The Investment Column: Food processing recruiter serves up excellent value

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Our view: Good value

Share price: 127.5p ( + 5p )

The credit squeeze is likely to put jobs at risk in some high-profile areas such as financial services but there are no such worries in the less glamorous regions of the workplace such as chicken plucking and cake making.

In these low-paid sectors of food manufacturing it can be difficult to find a constant stream of workers. Hence the need for specialist recruiters such as Staffline, which has emerged as a leading supplier of blue collar contract labour, primarily to the food industry.

The firm operates a small branch network but specialises in placing its own recruiters within the client company. This way it has a greater understanding of the kind of workers needed and is able to react more quickly when vacancies occur.

Profits for the year just ended are likely to have risen by 30 per cent to 4.4m largely due to organic growth and new contract wins. There are now 99 locations where Staffline has "embedded" personnel.

An upbeat trading statement said there was a strong pipeline of opportunities pointing to further progress in the current year.

The company is also growing two smaller businesses, Techsearch, which specialises in temporary and permanent engineering jobs, and OSP, which serves the distribution and logistics sector.

Staffline's strong association with a defensive sector such as food manufacturing means it is less exposed than other recruitment firms serving volatile areas such as IT.

However, one worry is that it relies very heavily on East European labour. For the time being they appear to have few complaints working for relatively low wages, but if they begin migrating to better paid jobs Staffline could be faced with a recruitment problem of its own.

Staffline offers reasonable value at 7.6 times 2008 likely earnings. It is also in a sector where there is constant talk of consolidation.

Hichens Harrison

Our view: Hold

Share price: 242.5p (+32.5p)

Hichens Harrison never ceases to remind investors that it is the City of London's oldest firm of stockbrokers perhaps to underpin its credentials as a fully paid-up member of the blue-chip investment community.

But the firm is now reaching out beyond the boundaries of the Square Mile, forging potentially exciting new trading links within a number of overseas emerging markets.

While its traditional stockbroking activities will continue to play an important role, the firm is reducing its reliance on swings in share trading by offering corporate broking and investment management services to small and medium-sized companies preparing to tap into the London equity market for funds.

In a significant demonstration of its newfound power, it raised 55m in pre-IPO funding for Panceltica, a steel construction business in the Gulf. Panceltica is planning to float on AIM this year, which should trigger another round of fees for Hichens.

Soon, offices will be opened in Qatar, Singapore, India and Japan to create a new pipeline of business. Some of the ventures have a local partner.

After two years of vigorous growth, the AIM new issues market floundered last year, but experts predict a steady recovery. There is talk of 20 shipping companies considering a listing to take advantage of booming conditions in global shipping.

The building blocks being put in place by Hichens Harrison leave it well placed for any IPO bonanza on AIM.

The company said yesterday it expected to finish 2007 with a significant increase in turnover and profits, pushing the price sharply higher and leaving it well up with events for now. The shares were floated at 50p in May 2005.

Ricardo

Our view: Buy

Share price: 318p (-7.75p)

While the names of Ford and Vauxhall trip off the tongue few people who get behind the wheel of a car will have heard of Ricardo. Yet the British firm is one of the world's leading automotive engineering consultants, helping to design many bestselling vehicles.

Because of the secretive nature of much of the work and the fierce competition between makers, much of its contribution to improving the quality, performance and safety of cars goes un-noticed. But it helped BMW to finish the new mini after the split with Rover, worked with GM on V6 engines for Saab, and collaborated with Ford on diesel engine technology.

The latest raft of projects is driven by stringent emission legislation and the need to improve fuel economy as the price of oil continues to surge.

A high-octane performance for the opening five months, underpinned by a strong order book, puts Ricardo on track to deliver profits of 13.5m for the full year to next June. This compares with 12.2m last year, itself an improvement of 13 per cent.

Ricardo is serving a multinational industry being forced to spend heavily in order to adapt to major environmental and legislative changes. The shares belong in the fast lane.

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