Investment Column: National Express still has room to travel

Bodycote; Ashmore


Our view: Buy

Share price: 247p (-2.5p)

Finally, some good news for much-troubled National Express. From the doldrums of a scrapped rail franchise and sharp financial losses in 2009, the transport group posted annual results for 2010 yesterday showing a return to profit and a proposed final dividend of 6p per share.

Under the newly installed chief executive Dean Finch – who joined from Tube Lines, the London Underground public private partnership, this month – the company saw revenues boom by 22 per cent to £2.1bn, and pre-tax profits soar by 38 per cent to £161m, leaving statutory profits of £62m, compared with £53m of losses last year.

Mr Finch's turnaround strategy – which has included restructuring the National Express bus network and extending its East Anglia and C2C London commuter train franchise – has been sufficiently successful to beat analyst forecasts and see the restoration of the dividend scrapped in 2009 to mitigate the losses from collapse of its East Coast rail franchise deal.

Chairman John Devaney was suitably upbeat yesterday, praising Mr Finch for the "clarity and operational focus" he has brought to the group. "Following a turbulent 2009, we are rebuilding a high-quality business, focused on its core operations and established on a sound financial footing," Mr Devaney said

Mr Finch was equally bullish. "This is a renewed company," he said. "Our much improved financial performance provides a platform to drive further growth, continue targeted investment and restore a dividend. With a clear focus on our strategy, we are confident in the year ahead."

That said, the hard work is far from over. Douglas McNeill, an analyst at Charles Stanley Securities, said: "The failings of which the group was guilty in 2009 have been fixed in short order, and that's impressive; the challenge now is to achieve organic growth and retain the East Anglia rail franchise."

National Express has come far from the slump of 2009, and the shares have performed well. But there is still plenty of headroom and Mr Finch should inspire confidence. Buy.

Bodycote

Our view: Buy

Share price: 286.5p (-12.2p)

Given the frothy state of the markets, it is not unusual to find companies with share prices that have rocketed over the past couple of months as investors waded back into equities. Often, the rally is out of step with reality, running ahead of fundamentals as speculators took a punt. Bodycote is not such a company.

The engineering group's shares have done well – and deservedly so. First, trading has recovered and both revenues and profits have been rising, something that was confirmed by last night's results.

Second, the wider sector has been recovering nicely in recent months, after suffering as customers started running down stockpiles, as opposed to placing new orders, during the recession. Manufacturing activity has been picking up round the world, boding well for Bodycote's performance.

Of course, it would be foolish to overlook the uncertainties that continue to cloud the macroeconomic outlook. But, at under 13 times forward earnings, and with a prospective yield of nearly 3 per cent, that seems to be more than reflected in the stock.

Given Bodycote's efforts to cut costs during the downturn, that makes this a horse well worth backing. Buy.

Ashmore

Our view: Buy

Share price: 333.9p (-9.1p)

As an investment manager specialising in emerging markets, Ashmore landed in a rather sweet spot during the recession. And while there have been fears that those may be getting a bit toppy, Ashmore's interim results, released yesterday, show appetite remains strong.

In the six months to the end of December, pre-tax profits rose 14 per cent to £127.6m with revenues up 17 per cent to £173.7m. Chief executive Mark Coombs said: "Events of the last six months have continued to underline the increasing importance of the emerging markets."

The message is getting through. Ashmore's assets under management hit $46.7bn at the end of the year, $11.4bn higher than six months earlier.

Moreover, at 14.3 times forward earnings, the valuation leaves room for further gains. Buy.

Suggested Topics
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

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones