Vosper looks like a safe harbour

Powderject still has room to grow; Prospects for Wiseman Dairies remain sour
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The Independent Online

If Vosper Thornycroft never signs another contract, existing orders will enable it to maintain revenues at their current level for the next four years. How many companies can say that in these opaque and nervous economic times?

For a company built on the shipbuilding heritage of a long-dead industrial past, the transformation of the past decade has been nothing short of miraculous. It has refashioned and modernised what is left of its shipbuilding interests while moving firmly into support services – originally running Ministry of Defence facilities but latterly moving out into civvy street.

The retirement of its chief executive, Martin Jay, after 13 years is infused with symbolism. His final results yesterday showed support services now account for 60 per cent of sales. He is being replaced by Paul Lester, whose previous role as managing director of Balfour Beatty puts him firmly on the support services side of the business. It was also announced the plc name will change to VT Group.

Turnover in the year to March was up 26 per cent to £479m, with pre-tax profit, before goodwill, up 1 per cent to £36.8m. It was something of a gap year for earnings growth because the group instead ploughed money into support services acquisitions and invested in new private finance initiative deals that will bear monetary fruit in future years. There should also be opportunities for cross-selling to its support services clients.

VT's shipbuilding interests have been underpinned by a deal to build "the front third" of six new warships for the MoD, safeguarding jobs and keeping alive hopes for new orders from overseas. The group's main facility is being moved from Southampton to a new hi-tech centre in Portsmouth, near to the Naval base, at a cost of £10m.

ING Financial Markets predicts underlying profits will be £45m this year, rising to £55m in the year to March 2004. That puts the shares, up 7.5p to 1,470p, on a price-earnings multiple of 17 this year falling to 13. That's good value.

Powderject still has room to grow

Powderject Pharmaceuticals, the vaccine company, titled its full-year report to the City yesterday Excellent financial results. Modesty would have been inappropriate, since the £1.2m net profit – its first – was wholly unexpected and comes thanks to better-than-hoped sales of its most significant products, flu and tuberculosis vaccines.

The company has bought a Scandinavian travel vaccines company to bulk up group revenues at the same time as cutting its losses on the Powderject technology, a needlefree injection technology that appeared unlikely to be a money-spinner for anything other than vaccine delivery.

Now it is a proper specialty pharmaceuticals company, aiming to spend about 20 per cent of revenues on research and development and to reduce its reliance on other costly distributors to sell its products. It is planning to expand the Scandinavian salesforce it inherited with the acquisition into new territories in mainland Europe. Paul Drayson, founder, was keeping his powder dry yesterday, but when details do emerge analysts will certainly be able to up forecasts of group margins.

Mr Drayson has to overcome considerable scepticism over the usefulness of the needle-free technology, which shoots vaccines through the skin. But there is still plenty of growth in the vaccines markets that Powderject is already in. The company has already sold all the flu vaccine it can make this year, at better prices than last, as governments around the globe decide mass immunisation is better than cure. With the shares up 32.5p to 491p, those who followed this column's advice and bought in last October are sitting on a 40 per cent profit. The shares have further to go.

Prospects for Wiseman Dairies remain sour

On the surface Robert Wiseman Dairies looks well positioned in an industry that has not been flavour of the month for many moons now.

The Glasgow-based company has increased its milk volumes to more than 1 billion litres per year. More than 60 per cent of that comes from business south of the border, where Wiseman lags the market leaders Dairy Crest and Express Dairies and so has scope to grow. New contracts from key supermarkets such as Sainsbury's have created extra demand. And to gold-top it all, raw milk prices fell by 2p a litre in the latest round of milk pricing – and the supermarkets have yet to cotton on and demand lower prices from the dairies.

Yet prospects for the milk industry remain sour. Consolidation is inevitable if the industry is to salvage falling margins and solve the perennial problem of oversupply.

An Office of Fair Trading inquiry is another worry. A fine is the most likely outcome. The investigation, into Wiseman's policy of charging different prices in different parts of Scotland, cost it £700,000 in legal fees last year. This dragged down the group's pre-tax profits for the year to 30 March to £16.5m from £18.5m. That despite a 24 per cent rise in turnover to £371m.

The shares, flat yesterday at 125p, trade on a 2003 p/e of about 8 times, which looks about right for now.

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