The Week In Review: Imperial breathes easy, despite bans

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The Independent Online

The decline in cigarette consumption in mature markets driven by smoking bans and health issues exercises little restraint on the growth of Imperial Tobacco. The current year to September is picking up from where 2007 left off with improvements in volumes, market share gains and earnings.

However, worries about rising UK competition contributed to a sell-off in shares before they clawed back most of the losses. Yet Imperial remains a copper-bottomed stock in times of economic distress. Smokers will probably smoke more, while those trying to stop will find the task tougher as financial pressures increase.

The UK cigarette market fell by 4 per cent during 2007, broadly what Imperial anticipated after smoking bans across the region came into force. Since October, Imperial's market share has been stable at 46.4 per cent. It is probably too early to see what impact an 11p-a-packet price rise will have.

Germany fell 6 per cent, but Imperial made progress in most European countries. Growth will come from Eastern Europe and Africa. And attention will focus on its £11bn buy, Altadis, maker of Gauloises and Fortuna.

Shares have slipped 13 per cent from their best levels of last year, and sell on 15.7 times forecast earnings for 2008. In an uncertain year for consumers, they are probably fairly priced.

Healthcare Locums

Recruitment specialist Healthcare Locums (HL) has been staff in our hospitals. Now it is tapping into overseas markets such as the US and the United Arab Emirates which are also short of health workers.

The company joined AIM in 2005.Market share has grown from an acquisition spree. HL finished 2007 in good shape, with turnover up to £157m. As well as overseas prospects, the company has gained from the unsuccessful attempt by the NHS to handle recruitment in-house. The target is to double market share to 20 per cent. Shares sell on just 6.5 times forecast earnings, which seems cheap.


Mini department-store chain Beale's results make grim reading. Full-year sales were virtually flat at £108m as it slipped into the red after grappling with rising rent, rate and energy bills. Losses were just over £1.4m, against a profit of £324,000 before. Beale faces another hard year. And a series of warnings have hit shares hard. At the current price, the business, which trades from 11 sites, is worth just £8.5m. The only upside seems to be a bid.


The Pru has showed there is nothing like fears of a financial meltdown to boost safe savings products. The company reported sales up from £2.47bn to £2.87bn in line with expectations. Business in Asia grew by 44 per cent, to £1.31bn, the largest contribution from any region. India grew sales 67 per cent and Indonesia 75 per cent. The results underline Asia's growing importance.

The UK made the second largest contribution, of £897m, but little up on 2006. The market grew increasingly competitive, and Prudential concentrated on retirement products. This year will be more testing as budgets are squeezed and people attempt to pay off debts. Shares are 21 per cent off 2007 levels. Hold.


Poor weather in 2007 drowned sales of water butts for AIM-listed recycling products group Straight. Fortunately, waste containers did well, although not enough to plug leaks. Shares have fallen to 60p, where it is valued at just £7.4m. With 2007 profits expected down from £2.3m to £1.5m, a turnaround depends on new recycling products – and the weather. Avoid for now.

Begbies Traynor

Insolvency specialist Begbies had reason to welcome the credit crunch. The first half of the year was the worst since the firm floated on AIM in 2004. Profits fell 44 per cent as insolvency income dried up.

Begbies is paying an unchanged dividend – a gesture of confidence underpinned by new insolvency figures. The task is to beef up other areas. It has announced the acquisition of the tax adviser Shaw.

Rising insolvency should lift full-year profits to £7m, leaving shares at around 20 times earnings, which looks full enough for now. Hold.


GoIndustry runs online auctions of machinery bought by companies setting up abroad. The market is worth billions, and is growing fast. GoIndustry's market share is 0.5 per cent, but that will nearly double after the acquisition of its main rival, US based DoveBid.

Even without DoveBid, the UK firm was on course for profits of around £2.7m for 2008, on over 12 times earnings. It is a unique listed company operating in a dynamic marketplace. Buy.

Oakdene Homes

The South-east housebuilder Oakdene was 53 per cent off its year's high when it gave its profit warning, turning that into a 70 per cent slump. Profits will now be down from £8.6m to around £5m. A bulk buyer of 30 of 111 units at its flagship development at Newhaven just walked away.

Oakdene is expecting completions to fall from 228 to 165. Revenue will be down 30 per cent at £37m. Brokers have cut forecasts from to £5.4m, reflecting the downturn expected. Avoid.


Vodafone, the world's largest mobile phone operator by sales, delivered a 16 per cent rise in revenue for the third quarter to last December of £9.2bn, ahead of expectations. In November, the company forecast full year revenues of £34.5-£35.1bn with operating profits between £9.5-£9.9bn. It did not revise the figures this week, though they will come in higher if the euro continues to strengthen against sterling. But Vodafone is not relying on currency movements. Growth in emerging markets exceeded 13 per cent. And while it has continued to grow its services it has also acted to keep a tight grip on costs. The shares have risen 30 per cent since bottoming out at 134p last year. They have further to go.

ITM Power

ITM Power floated in 2004 with the tantalising promise of developing hydrogen fuel cells which could one day power the central heating in the home and the car in the drive. Its technology has drawn admiring glances from car makers, aircraft giant Boeing, and the US Navy's underwater warfare centre among others. But so far no one is shelling out to help pay for the development work. ITM is burning cash at around £4m a year but with £29m in the bank is under no immediate pressure. But it badly needs firm evidence that its technology is suited to volume manufacturing. Listed at 50p, the shares have been volatile reflecting progress, or lack of it at various times. At this stage they remain worth a punt for those who believe they'll find a way into the mainstream.


The big issue for Carluccio's is whether it is sufficiently different from other eateries to weather the economic storm. The signs look reasonably encouraging. The range of food to take away is well presented and fairly priced. And there is a high proportion of seating outside so it benefits when the weather is favourable. While some rivals have mothballed opening programmes it plans to open five more outlets this year - on top of the 34 already trading. Nevertheless, the stock remains vulnerable at a time when discretionary spending is under pressure. The sharse fell this week and it now sells on 17 times forecast earnings for 2008. A fairly safe hold for now.