Aggregate Industries weathers Brown's levy

Medisys worth the pain; Outlook for Acal is still not bright

Every spring, Aggregate Industries, a supplier of sand and gravel to the building trade, squares up to the twin assaults of the British weather and the Chancellor of the Exchequer. This year, as it does more often than not, it has met the challenges well.

Volumes and prices in the UK have held up well through a combination of benign weather and good demand from the construction industry. Sales of all aggregate products are ahead of the corresponding period of 2001.

Even the aggregates levy, a new UK tax introduced in April, does not seem to have troubled the company. It was thought that builders would stock up ahead of the tax, which was being passed onto the consumer, and then AI would see a lull in demand. In the event, the impact has not been especially pronounced.

In the US half of the group, where the severe winters in the US make it even more of a seasonal market, there were no worries apparent in yesterday's trading update. AI was optimistic for the crucial summer months.

Major infrastructure projects are an important feature of the group's US business and those scheduled to begin this year have commenced as planned. There are risks to levels of state funding in some of the regions, but so far trading activity in the US has met or beat expectations. Housing starts have remained unexpectedly buoyant, making up for the commercial sector, where demand has weakened.

During the first half, AI pulled off a number of bolt-on acquisitions, as usual. But there is no sign of the bigger deal that Peter Tom, the chief executive now in his 60s, is rumoured to want to pull off before he goes. Certainly in the UK its choices are few and far between. The obvious target, RMC, which has been in trouble for years, is twice AI's size and it would be a difficult acquisition to pull off.

AI shares have been performing well, closing unchanged at 95.5p yesterday. Teather & Greenwood is looking for earnings of 6.9p a share this year, putting the stock on a multiple just shy of 14. Hold.

Medisys worth the pain

Ouch. Medisys, the healthcare products group designing a syringe doctors and nurses can't prick themselves with, unveiled a painful £1.5m one-off charge with its interim results yesterday. The company spent all that money on due diligence at a US company only to find it could not agree a final price and to abort the £100m at the last moment.

The charge has put a dent in Medisys's cash pile, down to £10.8m at the end of March, but it still looks to have the money to get it through to profitability next year.

After all the waiting (and there has been more than anyone bargained for), the company is set to launch its Futura syringe next month. The device, whose needle retracts out of harm's way thanks to a nifty elastic band, is being sold in the US by Smiths Group, whose salesforce is already selling an earlier generation of safety syringe. The omens are good for a successful launch, since demand from litigation-wary US hospitals is predicted to outstrip manufacturing supply. Futura is also set to be the cheapest on the market, although there was some disappointment yesterday that Medisys and Smiths are keeping the final details under their hat.

So it is crunch time for the business, and not just for the Futura product. Medisys's other main division, Hypoguard, a maker of diabetes testing kits, also has a raft of new products being launched into the home testing market later this year. Hypoguard has established, through acquisition, a strong US salesforce. If it is successful in pushing the new products, the Medisys share price – down 5p to 41.25p yesterday – will look wholly inadequate to reflect the returns. The stock is worth a punt.

Outlook for Acal is still not bright

It is pleasing to see a dividend rise by a company in the electronics sector, despite the trauma of the industrial recession. Acal upped its final payout by 11 per cent yesterday, an expression of confidence in the medium-term trading outlook and a symbol of the continued strength of its balance sheet.

The company supplies components to electronics equipment manufacturers and – importantly – designers. Because it is a niche player, it has weathered the downturn better than some of its larger, high-volume sectormates. That said, pre-tax profits still collapsed in the year to 31 March, by 30 per cent to £14.0m. Turnover was down 9 per cent to £297m.

The outlook for this year is still not bright. Sales to the IT industry are growing modestly, but the best that can be said of the electronic and industrial components business is that it has stabilised. The one bright area is computer spares. As businesses cut back its IT budgets, the need to repair existing equipment has grown, hence Acal's 24 per cent sales growth in this area.

The shares, down 3.5p to 589p, trade on 13 times ABN Amro's forecast of earnings for the current year. That is not cheap for this stage in the business cycle, but the stock is worth holding.

Belhaven still an attractive brew

Regional brewers have been about as fashionable as tank tops in the past year or so, but the performance of Belhaven Brewery has shown that it can pay to stand out from the crowd. Shares in the Scottish brewer have soared on the back of small pub acquisitions and the continued popularity of its flagship beer, Belhaven Best. They closed up another 25.5p at 330p yesterday as full-year profits came in up 23 per cent at £9.2m, a record since the group floated at 180p a share in 1996.

Belhaven has 151 pubs, having added another 34 in the year, and it hopes to double the estate within four years. It is dabbling in branded chains aimed at younger drinkers, such as Drouthy Neebors (thirsty neighbours to those south of the border), Pivo Caffes (Czech beers) and The Yard. On the brewing side Belhaven Best increased sales by 14.2 per cent, helped by a new "Extra Cold" version. And there is a new £70m, five-year supply deal announced yesterday with Interbrew, which will see the Belgian giant supply its Tennents and Stella Artois lager brands.

On current year profit forecasts of £10.4m the shares trade on a forward price-earnings ratio of 10. Still worth supping.