Build on Kingfisher while the DIY boom continues

Taylor & Francis is a cell; CSG still unable to shake of its past

Kingfisher, the owner of B&Q, has been busier than a builder taking a busman's break on a bank holiday. During the past 18 months it has bought up the remainder of its French DIY business Castorama; spun off Comet and the rest of its electricals retailing business; got rid of operations in Canada, Belgium, France and Poland; and closed the loss-making Castorama stores in Germany. It has laid its foundations as a focused DIY retailer and, with just Brazil left to exit, it is all systems go for life selling paintbrushes.

The shares, though, have trodden water since the electricals demerger in July, and yesterday they lost further ground, despite better-than-expected interim figures.

Gerry Murphy, the new chief executive, was hammering home the message that Kingfisher can make dramatic improvements now it is one of the world's top three DIY retailers. He says a major initiative to slash Kingfisher's suppliers from 8,000 to 5,000 will help it screw better deals from them. The group's increased focus on own-label tools will mean better margins and lower prices for shoppers. And Mr Murphy aims to improve the group's returns on invested capital, which are (inexcusably) lower than its cost of capital.

Meanwhile, there is no sign of the public's love affair with DIY abating. Home improvement sales in the six months to 2 August were up 5.5 per cent. Although the hot weather messed up shopping patterns at B&Q, like-for-like sales growth was still 4.9 per cent. After exceptionals, pre-tax profits on continuing operations rose to £309m from £250m a year earlier. As ever there is room for improvement at Castorama, where yet another new format is being tested. Meanwhile, the roll out of Brico Depots and mini B&Q warehouses will provide sales growth on both sides of the Channel. Earnings growth of 15 per cent a year seems assured for some time.

The shares, down 8.5p at 272.5p, are pricing in a lot of the efficiencies to come but with a 3.5 per cent dividend are still attractive. Buy.

Taylor & Francis is a cell

The Molecular Biology of the Cell may not be Jilly Cooper, but in its own way it has proved a blockbuster for Taylor & Francis, the publisher of academic books and journals.

The market for this type of book is eminently predictable and there is little chance that any of its titles will flop. But there is also little chance that any will hit the best seller lists. Growth in the market is not meteoric - between 5 and 7 per cent a year for academic books, and 8 to 10 per cent for journals.

The company said yesterday its half-year profits were up 24 per cent and turnover was up 12 per cent. This despite the bankruptcy of one of its main agents in the US, which caused a £1.2m charge. It was also optimistic on future prospects, saying it would publish 59 new journals in 2003 and 2,300 new books.

T&F has lost some credibility in the City this year. While it made three successful bolt-on acquisitions, it came away from three major deals empty handed. The last was for Bertelsmann Springer, which went to venture capitalists that have created a new acquisitive company that could now snatch away other bid targets.

T&F also has 65 per cent of its revenues in the US, where the dollar has been weak. It has no exposure to the economic cycle through advertising, unlike most media companies. But what had been a blessing, may turn into a curse, if there is an upturn.

Despite being a robust company that has performed consistently over the years, it pays no dividend to speak of. At 552.5p, the shares trade around 17 times this year's earnings and look too expensive. Avoid.

CSG still unable to shake of its past

If ever there was a company haunted by its past, it would be the Corporate Services Group. The company took over Blue Arrow (whose cock-up of a rights issue resulted in one of the most notorious fraud trials of recent decades) and yesterday found itself putting out its latest results just as two previous directors were convicted of accounting fraud at the company in 1997-8.

None of which should detract from the truly appalling results Corporate Services recorded for the six months to 30 June. A new management led by Julian Treger is trying to sort out the legacy of 50 ill-timed and badly integrated acquisitions in the Nineties, but the recovery plan is behind schedule and the recruitment market is continuing to get worse. The company - which has market leading positions placing lorry drivers, locum doctors and catering staff - saw revenues on its remaining businesses slide 13 per cent to £258.1m. The declines are certainly slowing (in the US, the last few months have even shown year-on-year rises) but the employment market may well lag any economic recovery. The boom-time margins for recruitment companies look to be a thing of the past.

Corporate Services shares fell 17 per cent to 9.62p yesterday on news of another 150 job cuts in the UK, where break-even is still more than a year away. Mr Treger has attracted heavyweight followers among institutional investors, but the task is tough and private punters may want to hang on the sidelines for a bit yet.