The Investment Column: TNS a better bet than overvalued Aegis

Admiral still on course to deliver growth; Hold on to your slice of Premier Foods while it seeks new deals

Edited,Damian Reece
Sunday 21 July 2013 22:31

He delivered a 7.5 per cent increase in like-for-like revenue growth, which totalled £389m for the six months to 30 June.

A third of its business comes from market research under the Synovate brand, which saw 12.2 per cent like-for-like sales growth and helped to deliver total sales of £144.8m.

Its main business of buying media space for advertisers and "communication planning" grew 5.2 per cent like-for-like with total sales of £244.2m.

But within its media business, the internet-related areas, mainly under its Isobar consultancy, grew a healthy 20 per cent like-for-like and now account for 13 per cent of media revenues.

Comparing profits is slightly tricky because of the change to new accounting standards but under the old UK GAAP standard, pre-tax profits were up 10.7 per cent at £40.3m.

So Aegis under Mr Lerwill is doing the right things: fighting hard for its traditional media-buying business, expanding its market research business and developing its internet and mobile phone marketing expertise. It will also probably benefit from a bit more focus under Mr Lerwill than under his predecessor.

But a good operating performance does not necessarily add up to a strong buy signal for its shares. We tipped Taylor Nelson Sofres, its rival, yesterday because its shares offered some value, after a difficult first half, amid signs of a recovery. TNS has a price-earnings ratio of 13.7 for 2006 compared with 17.6 for Aegis.

The big bet on Aegis is a takeover. The French corporate raider Vincent Bollore has built a 6 per cent stake, possibly to broker a deal with the French group Havas or, just as likely, to make sure whoever does bid for Aegis pays top dollar. His presence my even deter a bid.

Anyway, at this stage in the economic cycle, with the advertising market growing, Aegis might prove too expensive for a bidder. Stick with TNS for greater value.

Admiral still on course to deliver growth

Admiral, the car insurer, has barely put a foot wrong since setting sail on the London market almost 12 months ago. In spite of a toughening market, which has seen premiums fall across the industry, the company was boasting a 17 per cent increase in first-half profits yesterday, and promised to hand back yet more cash to shareholders at a time in the cycle when insurers would usually be struggling.

Henry Engelhardt, its chief executive, has conceded that 2006 will be harder still, but the company's focus on specialist areas of the market - such as female drivers through its Diamond brand - continues to give it the pricing flexibility that many of its competitors lack.

Mr Engelhardt remains adamant that the group can keep its combined ratio - a measure of its claims and expenses - well below the 100 per cent level or above which would represent a loss. It is currently 86.5 per cent.

Since we first tipped this stock at flotation, its shares have risen 40 per cent - and while we would be surprised to see such performance repeated over the next year, its benevolent dividend policy and strong market position mean Admiral still represents good value. Buy.

Hold on to your slice of Premier Foods while it seeks new deals

Premier Foods is the group behind some of the choicest British brands languishing at the back of your larder. From Branston Pickle, to Hartleys jam, Bird's custard to Ambrosia rice pudding, Premier ticks most of the boxes on your average shopping list.

But Robert Schofield, the chief executive, knows that is not enough. Food companies are under pressure to extend their brands into all mannerof goodies.

Which is why Premier is launching offshoots of its major, highest-growth brands. This autumn, you will be able to buy Branston relishes and Hartleys smoothies . The company will air four major TV campaigns in the hope it can keep its brands growing at between 5 and 10 per cent a year.

Premier's interim results showed the company needs this growth to hit its annual sales growth target of 1 to 2 per cent. In the six months just gone, group sales fell 4 per cent - largely because of its problematic potato-growing business where turnover fell by one-third.

Premier spent £5.5m yesterday on Gedney, a vegetable-growing outfit that it hopes will boost its battle for new contracts with supermarkets. Once the group has revived its commodity food-growing arm, presum-ably it will sell it.

Pre-tax profits were £18.3m in the six months to 2 July on sales of £409.2m. Its operating profits rose 5.4 per cent on a like-for-like basis.

We have been fans of Premier since it floated at 215p last year. On a 12 times price-earnings ratio, its shares, down 11.5p at 314p, are one for the store cupboard.

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