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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Guru Careers: Financial Director / FD / Senior Finance Manager

Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen