales increase for the five months to 14 per cent.

The shares have had a cracking run since we said buy at 271.5p in April, and they now trade on a multiple of 10 times this year's forecast earnings. That looks abour fair, but the prospect of upgrades makes them a buy still.

Austin Reed pins hopes on revamp

Upmarket retailer Austin Reed has had a difficult time of late. The brand has looked a little moth-eaten and trading hasn't been helped by the disruptions caused by the redevelopment of its flagship Regent Street site, which accounts for around 18 per cent of group sales.

The chief executive, Roger Jennings, blames a 6.5 per cent drop in group sales to £56.4m for the six months to 9 August on this "period of transition".

The company now pins its hopes for an upturn on a brand rejuvenation exercise, including changes in the design teams the introduction of new brands and the now-reopened flagship store, to arrest this worrying decline in sales.

The new lines, including an eponymous luxury smart casual range and an expansion of the Petite brand, don't arrive until next spring and Regent Street opened just a few weeks ago so it is still a case of wait and see. The company has also been the centre of much takeover speculation this year. A net asset value per share of 183p, compared with yesterday's 146p closing price, means a bid is certainly possible. The company founder's grandson, Nigel Robertson, Joe Bloggs entrepreneur Shami Ahmed, the family of property developer David Rowland and Slater Menswear, the Scottish retailer, have all been linked with the company.

That bid speculation counters the doubts that still exist over trading. Hold.

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