Odds still in William Hill's favour

Kidde can be locked away for the long term; Lack of clarity makes Mowlem one to steer clear of

Punters who had a flutter on William Hill's shares at flotation should be smiling all the way to the cashier. The going for Hill has been very good over the past year and its shares have been gaining ground.

The company yesterday said turnover was up 77 per cent and profits up 43 per cent. Growth was driven by a relaxation of betting rules that has allowed bookies to put fixed-odds betting terminals in their shops. These FOBTs are high-tech slot machines, allowing punters to play roulette while waiting for the next horse race to start. Hill's roll-out of FOBT has been fast and furious, but the growth prospects are nearing the line and it is unlikely that much more can be flogged out of them past 2005.

The entire market for gambling in the UK is about to expand, however, as arcane rules designed to protect the public from emptying its wallet are swept away. Bookmakers will be able to open more shops, which will threaten Hill, but it does have a strong brand on the high street to carry it through. Casinos are the big winners in gaming deregulation, as they will be able to open doors to all. This is an avenue Hill is considering.

The brand's strength has also helped draw in customers for online betting. Profits here were up 80 per cent last year. This is an area of high growth and Hill has already secured a slice of the market.

Shareholders are starting to reap the company's strong cash flow, as Hill increased its dividend by 44 per cent and promised more. It has also said it wants to buy back up to 10 per cent of its share capital. This could boost earnings per share by 5 per cent in 2004.

Longer term, Hill may lose out to increased competition from deregulation. But it is still odds on to generate plenty of cash and good growth for some time. We have been positive on the shares since flotation and even at last night's close of 484p, which puts the stock on a forward multiple of about 15 times earnings, there is still time to pile on for the final furlong of growth.

Kidde can be locked away for the long term

As celebrity product endorsements go, it's not up there with Britney doing Pepsi or Pele pushing Viagra. But Kidde was clearly chuffed yesterday that it has bagged Rudy Giuliani to advertise its fire alarms on US television. New York's former mayor is fronting the fire safety's group's latest campaign to educate people about protecting their homes with smoke detectors, carbon monoxide monitors and other Kidde products. Which makes it ironic that consumer sales were the only minor disappointment in the company's better-than-hoped 2003 results, published yesterday.

Sales have snapped back in the early months of this year, though, and the outlook for the group as a whole is rosier than it has been since Kidde was demerged from the old Williams conglomerate in 2000.

Spares for fire safety systems in civil aircraft should pick up this year after the post-11 September tumble in air travel. A buoyant US economy should also start to encourage business to invest in new factories, where alarms, sprinklers etcetera are required by law.

This outweighs the negatives, such as the weak dollar (in which Kidde conducts more than half its business) and the worry that we have passed the peak in demand from the military, to which Kidde sells temporary bridges for getting vehicles across ravines, as well as safety systems for aircraft.

Strong cashflow and recent debt reduction means Kidde can pick up the pace of acquisitions, particularly in central Europe. The shares, at 104.25p, offer good long-term growth and a 3 per cent dividend. Hold.

Lack of clarity makes Mowlem one to steer clear of

Sir John Gains, chief executive of the construction group Mowlem, rubbed some people in the City up the wrong way yesterday. His company's results came in a little shy of forecasts, barely two months after a trading update that failed to signal a restructuring. Mowlem is combining its infrastructure business (which works on railway projects, for example) with its core construction division, and taking the opportunity to write off bad debts on old projects. Sir John was vague on the costs involved, on the savings that might be achieved, and what all this might do to 2004's results. Analysts left a meeting with a bad taste in their mouths but, to be fair, they are still positive on the company's shares.

Mowlem has won plaudits for its work through the Private Finance Initiative, in which private companies jointly fund public sector building work. Last year's £45.2m profit contained a one-off £15.6m from the sale of Mowlem's stake in the PFI that extended London's Docklands Light Railway. The company is also expanding in support services, through building maintenance contracts and one of the UK's biggest cleaning firms.

This is all low margin work, of course, and the uncertainty created means Mowlem shares (down 10 per cent to 200.25p) will not soon narrow the valuation gap with their peers. Avoid.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Telesales Executive - OTE £25,000

£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Ashdown Group: Marketing Assistant - Financial Services Sector - London

£20400 per annum: Ashdown Group: An established and highly reputable organisat...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future