Finelist's progress good in parts

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The Independent Online
Finelist's half-year figures yesterday were pleasantly uneventful, coming soon after the acquisition last month of Ferraris, the engine parts distributor. Pre-tax profits of pounds 7.1m were an impressive 76 per cent ahead but the market expected as much and the shares, which have had a storming run this year, eased 4p to 385.5p.

It has been quite a year for Finelist, one of two quoted motor parts retailers and distributors that are steadily carving up the estimated pounds 2.4bn-a-year car parts market. The acquisition last year of Motor World, together with the Ferraris deal, has effectively doubled the size of the company, but with half-year turnover only pounds 87.2m there is still plenty to go for.

Investors should expect the trickle of deals to continue but shouldn't worry about it. Chris Swan, chairman, has shown he has the ability to absorb a stream of acquisitions and the 26 per cent rise in earnings per share reported in the six months proved he can do it without diluting earnings. Shareholders were rewarded with a 2.2p dividend, a 16 per cent increase.

Floated at 130p nearly three years ago, Finelist's shares have nearly tripled, shrugging off calls on shareholders such as the 4-for-17 rights issue in January to pay for the Ferraris deal. Worries that it was just another 1980s stock market shooting star that used its high-flying shares to create a house of cards have proved well wide of the mark.

The key to Finelist's progress is the economies of scale that will give the group a huge advantage over its smaller peers. Compared with the small back-street chains thattypify the industry, Finelist's buying power with manufacturers such as Lucas grows with every deal it does.

On the basis of forecast profits this year of pounds 17.4m, the shares trade on a prospective price/earnings ratio of about 18. That incorporates much of the good news, but the shares remain good value.

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