Investment Column: Mouchel is a haven from the spending cuts

Hargreaves Lansdown; Vertu Motors


Our view: Buy

Share price: 125p (+8.5p)

While the looming public spending cuts are striking fear into hearts across industries reliant on government business – not to mention raising the spectre of a double-dip recession – the engineering consulting and services group Mouchel sees the late October Spending Review as an opportunity rather than a curse.

The group's local government consulting arm focuses on just that kind of cost-cutting and improving service skills that will be much in need. And the highways business specialises in maintenance, rather than building, which is likely to see a boom as large-scale infrastructure investment plans are scaled back.

"The medium and longer-term outlook is becoming increasingly positive as the new government's policies are implemented by organisations across central and local government," Mouchel said in a trading update yesterday, sending the shares shooting up by more than 6 per cent in early trading, before closing the day up 7.3 per cent.

Mouchel has not escaped unscathed from the recession. It was badly burned by the collapse of the Dubai property market, and is now exiting the Emirate in favour of cash-rich neighbour Abu Dhabi. It is also still in the process of slashing £25m of costs out of its UK business, which includes office closures and headcount reductions.

But the outlook is positive. As well as the potential austerity-induced surge in orders, it has an order book and pipeline in the region of £2bn. The Australian market is proving particularly fruitful. In a joint venture with Downer, Mouchel is preferred bidder for the Mid-West Gascoyne highway maintenance contract in Western Australia, the group said yesterday.

Notwithstanding the last year's patchy progress, Mouchel has much to recommend it from an investor's point of view. The case for optimism in the face of government spending cuts is a compelling one. And the shares have been dragged down – inappropriately, in our view – by recent read-across from troubled property group Connaught.

Taken together, Mouchel's stock has plenty of room for growth. Buy now.

Hargreaves Lansdown

Our view: Buy

Share price: 390p (+0.9p)

Peter Hargreaves and Stephen Landsdown are leaving the financial adviser and broker they founded 29 years ago in very rude health.

Yesterday Hargreaves Landsdown announced record pre-tax profits, fund inflows any money manager would kill for and a special dividend. The founders are going out on a high but there are good reasons to think there is further growth to come.

The search for yield amid record low savings rates that saw investors switch to funds and helped Hargreaves attract more than £5bn of new money last year is set to continue.

New chief executive Ian Gorman, a former Deloitte and Grant Thornton financial services chief, is a safe pair of hands and investors can draw strength from the knowledge that both founders will remain close to the business in which they retain a combined 50 per cent stake.

Mr Hargreaves should prove particularly useful. He is stepping down from management to concentrate on marketing and communications, and we reckon that could be a savvy move from an investor's point of view. Buy.

Vertu Motors

Our view: Buy

Share price: 27p (+1.25p)

With the "cash for bangers" scheme ending earlier this year and UK consumers tightening their belts, most car retailers are currently an unloved bunch.

This is partly why shares in Vertu Motors, the UK's eighth-largest motor retailer with 67 outlets, decelerated to a 12-month low of just under 26p on Tuesday. But investors put a turbo booster under its shares yesterday, following an update ahead of its half-year ending on 31 August that revealed underlying profits would be "materially ahead" of the same period last year.

Despite the ending of the scrappage scheme, Vertu revved up its like-for-like sales of used cars by 5.2 per cent in the five months to the end of July. Its private new car sales volumes also accelerated by 6.7 per cent. Vertu, which raised £30m in a share placing last year to boost it acquisition strategy, also said it had made "good progress" with the eight sales outlets it has acquired this financial year.

Shares in Vertu appear to be fairly valued on a 2011 price-earnings ratio of 11.1. But as it is considering reinstating its dividend, we think there is fuel left in Vertu's tank, despite the uncertain consumer environment. Buy.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little