The shortfall prompted a pounds 1m reduction in full-year estimates to pounds 17m, versus pounds 13.5m in 1994, which implies a prospective p/e ratio of less than 13 with the shares at 446p. Nevertheless, the broker retains a positive stance, as Evans Halshaw continues to outperform the new car market and achieve profitability levels that are among the best in the industry.
In addition, the full benefits of reorganisation should come through next year, while recent acquisitions offer plenty of scope for margin improvement.
SWITCH out of Courtaulds (465p) into ICI is the advice from the Charles Stanley research team.
The medium-term outlook at Courtaulds is clouded by low volume growth, limited recovery potential and below-average earnings growth. Margin pressure, already apparent in all divisions, is set to continue unless raw material prices have peaked, which is by no means certain. And the high hopes pinned on Tencel, Courtaulds' innovative new fibre, depend on how fast production costs can be reduced to counter the decline in selling prices.
Gearing of 41 per cent is set to rise to 55 per cent by the end of 1997, as up to pounds 500m is shelled out for capital expenditure, including the building of new plants in China and India. But despite the downside potential, the shares continue to command a premium rating of over 18 times historical earnings. With returns from Courtaulds uncertain, ICI offers a much more stable alternative within the sector and is cheap by comparison.
MANAGEMENT at Leeds-based speciality chemicals group Hickson has come in for some stick from local broker BWD Rensburg. "The absence of any meaningful recovery in earnings before 1997 coupled with a reputation for being accident-prone means they may pay the ultimate price for any further delays or mistakes."
Strong stuff. But with the shares languishing at 118p, Rensburg reckons they should be held because Hickson may attract the attention of a predator.
PAY particular attention to the dividend when Anglo-French paper group Arjo Wiggins Appleton (245p) reveals interim results on Thursday. While pre-tax profits should advance by more than a third to pounds 145m, the payout policy is likely to remain, in the words of one broker, "enigmatic". Only a paltry 4 per cent rise to 2.75p is forecast, suggesting management is cautious about the durability of the current paper industry cycle. Avoid.
BUOYANT European car production should enable automotive components and building products group Laird (380p) to post an excellent set of interim results on Friday. Broker NatWest is looking for a 42 per cent rise in pre-tax profits to pounds 23.9m.
Although there is a danger that European car production will be trimmed to correct stock levels, NatWest reckons Laird has a significant amount of new work and new capacity coming on stream in Spain and the former Czechoslovakia to bolster sales.
Above average earnings growth is seen over the next two to three years, which makes the prospective p/e ratio of 12 undemanding relative to some of its peers in the sector.
THE next few weeks is likely to mark the nadir for the building materials and merchants sector, at least in terms of news flow, argues Societe Generale Strauss Turnbull. The prospect of a tax-cutting budget, increasing interest rate optimism and even, though less likely, direct assistance for the housing market should improve sentiment.
Accordingly, the broker is moving from a neutral to an overweight stance on the sector and particularly likes internationally based such as Pilkington (213.5p) and Blue Circle (334p).
PUNTING on small oil explorers is risky at the best times; buying on takeover hopes is more speculative still. But Arco's bid for Aran could be the prelude for more corporate activity in the sector. Perhaps the most interesting is Hardy (172p), under new chief executive John Walmsely. Apart from the turnaround potential he brings, Hardy could become the target for predators seeking exposure to the big Elgin gas field.
VALUING cable television companies is not the sort of thing to be done on the back of an envelope. The number-crunching is best left to analysts, who are busy updating complicated cash-flow models and revising recommendations after recent results from the leading players. According to BZW, General Cable (184p) continues to outperform Nynex and TeleWest - its two quoted rivals. But the shares are rated only a hold now that they trade close to broker's current fair value estimate of 190p.