Williams spin-off to float to the top

CITY TALK

RECENT American research suggests MBOs and corporate spin-offs are a good bet for investors. The change from the protective parental embrace often emboldens management, while the fact their own money is tied up in the business means they are unlikely to take too many unwise risks.

For these reasons, keep an eye open for the flotation of Cortworth, a small engineering group, set for mid-November. It has three arms: specialist engineering, plastics and controls. The group has stormed ahead since management bought itself out of Williams Holdings in late 1993. Profits last year hit pounds 6.4m on sales of pounds 58.3m. The directors are forecasting a 1995 operating profit of pounds 8.5m. The issue should raise over pounds 30m.

UNDER the title "McCheap", broker BZW rates property company Scottish Metropolitan a strong buy. Analyst David Nighy says the company has all but finished a retrenchment to its home turf in Scotland and the north of England, where its local ties should give it a competitive edge.

Healthy profits should see the dividend grow at 10 per cent a year over the next two years. At 73p, the shares trade at a 27 per cent discount to the net asset value, against a sector average of 18 per cent.

WHEN City Talk previewed Smiths Industries' (574p) results last week, analysts expected good figures in a range of pounds 135m to pounds 139m. In the event, the figures came in at the top end, with pre-tax profits of pounds 138m.

What sets the medical equipment-to-aerospace group apart from most of its peers is a remarkable ability to generate free cash. For example, it began the year with net debt of pounds 21m but ended it with net cash of almost pounds 1m, having spent pounds 52m on acquisitions. Assuming profits of pounds 160m next year, a prospective p/e of 16 times is not cheap. However, the shares remain a buy.

A BOUT of profit taking hit Danka Business Systems this week as it announced the pounds 109m acquisition - its biggest ever - of Infotec, a Netherlands photocopier and fax machine distributor.

The shares fell 67p to 489p, before recovering to 514p on Friday. That cast a shadow over a 28 per cent rise in interim pre-tax profits to pounds 27m. Some analysts felt the share price drop was overdone, but even so, the shares are still trading on a steep historical multiple of around 30 times earnings.

The assumption that profits will continue to grow at the heady rate of the past puts a lot on trust. Take profits.

VIDEO and computer games retailer Rhino has charged back to the market, seeking pounds 9m from its shareholders through a five-for-six rights issue at 8p for each new share. At the current share price of 10.5p, that may seem a reasonable discount, but investors who piled in two years ago near the high of 67p are hardly on to a winner. Do not take up the rights.

CONVERTIBLE bonds - loan stock issued by a company that can be swapped into its shares some time in the future - is a specialist, not to say a somewhat esoteric, market. But they offer several attractions.

For a start, there is the promise of a fixed yield. Broker Panmure Gordon's research team likes two convertibles at present: British Airways 9.75 per cent, redeemable in 2005, which yields 4.7 per cent against the current 3.5 per cent on the ordinary shares; and Reckitt & Colman's 9.5 per cent bond, also due for redemption in 2005. The yield in this case is 6.25 per cent, against 3.7per cent on the ordinaries.

Panmure points out that neither bond would be affected by any change in advanced corporation tax rates, a fear often rumoured in the run-up to the Budget.

TIME to take a second look at insurance broker Fenchurch, out in the cold along with its peers in the insurance sector. Since floating in November 1993, it has underperformed the market by 35 per cent.

But unlike some competitors, Fenchurch actually has a fine track record. Profits and dividends have continued to climb at a time when trading has been tough. Full-year results to the end of September, due next month, should see a further improvement on 1994's level of pounds 7.79m.

In addition, Fenchurch is not over-reliant on any one source of business, including Lloyd's of London. Nor does it have much exposure to the US retail market, while its balance sheet is free of long-term debt. At 137p, the shares trade at a fairly undemanding prospective p/e of eight times earnings for 1996. Buy.

DWR CYMRU - or Welsh Water (754p) as it is known in the City - seems to have missed out on the bid fever engulfing the sector. But its gearing remains low for the industry, suggesting that there is plenty of room for special payouts to investors.

The scope for dividend growth is also good. Buy.

PROMOTED VIDEO
Voices
Ukip leader Nigel Farage arrives at the Rochester by-election count
voicesIs it any wonder that Thornberry, Miliband, and Cameron have no idea about ordinary everyday life?
Life and Style
tech
News
i100BBC political editor Nick Robinson had a lot of explaining to do
Life and Style
Nappies could have advice on them to encourage mothers and fathers to talk to their babies more often
newsTalking to babies can improve their language and vocabulary skills
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

Immigration: Obama's final frontier

The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

Bill Cosby rape allegations explained

Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

You know that headache you’ve got?

Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

Scoot commute

Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
Paul Robeson: The story of how an American icon was driven to death to be told in film

The Paul Robeson story

How an American icon was driven to death to be told in film
10 best satellite navigation systems

Never get lost again: 10 best satellite navigation systems

Keep your vehicle going in the right direction with a clever device
Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

Paul Scholes column

England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

Michael Dawson: I’ll thank Spurs after we win

Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

Frank Warren column

Dr Wu has big plans for the professionals yet he should stick to the amateur game
Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

Terror unites Jerusalem after synagogue attack

Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

'How do you carry on? You have to...'

The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
Isis extends its deadly reach with suicide bombing in Kurdish capital

Isis extends its deadly reach with suicide bombing in Kurdish capital

Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
Underwater photography competition winners 2014 - in pictures

'Mysterious and inviting' shot of diver wins photography competition

Stunning image of cenote in Mexico takes top prize
Sir John Major: Negative West End portrayals of politicians put people off voting

Sir John Major hits out at theatres

Negative West End portrayals of politicians put people off voting
Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

Kicking Barbie's butt

How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines