Carphone winning over its critics

NHP nursing itself to health; Victrex's core plastic business is worth a peek

Carphone Warehouse is a company that likes to ring the changes. Britain's biggest mobile phone retailer is trying to shift towards becoming more of a telecoms services provider where an increasing proportion of its revenues come from ongoing support services rather than a one-off transaction in one of its 1,041 shops across Europe.

Carphone Warehouse is a company that likes to ring the changes. Britain's biggest mobile phone retailer is trying to shift towards becoming more of a telecoms services provider where an increasing proportion of its revenues come from ongoing support services rather than a one-off transaction in one of its 1,041 shops across Europe.

It is this strategy that lies behind yesterday's acquisition of the German business of Hutchison Telecom for a net cost of £32.4m. The deal doubles Carphone's market share in Germany, increases the proportion of higher value subscription customers and adds other services such as billing.

It also cures a headache for Carphone as its German operation lost £6m last year. It should make up to £4m profit this time. But the wider impact is that it increases recurring revenues to more than 50 per cent of the group total for the first time.

The other key driver behind yesterday's full-year results was the Opal fixed-line telecoms business acquired last year. It made a profit contribution of £8m, helped by a significant increase in business customers. The next battleground is the consumer via the talktalk service, which has sparked a war of words with BT. So far Carphone's service has signed up 62,000 new customers, well on the way to chief executive Charles Dunstone's 12-month target of 300,000.

All of this overshadowed the original retail business, though the plan is to make more use of this network by selling customers services such as insurance and fixed-line phone deals.

Even so, retail profits rose by 4.8 per cent on a like-for-like basis, with the number of new subscriber connections growing by 8.1 per cent to 1.91 million.

The maiden dividend is welcome and Carphone looks like a business that is starting to win over its critics. Profits are forecast to rise to about £70m this year, according to UBS. But the shares have had a strong run recently and much depends on the success of talktalk and whether it will spark a further price war with BT. At 88p, up 5p yesterday, the stock looks fairly valued.

NHP nursing itself to health

NHP is an owner and operator of nursing homes but the greatest amount of nursing it has done in the past few years has been of itself. NHP has gradually been restored to health after a near-death experience in 1999-2000 when the group's business model hit problems.

It had previously been an owner of care homes that it then leased to operators, securitised the proceeds and then used the funds to buy more sites.

When some of the operators hit financial difficulties NHP moved to operate some of the sitesthemselves. Of its 370 nursing homes it now runs 158 itself within its Hightailed Homes Division.

The unit lost £2.7m in the six months to March and is expected to remain in the red for the full year as NHP increased spending on refurbishment. This will total £7m in the current year and the homes will need another year of above-inflation fee increases to get back into the black.

Even so NHP seems to be doing the right things. First-half profits were £10m against the previous year's £7m. The company is trying to increase its proportion of privately funded patients, which currently accounts for only 15 to 20 per cent of the total. These patients attract higher fees. NHP has also returned to the dividend list and managed to record some figures that don't feature a bad debt provision for the first time in years.

The shares have been recovering nicely, although they shed 2.5p to close at 115p yesterday. This is in line with net asset value of 109.2p

The worry is that with local authority budgets under continued pressure, the fees from the publicly funded patients will remain constrained. However, the tenant base is stronger and when the refurbishment programme is completed, profits should start to improve. A decent hold.

Victrex's core plastic business is worth a peek

During the internet boom, the chemicals company Victrex had investors foaming at the mouth with excitement after it set up a fuel cell technology joint venture.

That hype overshadowed its core business which was the manufacture of Peek, a high-performance, hard-wearing polymer or plastic which is performing well.

Victrex sells Peek to a number of industries such as transport, where it is used in transmission systems, and food processing, where it is used in coffee machines.

In the six months to 31 March, first-half sales volume jumped 33 per cent to 743 tonnes, which was also 15 per cent ahead of the 648 tonnes sold in the previous six-month period.

The company's financials also beat City forecasts with a 36 per cent rise in pre-tax profits to £12m. Turnover was £36.1m in the half year, up from £27.2m a year before.

As it turns out, the fuel cell business is more a longer-term prospect. In the near term, Victrex has high hopes for selling Peek into the medical market.

The shares, which rallied nearly 6 per cent yesterday to close at 317.5p, trade on a multiple of nearly 17 times based on forecast earnings of about 19p a share. Not cheap but worth holding.