The Investment Column: Vantis in demand as companies feel the strain

Holidaybreak; Fuller Smith& Turner
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The Independent Online

Our view: Buy

Share price: 107p (+7p)

No prizes for guessing who is making money out of the current economic upheaval. Yes, as always in times like these, the corporate morticians are once again in demand. The AIM-listed Vantis is an accountancy and professional services group which, in ordinary times, ticks over nicely, giving advice to small and medium-sized firms and well-off individuals.

There is also a business recovery side helping firms facing bankruptcy and struggling with strained balance sheets. Not surprisingly, this is in overdrive at the moment. Sensible clients, spotting problems early on, are calling in Vantis to see how best to reshuffle debts, slim the business down or, if all else fails, handle the subsequent insolvency. The advisory work is carried out from a network of 18 offices around the country. A number of strategic acquisitions have created the present multi-skilled structure which enables Vantis to cross-sell more services to clients. The aim is to become one of the top 10 advisory groups in the UK.

Group turnover grew 7.5 per cent to £94m in the year to April giving profits after charges of £14.9m, up 8 per cent. While two-thirds of turnover is generated through its business advisory arm, the recovery side was the best performer, increasing turnover by 12 per cent to £19m and handling a number of well-known insolvencies such as the recruitment firm Hat Pin and the betting group BetonSports. The longer period spent on this work puts some strain on working capital but margins are attractive and bad debts negligible.

Other parts of the group specialise in handling investments for high net worth individuals and civil lawsuits involving international arbitration. Despite weaker markets, the corporate finance arm completed more than 80 deals. While merger and acquisition work has slowed, there are opportunities helping clients pick off some weaker competitors while some groups are actively looking at management buy-outs to bring in needed cash.

The market warmed to news of an improvement in cash flow although there was some disappointment that organic revenue growth of 7.3 per cent was not higher. The shares rose 7 per cent with the broker Landsbanki setting a target price of 186p. Buy.


Our view: Hold

Share price: 366p (+11.7p)

Holidaybreak, probably by accident rather than design, has emerged as one of the holiday companies most likely to cope with the fall- out from the credit crunch. It is not in the mass market so is spared the hit from thousands of cancelled holidays on foreign beaches.

The group offers a quirky mix of niche holidays which almost, but not quite, look recession-proof. The camping business on which the group was founded offers self-catering mobile homes and tents on well-run sites across Europe.

The group rents the sites and took the decision to reduce capacity by 5 per cent this summer to avoid having to cut prices. Sales are currently up 1 per cent, according to yesterday's update. A typical holiday can cost as little as £300 which should appeal to those on stretched family budgets. There is an adventure division offering diving and trekking holidays for more prosperous travellers undaunted by the prospect of splashing out £3,000 for a trip to one of the world's less-known beauty spots. Here, sales are up a robust 3 per cent.

The acquisition of PGL, a leading school trips organiser, last year, took the group into educational tours and activity holidays catering for around 250,000 children a year. Sales are currently up 9 per cent but there is concern that next winter's ski holidays may suffer from changes to the school holiday dates. The company believes families will continue to dig deep to fund school trips but that seems to take a lot for granted.

One area showing weakness is short hotel breaks in London where sales intake has slowed from 7 per cent to 3 per cent. One explanation is that last year the capital attracted more visitors for exhibitions such as Tutankhamun and the Chinese Terracotta Warriors.

Across the group sales are up 4 per cent, down from 6 per cent in May. The market's verdict, marking up the shares by 11.7 per cent, suggests Holidaybreak is showing encouraging signs of resilience in difficult conditions. Hold.

Fuller Smith& Turner

Our view: Avoid

Share price: 427.5p (+2.5p)

The rate of pub closures is increasing. The sector has been hit by the smoking ban, spending crunch and discounting by supermarkets. Popping down to the local has become an expensive habit. I recently asked Fuller Smith & Turner, famous for London Pride, why a small glass of house wine and pint of lager in my Chiswick local should now cost a staggering £7.10p. The efficient customer service department told me costs were rising, blah blah blah and most customers were happy to pay more to drink in a Fuller's pub. Really? Perhaps someone should ask them.

Anyway Fuller's seems to be surviving the downturn for now. Sales grew 2.7 per cent in its managed pubs in the 16 weeks to July 19. The brewing side also grew against the backdrop of a falling market but no figure was put on the improvement. The shares are off 20 per cent in the past three months and yesterday's update does little to dispel the gloom especially as Fuller's admits consumers are feeling the squeeze. There are fears the local is an endangered species. Even a well-run brewer like Fuller's has nowhere to hide in current conditions. Avoid.