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The Investment Column: Scope for growth at Gartland

Tony Gartland, the chairman, and his management team which built up FKI, the engineer, have created another profitable niche at Gartland Whalley & Barker by taking big stakes in small companies and building them up for flotation or sale. The company reported another 63 per cent increase in pre-tax profit to pounds 20.7m in the year to the end of October.

However, the figures failed to please the market. Almost half the profits last year came from the disposal of Quadramatic, which makes coin counting equipment, and the flotation of Aquarius, the bathrooms and furniture group, both of which took place in the first half of the year. Profits in the second six months were disappointing, falling 12 per cent to pounds 5m, causing the shares to fall 3.5p to 119p yesterday.

That reaction seems harsh. There is still scope for strong growth, in the UK and especially the US. This year Mr Gartland is predicting 15 acquisitions, two flotations including the recruitment business, Quantica, and the probable sale of Independent Parts Group, the quoted motor parts distributor, now a pounds 33m business in which GWB has a 27 per cent stake. The new smaller company division, Crossley House Ventures, also announced its first acquisition yesterday, paying pounds 3.6m in cash and shares for Vatre Terracotta.

There are risks. Profits are lumpy and the group's success hinges on its deal-making ability. A stock market downturn could create bargains but make fat profits from disposals harder to generate. Analysts forecast pre-tax profits of pounds 22.1m, putting the shares on a prospective p/e of just 6. With management owning most of the company stock it can be difficult to come buy but, if you can get hold of them, the shares are worth a punt.