Shares digital

With results thin on the ground this time of year, the Shares team is turning its attention to the deluge of trading updates that are flooding the market

Lamprell (LAM:AIM) 434.75p HIT

The Dubai-based oilfield services firm says that its final results, due in March, will be at the top end of market expectations, putting net profits at around $82.7 million. The company builds new and services old oil rigs for multinational drilling companies. Demand remains strong, supported by increased oil and gas exploration in the Middle East, and the order book has risen to $580m, 90% of which is new build related. Broker Arden Partners, which reiterates its ‘buy’ rating on the stock, says: ‘2009 will see a steep change in capacity for the business.’

Shares says: The company is well placed to take advantage of rig shortages in the near-term and beyond. BUY

by: Tom Sieber

Hays (HAS) 107.25p HIT

Shares in most of the larger staffing agencies have underperformed the market by around 20% in the past three months on fears that an economic slowdown in the UK would reduce hiring. Michael Page (MPI) eased investor concerns this month with a robust trading statement (see Shares 10 Jan ‘08, page 12). Hays continues this positive stance, aided by strong overseas gains.

It didn’t provide earnings figures for its second quarter report, but said net fee income has increased by 27%. Stockbroker Landsbanki’s forecast of £240 million pre-tax profit for the year is roughly in the middle of analyst consensus. It said that Hays would have to produce a standstill in second half revenues for the full-year not to beat forecasts.

Non-UK business has jumped from 35% to 40% of group revenue in the past year. This strong exposure to multiple economies should stand Hays well if UK conditions continue to decline. Indeed, net fee income growth in the UK moderated from 14% in the first quarter to 13% in Q2.

Shares says: Hays’ diverse geographical exposure offers some protection in tough times. BUY

by: Dan Coatsworth

Bovis Homes (BVS) 496.5p HIT

Lower consumer confidence, fewer mortgage approvals and slower price inflation meant that the house builder had to focus on margins. While volume was 6% down from 2006, the underlying average sale price rose by 3%. This means Bovis should meet market expectations at the finals in March, but the bad news is that the forward order book is 19% down, which puts the company in a more precarious position than its peers going into 2008, according to analysts at Numis.

Shares says: A PE lower than the dividend yield sounds like a buy, but the weak book needs fixing. HOLD

by: Carlo Svaluto

Prostrakan (PSK) 69p HIT

Full-year revenues are tipped to increase 18% to around £45 million at the pharmaceutical company although it will remain in the red, which is expected. Several products are lined up for either regulatory reviews or launches in 2008 and 2009. It is set to have £24 million in cash, and a further debt facility of up to £30 million which Landbanski analyst Shawn Manning predicts will take the company through to profitability by 2010. He has a 123p target price for the shares.

Shares says: Solid results should help shares to continue their recent recovery. BUY

by: Susanna Twidale

Wellstream Holdings (WSM) £12.36 HIT

The designer and manufacturer of flexible pipeline for offshore oil fields continued the great run it has been on since floating in April last year. It says that full year numbers, announced next month, will be ‘significantly ahead’ of analyst expectations.

The company, which has plants in Newcastle and Brazil, says that the total order intake for the year stood at around £365 million and that, as of December 31, the total revenue backlog was about £330 million against a figure of £226.8 million last year. The company adds that all its manufacturing facilities are performing well and the update boosted the share price by more than 8%.

Wellstream is currently engaged in a £35 million expansion programme which should boost capacity by nearly 40% from the first quarter of next year. Merrill Lynch recently initiated coverage on the stock with a ‘buy’ rating and a £14 price target, citing its exposure to the booming Brazilian deep water market.

Shares says: Despite its rapid rise this still trades at a discount to its UK peers and there remains upside for investors. BUY

by: Tom Sieber

Chromogenex (CGX:AIM) 5.3p HIT

Although shares in the Aim tiddler have slumped over the past six months, they were boosted 20% to 5.3p after the group reported ‘a significant improvement in sales and profitability following a slow first half.’ As a result, the group says annual earnings will be in line with expectations. UK sales have improved and are resulting in enhanced gross margins for the company. Key products for Chromogenex are its Nlite laser for wrinkle reduction, its Nicolite laser used to help smokers quit, and its Chromolite S hair removal systems. The group also announced the appointment of Allan Charles Branch as the new CEO.

Shares says: Has several promising products which should prove fruitful to the patient investor. HOLD

by: Rachel Robson

William Hill (WMH) 407.25p MISS

The bookmaker will marginally miss full-year earnings forecasts after weak online business. Full-year earnings before interest, tax and one-off items will be around £285 million. This is roughly 2% below analyst targets.

Retail – which accounts for 82% of revenue – performed well, as did telephone bets, which contribute a further 5% to group takings.

Technical problems with the online sportsbook service means the IT platform is getting thrown out and a new system commissioned. Expect a £22 million impairment charge on the 2007 figures and £4 million restructuring in the current financial year.

There is still no news on who will replace chief executive David Harding, who left in September. Stockbroker Landsbanki said this is ‘fast becoming an embarrassing issue.’

William Hill is in talks with Turf TV, to ensure punters don’t miss out on watching races in its stores. This may encourage analysts to revise their earnings forecasts as it should bring more punters in – or at least help hold on to existing customers.

Shares says: Missing forecasts has already been factored into its share price. Expect 2008 to be a better year. BUY

by: Dan Coatsworth

Secure Designs KK (SDKK:AIM) 5p MISS

Shares in the biometric identification expert slumped 59% to a new all-time low of just 5p, way below its 47p summer 2006 flotation price, after management admitted a poor second half means the Japanese firm will miss analyst forecasts for the year.

This was Secure Design’s third profit alert in the past 12 months and was easily the worst of the trio. Not only did the company reveal a bad debt write-down, which accounted for almost 50% of the first half’s turnover, but the £2 million cap is now also having to assess its funding options.

Shares says: AVOID

by: Russ Mould

Augean (AUG:AIM) 96.75p MISS

The waste management firm is confident on hitting market forecasts, but analysts could be losing faith in the business.

Stockbroker Numis downgraded its EPS forecast 3% for 2007 and 12% for 2008, after hazardous landfill volumes only came in at 235,000 against 245,000 expected. Shares in the group have been weak for over six months, not helped by Augean having its third CEO in 18 months.

Irish investor One51, which owns 27% of stock, may start to put pressure on the business to perform as its holding has fallen considerably in value.

Shares says: Flat volumes in hazardous landfill is hugely disappointing. Give the company one last chance to improve. HOLD

by: Dan Coatsworth

Parity (PTY) 51p MISS

Shares in the IT recruitment, consulting and training expert slumped 8% to a new twelve month low of 51p, even though this week’s trading statement revealed management expects to meet analyst forecasts for the financial year which ended in December.

A restructuring programme launched in 2005 has dragged the firm into the black after years of heavy losses. Relatively low exposure to the credit-crunched financial services industry is also a plus and management is targeting further earnings and operational improvement in 2008.

However, investors took fright at chief executive Alwyn Welch’s comment that some clients have become more cautious, even though fresh cost control measures have already been put in place in response.

Nor did Welch address the issue of his firm’s net debt position, which rose unexpectedly from £5.7 million £9.3 million in the first six months of last year. Management put this down in September to working capital timing issues and confidence would be boosted if the full-year accounts back up this assertion.

Shares says: A prospective PE of barely 7x for 2008 is alluring but the the market is clearly expecting forecast downgrades to emerge. HOLD

by: Russ Mould