The Investment Column: Ultraframe set for listing

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The Independent Online
At first glance Ultraframe, the biggest conservatory roof maker in the UK which is coming to the market next week, looks like a decent investment. It has a solid financial track record and a strong position in a niche market. Demand for its products should show a healthy rate of growth over the next few years thanks to the continuing rise in the housing market, with new homeowners more tempted to splash out on an extension.

It is also moving into the higher margin commercial market rather than relying solely on domestic purchases. New products used in anything from fancy new buildings to swimming pools are also doing well.

But while its short-term future looks assured, Ultraframe's profit growth could well begin to slow within a few years. It has already cornered around 35 per cent of the UK conservatory market which limits its ability to expand over here. And demand for conservatories will fall if the fickle housing market takes a tumble.

Ultraframe's fortunes will then hinge on its overseas expansion plans. It hopes to take a large chunk of the US and Far Eastern market but, as always, competition is fierce and success is far from guaranteed.

John Lancaster, the group's founder, and his family have also sold a huge chunk of shares, which should send out some warning bells to investors.

Ultraframe will be valued as pounds 136.4m, putting the shares on a historical p/e of 15.8 for the year to September, a small discount to the building materials sector. Ultraframe's placing has certainly whipped up plenty of interest from institutions, which should ensure the shares get off to a decent start. But investors should be wary of holding the shares in the long-term until the group shows evidence it can crack overseas markets.