It looks as though it will struggle to reach the £1.7m produced in its last full year. I am surprised by the upbeat nature of its interim statement. Clearly Lennox is an uncomfortable setback for the portfolio. Should the shares fall further – say to 20p – they will be sold without further ado.The group managed a profit of only £93,000 at the half-year stage. It is difficult to see things getting much better.
Peter Voller, the ousted chief executive, still sits on 21.54 per cent of the capital and has probably been deterred from selling his stake by the slump in the share price Until cleared the overhang will remain a drag on the shares.
Not surprisingly the shares are pale shadows of their former selves. They are now 33.5p (after crashing to 22p) against 64.5p when recruited. Since I last discussed its performance two hitherto profitable constituents have fallen into the red; one of them collapsing quite alarmingly
Lennox is the source of my dismay. The food and drink distributor operating in Spain has had an appalling time, with an unseemly boardroom bust-up followed by a pathetic set of interim figures. The above are recommendations from the daily Investment Column s.foley independent.co.uk. The No Pain, No Gain portfolio has, sadly, failed to reap any benefit from the stock market’s recent bull run. But other concerns have not gone away – important financial ratios such as income margin are still falling and profit growth lags asset growth.
We have advocated over the past year that long-standing investors lock in some profit as the risks mount, but trading at about 11.7 times 2005 earnings, it is worth hanging on to some. While other banks have suffered rising bad debts, Northern Rock reassured investors that arrears remain low. The more business it wins, it says, the more profit it can share with customers in the form of better deals: a virtuous circle. Although this week’s trading update contained no nasties, it disappointed some who had looked for the bank to raise its guidance to investors.
It is stealing a bigger slice of the mortgage market as a result. The bank’s proportion of net mortgage lending is at a record 14.2 per cent. Despite stagnating property prices and a slump in the home loans market, it still managed to increase its mortgage lending by 23 per cent over the first nine months of 2005. So says Bob Bennett, the finance director of Northern Rock, who believes the former building society has pulled off a remarkable feat over the past year. Inspicio sees room for major cost cuts and says recent laboratory investments will also soon start to pay Buy. Rock steady growth means investors should hold tight No one else is doing this – at this speed.
INSPICIO Inspicio, the cash shell, made its first purchase this week buying Inspectorate, a company which checks the concentration of hydrocarbons or contaminants in oil, for £52m. The business is not immune to a retail slowdown, but its resilience and niche position mean the shares should continue to motor Hold. The group’s growth strategy has been focused on opening new stores and making more efficient use of its large sites. It now has 402 retail outlets and reckons there is ample room for another 150 in the UK. But like-for-like increases of 2.6 per cent over the six months to the end of September would make other retailers envious. Most of what Halfords sells are purchases that people buy because they have to.
