Dawson storms to treble profits: The Investment Column

Shares in newspaper wholesaler Dawson Holdings have been storming performers since they graduated from the Rule 4.2 market to become one of the founder members of AIM in June 1995.

They have more than quadrupled since then, rising another 225p to 2,175p yesterday on news that profits in the year to September had almost trebled from pounds 3.5m to pounds 9.8m. Earnings per share rose from 36p to 132p while the dividend was raised to 40p (10p).

Dawson has built a leading position in its two main markets - newspaper distribution and library services - which both have high financial and technological barriers to entry.

The integration of Faxon, the US library supplies business bought in 1994, is largely complete. That deal made Dawson number two in the world subscription management market for academic and corporate library customers, ahead of Blackwell's of Oxford.

Earlier this year Dawson paid pounds 15.4m for the 50 per cent it did not own in family-run Surridge Dawson, the UK's third-largest newspaper distributor after WH Smith and John Menzies with a 14 per cent share.

The move, which added pounds 2.9m to profits, cleared the way for a move to the main market, which Dawson expects to complete in the summer. A 10- for-one share consolidation is also planned to make the shares even more liquid - they are already one of the most actively traded on AIM. A name change is also on the cards - there are two other quoted Dawsons, textile group Dawson International and transport company Dawsongroup.

Fears that supermarket giant Tesco might launch a price war in wholesaling, claiming local supply deals left supermarkets short of best-selling magazines, have receded in recent months and Dawson is confident of another successful year.

With the results comfortably ahead of house broker UBS's pounds 9m forecast, analysts were busy raising their estimates, though no new numbers were immediately available. However, the historic rating of 16 still looks undemanding given the impressive growth record. Good value.

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