Our view: Hold
Share price: 149.75p (+13.25p)
Finding highly qualified professionals such as lawyers, accountants and bankers is getting tougher. Recruitment group Robert Walters says shortages are occurring in all its main markets.
This has not restrained growth so far as Walters continues to expand around the world. The latest acquisition takes it into China for the first time.
The firm is also benefiting from a trend by employers to use one agency to supply all their staffing needs. Some companies also want assistance in other areas such as managing payrolls. Walters says there is a growing polarisation between international players like itself that are able to offer a wider variety of services, and small recruitment boutiques which are being squeezed out of the market.
Walters did better than expected last year, increasing turnover by 19 per cent to £128m and raising profits before tax by a quarter to £24.9m. But growth in the UK is being surpassed by overseas operations, which now represent 62 per cent of total fee income. Continental Europe improved 33 per cent and Asia Pacific, now the largest region, gained 27 per cent.
Demographics are beginning to have a strong influence on employment trends. In Japan, by the year 2020 there will be 14 per cent fewer males between the age of 20 and 40 in the workforce. But of more immediate concern to Walters is whether the ripple effect of last summer's credit crisis will spread from investment banking into other professional fields. There are already signs of weaker demand for banking positions in London, New York and Hong Kong.
The share price has reflected concerns over the impact of a slowdown and is 64 per cent off last year's peak. Walters suffers from knee-jerk reactions and trading can fluctuate violently in a week. Employers can end the quest for new permanent staff with a single telephone call. Temp-orary workers can be laid off overnight. The shares staged a near 10 per cent bounce despite the company's own broker cutting forecasts for 2008 by a hefty 17 per cent. Despite its strong international spread, Walters faces a tricky year in key markets and some caution is necessary. Hold.
Our view: Speculative
Share price: 37.5p (+7.5p)
Roy Stanley caught the stock market's eye with Tanfield, the maker of zero-emission electric trucks and vans which sped from 20p to 204p. So it was no surprise there should be some excitement over his latest venture, Darwen Holdings, which is planning to manufacture low-emission buses for inner cities using diesel electric hybrid technology.
There are only a handful of hybrid buses on the roads – unlike in the US where there are more than 2,000 – and they are operated by Transport for London. Darwen, which also makes petrol-powered single and double deckers for the likes of Go Ahead and Arriva, believes legislation will force more operators to use hybrid vehicles. In addition to their low emission, they can cut fuel bills by 25 per cent.
Darwen, based in Blackburn, was set up in 2007 when it bought East Lancashire Coach Builders out of administration and then picked up the chassis and body designer Leyland Product Developments. LPD has a skilled research team which will be the cornerstone of the drive towards hybrid buses.
There is big potential. Demand for city buses is expected to rise from 1,900, worth £342m at present, fuelled by government pressure to cut emissions. The current generation of ageing buses on our roads is also due for replacement. Darwen is expected to make profits of £2.4m in the current year but the excitement will centre around progress on the development of hybrid buses. At the placing price of 30p, it is valued at £15m. Speculative.
Goals Soccer Centres
Our view: Fairly valued
Share price: 330p (+7p)
Goals Soccer Centres, organisers of five-a-side football in the UK, plans ventures in South Africa and the US. The timing is good as South Africa is the host of the 2010 World Cup. Goals is to grant a master franchise, which means it receives fees without having to stump up cash. A site has been lined up next to the World Cup Stadium in Johannesburg. It is also opening a pilot centre in Los Angeles as part of a joint venture. Football is hugely popular in both countries.
Goals charges players for using its synthetic floodlit grass pitches, modern chang-ing facilities and qualified referees. It also runs competitive leagues. Around 300,000 games were played last year. There are 28 centres and six more planned this year.
Profits for 2007 rose 42 per cent to £7m. Turnover went up a quarter to £20m. The market has been worried that it will struggle to meet the roll-out program-me for new centres but every-thing has run smoothly so far. The more it opens, the more proficient it becomes.
We said the shares were probably high enough at 309.25p early last month, since when they have risen another 6.7 per cent. Goals is a leisure stock which has not felt the impact of a spending slowdown, while the overseas expansion adds to the excitement. Even so, they still look fairly valued.Reuse content