Investors Chronicle articles from August 2005

Investors Chronicle archives from August 2005

Reality checks.
August 5, 2005... A common mistake made by investors is to think that they know something when, in reality, they don't. Here is a good example: according to research by fund-management group New Star, 97.8 per cent of private investors failed to identify...

The loser's game.
August 5, 2005... Okay, think about the following statement: "Almost all the really big trouble that you are going to experience in the next year is in your portfolio right now." Not my words, but those of Charles D Ellis, a US investment professional and...

Why macro matters.
August 5, 2005... W hat use are macroeconomists? That's one question raised by the collapse of Granville Technology and Planestation. Their experience shows that reasonable macroeconomic conditions are no guarantee that any particular company will even survive,...

Birthday surprise?
August 5, 2005... This week marks the Monetary Policy Committee's (MPC) 100th meeting since Chancellor Gordon Brown handed interest-rate-setting powers to the Bank of England in 1997. So just how will the MPC celebrate its 100th birthday? Well, as long as...

The problem with capital puniShment.
August 5, 2005... Companies sometimes do wrong. They pollute, sell faulty products, evade taxes, bilk shareholders, collude to fix prices and, sometimes, they kill. Justice is usually punishment of capital: take the companies' money and hit them where it hurts....

When money talks.
August 5, 2005... If you want to know where commodity prices are heading, you should watch monetary growth in Asia. Our chart (below) shows that there's a close correlation between commodity prices and China-bloc M1 growth - a GDP-weighted average of monetary...

Gap watching.
August 5, 2005... If you're a typical stock-picker, you probably don't think much about the difference in dividend yields between British Land and Unilever. Maybe you should, because this difference can be a good predictor of relative returns on the two...

When economics works.
August 5, 2005... Since late April, the FTSE small-cap index has underperformed the FTSE 100 by more than five percentage points, seeming to vindicate the macroeconomic approach to investing. Back in April, I wrote that "on consensus forecasts... small-caps will...

Flying low.
August 5, 2005... Last week Planestation announced that EUjet, its low- cost carrier, had run out of cash and collapsed, while this week Ryanair reported a 21 per cent rise in first-quarter net profits. So what does this mixed news from the low-cost airline...

Pilkington: bolt-on acquisitions likely.
August 5, 2005... Pilkington has said that trading during its first half is in line with expectations, and reiterated its progressive dividend policy following its first dividend increase in a decade in March. The company also said that bolt-on acquisitions are...

Gibbs & Dandy buy midlands stronghold.
August 5, 2005... Builders' merchant Gibbs & Dandy is buying Timber Force in a move to strengthen its presence in the South Midlands. The deal involves GBP1.48m in cash, plus a maximum of GBP250,000 for net assets. Turnover at Timber Force in the year to August...

IT staffing market stalls at Spring Group.
August 5, 2005... IT recruitment specialist Spring Group has reported weak trading conditions, and predicted a small operating loss for the six months to 30 June. The company said that the IT staffing market is stalling, and will not recover for the rest of...

Moss Bros recovers despite retail blues.
August 5, 2005... Moss Bros, the smart menswear retailer, announced in a trading update that underlying sales for the 26 weeks to 30 July rose 3 per cent. Like-for-like sales for June were up 5 per cent, but were flat in July. Moss Bros's recovery is still...

Value stocks performance disaster.
August 5, 2005... Value stocks have begun to underperform growth. In the past month, the FTSE 350 high-yield index has underperformed the low-yield index by 2.6 percentage points. That's one of the worst monthly performances since the peak of the technology...

Suggestion of less bullish share returns.
August 5, 2005... Two leading indicators of All-share returns have turned less bullish. The Bank of England recently reported that non-bank financial institutions' cash holdings fell by 1.8 per cent in June, thus cutting the money-price ratio. And the discount...

Dana Petroleum discovers gas.
August 5, 2005... Dana Petroleum has added further gas reserves at its Barbara field in the North Sea. An appraisal well, drilled around a mile from the original discovery, made in 2002, has found around 120bn cubic feet of gas, plus associated condensate. ...

Saint-Gobain submits hostile bid for BPB.
August 5, 2005... French building materials conglomerate Saint-Gobain has launched a hostile 720p cash per share bid for plasterboard specialist, BPB. The offer is an improvement on the initial 675p, but BPB's board believes that it still undervalues the...

Credit-quality woes hit UK banks.
August 5, 2005... This week's spate of half-year results from UK banks has revealed a worrying deterioration in operating conditions. Go back 12 months, and life looked good: solid loan growth, record low-levels of bad debts, and all supported by a robust...

Circle Oil raises GBP10m.
August 5, 2005... Circle Oil, which holds more exploration acreage in Oman than any other company, has completed a GBP10m placing through broker Collins Stewart. The money was raised at a 10 per cent discount to the market price of 34p, but should, for a few...

Cello spends GBP4.75m on RS Consulting.
August 5, 2005... Cello is spending GBP4.75m on RS Consulting - its third acquisition since early July. The marketing services group, which joined the junior market last November, has been expanding its business advisory and consulting services. Following the...

1st Dental shares fall on profit warning.
August 5, 2005... Shares in dental laboratories operator 1st Dental fell 12 per cent this week as the company warned that profits for this year would fall below expectations. Although core business trading is going well, the integration of Benchmark - a rival...

Sportingbet lands ISC Entertainment.
August 5, 2005... Online gambling specialist Sportingbet has acquired US sports betting and gaming marketing group ISC Entertainment for $33m (GBP18.6m) in cash and shares. Sportingbet also said that it expects pre-goodwill profits of over GBP60m for the...

Fighter cutbacks threaten UK defence.
August 5, 2005... Areorganisation of US defence budgets could spell trouble for the UK aerospace and defence sector. There are fears that the Department of Defence's Quadrennial Defence Review (QDR) - which will decide how the US's $500bn budget will be...

Screen FX moves into trains.
August 5, 2005... Screen FX is moving into the transport advertising market via a six-year agreement with Central Trains. Screen's first move away from shopping malls provides a passenger entertainment system that will feature news, weather and sport. ...

Week Ahead...
August 5, 2005... NEWS Tuesday 9 August When a company's return on capital is less than its cost of capital, value is eroded because the returns are too low to offset the risks of the underlying business. Scottish and Newcastle, which will report...

Foreign names new managers.
August 5, 2005... Foreign & Colonial, the GBP2bn global growth giant, has completed its transition from being run solely by F&C to become a partially-outsourced multi-manager fund. Foreign & Colonial's US large-cap portfolio will be outsourced to four...

Pharma giants anticipate Vioxx verdict.
August 5, 2005... The first Vioxx trial, which began in Texas this week, could bring wide-reaching implications for the pharmaceutical sector. US company Merck's painkiller was withdrawn last year after studies showed that patients taking Vioxx for more than...

Game Group expands fast into Europe.
August 5, 2005... Game Group, the UK's biggest video games retailer, has bought French games specialist Addon for E6.2m (GBP4.3m). The deal provides Game with 10 leasehold properties and 10 franchise stores. "We're expanding fast into mainland Europe. France and...

Turbo Genset parts selected for Boeing.
August 5, 2005... Shares in Turbo Genset bounced nearly 30 per cent from an all-time low of 8.4p, after the power-generation specialist was selected by Cobham to supply motors for fuel pumps on Boeing's new 787 airliner, known as the 'Dreamliner'. The long-term...

Share issue funds Incisive acquisition.
August 5, 2005... Business information provider Incisive Media has bought conference firm Search Engine Strategies (SES) for GBP24.3m. To fund the acquisition, it is issuing 8.2m new shares at 150p, with the rest financed through debt. The company said that...

Ryanair cautious despite good results.
August 5, 2005... Low-cost airline Ryanair announced record first-quarter results driven by a 30 per cent jump in passenger numbers. Despite leaving full-year guidance unchanged, Ryanair was cautious on the outlook, drawing attention to the continued drag of...

Family dynasty ends at British Land.
August 5, 2005... British Land signalled a new era in its approach to corporate governance when Nick Ritblat, son of chairman John Ritblat, stepped down from the board. Nick Ritblat, who was seen some years ago as British Land's next chief executive, will remain...

Synergy Healthcare loses NHS bid.
August 5, 2005... Synergy Healthcare has lost its bid for a major NHS decontamination contract. The company, which specialises in decontaminating surgical instruments, failed to secure the Leeds Bradford contract, up for grabs as part of the government's...

Pass it on.
August 5, 2005... If you want to avoid inheritance tax (IHT) being applied to your assets, you should plan now so that your estate can be passed on smoothly. It is worth thinking carefully about the assets that you hold, as some investments are easier to pass on...

Investors cagey despite market rise.
August 5, 2005... Investors are still wary of equities, despite the market's recent rise. The dividend yield on the All-Share index is now 1.5 percentage points above longer-dated index linked yields. That's almost three times the average gap since 1986, and...

Let the games begin...
August 5, 2005... Celebrations for London's successful 2012 Olympic's bid proved short-lived after the tragedy of the tube and bus bombings. But the spectre of terrorist attacks, which still hang over London, will slowly lift, and the unbridled optimism of a...

Investing in the future.
August 5, 2005... W ithout the marketing hype of the banks and insurance companies, the investment trust (IT) industry is nursing a product that it anticipates will come into its own when the pensions simplification regime is enforced in 2006. IT pensions...

Active fund managers underperform.
August 5, 2005... The recent out- performance of small and mid-cap stocks has helped to reduce underperformance by actively managed funds, according to the latest Spot the dog report from independent financial adviser (IFA), Bestinvest. However, fund...

Rebuilding trust.
August 5, 2005... Investors' confidence in the investment trust sector was dented by the implosion of many dangerously constructed split-capital trusts during the post-millennium bear market but boards have responded to demands for change and managers have...

Get ready for April 2006.
August 5, 2005... W hatever type of property gets your investment nose twitching - be it a smart town house, a buy-to-let flat, student digs or a 200-year-old Tuscan farmhouse - the chances are that you would grab the opportunity to buy them at a 40 per cent...

RAB CAPITAL (RAB).
August 5, 2005... RAB Capital turned in another period of impressive growth as it reaped the benefits of last year's increase in funds under management. Management fees rose 41 per cent to GBP7m, while accrued performance fees, which won't be recognised until...

Cat could face UCB in Crohn's market.
August 5, 2005... Cambridge Antibody Technology (CAT) could face stiff competition in the Crohn's disease market. CAT's drug Humira is already approved for rheumatoid arthritis, but US partner Abbott Laboratories expects to file the drug next year for Crohn's...

NCI Vehicle Rescue.
August 5, 2005... Ofex. Vehicle breakdown rescue & repair.

Network Technology.
August 5, 2005... Main market. Hardware & software

Saregama.
August 5, 2005... Ofex. Pre-recorded CDs & music cassettes

Transport Systems.
August 5, 2005... Aim. Traffic management

TXO.
August 5, 2005... Aim. Oil & gas

ROLLS-ROYCE (RR.).
August 5, 2005... As one analyst succinctly puts it, Rolls-Royce's half-year results saw the engine maker well on the way to delivering 2006's forecast profits in 2005. Underlying pre-tax profits rose a staggering 54 per cent to GBP260m, largely driven by the...

ABERDEEN NEW DAWN (ABD).
August 5, 2005... Manager Hugh Young's strong record of outperformance is due to his value-driven, stock-picking approach. Over the past three years, Aberdeen New Dawn's total net asset value (NAV) return has been 97 per cent, compared with the sector average of...

HBOS (HBOS).
August 5, 2005... HBOS' half-year results, announced this week, showed few signs of any potential slowdown. Its retail arm grew profits by a solid 8 per cent to just over GBP1bn, and the corporate business did much better - profits there jumped 29 per cent to...

ALLIANCE & LEICESTER (AL.).
August 5, 2005... Even after stripping out GBP52m of exceptional disposal profits, generated in 2004's first half, Alliance & Leicester's profits still struggled - indeed, the core retail division's operating profit slipped by 1 per cent to GBP211m. Lending...

Projects Distribution.
August 5, 2005... Ofex. Clothing distributor

AMVESCAP (AVZ).
August 5, 2005... UK fund manager Amvescap derives two-thirds of its turnover from its US operations, where there has been a net outflow of funds for the past 49 months. There is now a new chief executive, Martin Flanagan. But this may turn out to be academic...

Sheba Exploration (UK).
August 5, 2005... Ofex. Mineral exploration & mining

BROADCASTLE (BCS).
August 5, 2005... If the recommended offer for Broadcastle from Siemens goes ahead as planned, this could be the last set of results from this provider of hire purchase, contract hire and discounting services. The offer values Broadcastle at GBP42m or 123.5p a...

INCHCAPE (INCH).
August 5, 2005... Finance director Alan Ferguson says that Inchcape's UK retail outlets have been "decongested", and now provide a "pleasurable experience" for customers. And these improvements have had a real impact on the group's core UK business: underlying...

ASTRAZENECA (AZN).
August 5, 2005... On the face of it, AstraZeneca is a picture of good health. Thanks to strong sales in recent months of key drugs such as Nexium and Seloken, the pharma giant has enjoyed a 44 per cent boost in adjusted operating profits for the half-year....

SHIRE PHARMACEUTICALS (SHP).
August 5, 2005... Shire's results for the second quarter were better than expected, with revenues up 32 per cent to $425m, driven by a strong performance from attention-deficit hyperactivity disorder (ADHD) drug, Adderall XR. Despite a Canadian ban,...

ELECTRIC & GEN. (ENG).
August 5, 2005... Electric & General, formerly Hender-son Electric & General, has undergone a period of reconstruction and looks a promising bet. The board sacked former manager Henderson last November, and brought in investment boutique Taube Hodson Stonex,...

GLAXOSMITHKLINE (GSK).
August 5, 2005... Most investors weighing-up GlaxoSmithKline (GSK) may want to concern themselves with sales of its asthma treatment, Advair, or production disruption at the group's factory in Puerto Rico. Strangely, however, they might do better to concentrate...

COOKSON (CKSN).
August 5, 2005... Cookson continues to restructure its business through asset sales and cost-cutting. The group is targeting disposals of GBP100m by the end of 2006, though only GBP13.4m has been raised so far. Unfortunately, it's doing it when two of its...

ALLIANCE UNICHEM (AUN).
August 5, 2005... Profits were held back by slower- than-expected growth in the wholesale division. But the retail side performed well, despite an ongoing refurbishment programme for its 1,251-strong chain of pharmacies based in the UK, Norway, Spain and...

CSR (CSR).
August 5, 2005... Bluetooth chip manufacturer CSR bounced back from a weak first quarter, and a fire at a subcontracted manufacturing facility, to deliver forecast-busting half-year results. It had expected fire-related production delays to hold sales back to...

ARC INTERNATIONAL (ARK).
August 5, 2005... Chip design specialist ARC inter-national now has over 100 customers after signing 17 new processor contracts in the first half. Many of these new license agreements are with companies in fast-growing markets, ranging from smart-card technology...

WOLFSON MICROELECTRONICS (WLF).
August 5, 2005... Wolfson Microelectronics had a GOOD first half thanks to the seemingly relentless iPod boom. Apple, whose ubiquitous music device uses a Wolfson audio chip, accounts for 10 per cent of the Scottish semiconductor group's sales. Yet although...

FILTRONIC (FTC).
August 5, 2005... Wireless electronics group Filtronic has had it tough recently, calling off the flotation of its struggling handset division, issuing profit warnings and breaching covenants on its debt. But there is a ray of light, with the business...

AUTONOMY CORPORATION (AU.).
August 5, 2005... No-one has ever disputed the clever-ness of Autonomy's technology - whether blue-chip companies were prepared to invest heavily in the software has always been the key doubt. But, looking at these results, that question has now been answered....

XP POWER (XPP).
August 5, 2005... Delayed orders from Californian semiconductor foundries and a major industrial purchaser dented first-half turnover at power supply manufacturer, XP Power. Chief executive Duncan Penny said that the combined top-line impact was $2.5m, although...

NATIONAL EXPRESS (NEX).
August 5, 2005... National Express says it's still too early to assess the impact of recent terrorist activity on demand for its public transport services. So although results were in line with expectations, the City was left feeling jittery. The group's UK...

ZETEX (ZTX).
August 5, 2005... Analogue semiconductor specialist Zetex has already warned that sales and profits this year will be weighted towards the second half. But chairman Liz Airey stressed that new products, further overhead reduction, and the benefits of recent...

MORGAN CRUCIBLE (MGCR).
August 5, 2005... Turnaround specialist Warren Knowlton was brought into Morgan Crucible three years ago to pick up the pieces of the engineering business. And, halfway through the planned GBP70m restructuring - which is expected to generate annual cost-savings...

ROYALBLUE (RYB).
August 5, 2005... After signing a handful of deals, Royalblue is beginning to look almost as blue-blooded as its name suggests. During the first half, the equity-trading software provider signed four deals for its Enterprise Fidessa product, including one with...

BRITISH ENERGY (BGY).
August 5, 2005... British Energy collapsed under the weight of its debts last October, and its shares were delisted at 13.5p. Following a debt-for-equity swap, shares in the restructured British Energy Group relisted at 285p in January. The results reflect...

ASTON VILLA (ASV).
August 5, 2005... Aston Villa shareholders are awaiting news on a proposed bid for the club from former Manchester City defender, Ray Ranson. He is reported to have the backing of the club's largest shareholder, octogenarian serial investor Jack Petchey, but has...

BRITISH AMERICAN TOBACCO (BATS).
August 5, 2005... Investors' ongoing addiction to tobacco shares has become puzzling. The bull market in equities is more than two years old now, but there's still plenty of demand for cigarette makers, which are generally considered a defensive refuge during...

HAYNES (HYNS).
August 5, 2005... Haynes publishes automotive and motorcycle repair manuals, and other DIY, transport and history books. The company has been battling higher paper prices and a weak dollar but, helped by cost-savings, it managed to post a small increase in...

REED ELSEVIER (REL).
August 5, 2005... Reed Elsevier benefited from rapid growth in online sales during the first half. Its legal division was particularly strong, with organic growth of 6 per cent helped by investment in new publishing and online sales. The business-to-business...

TRINITY MIRROR (TNI).
August 5, 2005... Trinity Mirror is battling an advertising downturn, but the company is not resting on its laurels. Trinity found incremental cost-savings of GBP4.1m in the first half, against a 2005 target of GBP7m, and is on track to deliver at least...

NAPIER BROWN FOODS (NBF).
August 5, 2005... Napier Brown Foods' results were put into the shade by the announcement of a bid for the company from the Real Good Food Company (RGFC). Under this arrangement, Napier Brown shareholders will receive 1.62 RGFC shares for each Napier Brown...

HOMESTYLE (HME).
August 5, 2005... It's all change at the beds and furniture retailer, with a new chief executive, a new interim chairman and three new non-executive directors. Such a wholesale shake-up was perhaps to be expected, following the deal with Steinhoff. This South...

FLYING BRANDS (FBDU).
August 5, 2005... The Jersey-based mail-order retailer had a tough first quarter, with poor weather and the consumer downturn hitting the Gardening Direct business particularly hard: sales here fell 15 per cent to GBP9.3m. Chief executive Mark Dugdale believes...

RENISHAW (RSW).
August 5, 2005... Renishaw's typically brief results statement gave little away. But with an operating margin of 19 per cent - enough to turn rivals green with envy - it's understandable that the company wants to keep its cards close to its chest. A strong...

UNITED BUSINESS MEDIA (UBM).
August 5, 2005... United Business Media (UBM), under new chief executive David Levin, has been working hard to focus on business media. It has sold its stake in Channel Five, and is offloading its automotive titles. That meant an impressive 89p-a-share special...

ELEMENTIS (ELM).
August 5, 2005... Elementis makes things the consumer never thinks about, such as pigments for ICI's paint and additives for L'Oreal's nail varnishes. It is the world's largest supplier of chromium, a material which, until recently, was oversupplied, leading to...