VT is looking shipshape with bulging order book

Bramall revs up as car sales rise; Things can only get better at NMS
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The Independent Online

VT Group, the old Vosper Thorneycroft, is only a few weeks away from breaking the champagne bottle over its new shipbuilding facilities in Portsmouth. The £50m project, which relocates the historic company's shipbuilding activities from the rival port city of Southampton, looked foolhardy when it was planned a few years back but, with the Government seemingly interested in ensuring a steady flow of work for the company and with the new state-of-the-art facilities able to attract orders from overseas, the shipbuilding backbone of VT Group looks a lot more secure than before.

All of which should be a source of comfort to investors who might otherwise have cause to avoid the VT growth story, which has seen the group move into the world of support services, helping to run defence facilities and military training programmes. In the UK, there are more potential contracts than VT could hope to bid for.

There was another shuffle in VT's new direction yesterday, with confirmation of the sale of two more pieces of its marine products business. VT Controls, maker of electrical systems for navies around the world, is going to Rolls-Royce for £11m, and VT Brisco, which works for the oil and gas industry, is going to US-based Weatherford for £2.5m. Not big money, but another small dent in the debt pile, which is expected to rise to about £100m as VT starts up new long-term support services contracts and makes some additional acquisitions to bulk up this side of the group.

The long-term hope is that the outsourcing of such services will catch on in the US, where defence budgets are so much bigger, in the same way as it has here. There could be an impetus if defence spending gets squeezed when government finances come under pressure.

Meanwhile, VT's prospects are underpinned by an order book which was £2.3bn at the last count at the annual general meeting in July. VT probably has about 90 per cent of the City's forecast turnover for the current year in the bag.

The shares are valued in line with the UK market and have a prospective dividend yield of 3.6 per cent. Hold.

Bramall revs up as car sales rise

A share in C D Bramall, the car dealership, has been a nice little runner in recent months.

Tony Bramall, chairman of the company who steered its transformation from textiles to motors 10 years ago, said yesterday that sales of cars have been accelerating in the past six months as consumers take advantage of very low interest rates to finance car purchases. The business owns 93 car dealerships and both new and used cars sales have improved, by 4 per cent and 15 per cent respectively.

C D Bramall also sells trucks and vans, as well as leasing out fleets to companies. These other divisions have also been growing, and pre-tax profits for the half-year beat all expectations with a 28 per cent increase to £17m. They also make for a well-diversified group. Even within the cars division, C D Bramall's franchises sell to all sections of the market - from Ford Fiestas to top-of-the-range Jaguars.

The company has made some impressive inroads into its debt pile over the past six months, reducing gearing from an uncomfortable 79 per cent this time last year to 45 per cent by squeezing more cash from the business and selling unprofitable properties. It plans to reduce this debt even further.

Changes to European rules covering the relationship between car manufacturers and dealerships, which come into effect in October, should also help C D Bramall, as it will open up opportunities to buy more franchises.

Rockier roads may be ahead for the company, of course. But Mr Bramall says there are no signs yet of debt-burdened consumers putting the brakes on spending, and CD Bramall's order book for the coming months is still revving up.

Shares in the company have been roaring away in the past year. At 512p, they are trading at less than 10 times earnings, making them cheaper than rivals Pendragon and Reg Vardy. The lights are still green for investors who want to join in. Buy.

Things can only get better at NMS

How the mighty are fallen. NewMedia Spark was the leader of the dot.com-era fashion for "incubators", companies set up with a big pot of cash and a little expertise to parcel out among start-up technology companies in return for equity stakes. It was never going to be the most tax efficient way for an investor to get access to a portfolio of high-risk, high-reward tech companies, but NMS shares went up and up in line with inflated hopes for its 80 investee companies.

And today? NMS is reduced to a corner of its plush offices in London's West End as workmen convert the rest into small offices which NMS must try to sub-let if it is to reduce its £1m a year rent bill. The company can no longer afford the finance director and company secretary of old, who were fired yesterday to be replaced by cheaper models. And barely 40 of those investee companies still exist.

But NMS shares jumped 7 per cent to 9.37p yesterday when it said its net assets per share were 12.4p at 31 March, with 8.1p of that in cash. It is still too early to say if there are diamonds in the portfolio (although the chip-maker Aspex looks promising). Flotations remain out of the question and trade sales would yield little. More investee companies will certainly go bust, but the NAV calculation was made at the bottom of the market. Things should be on the up from here.