THROUGHOUT the week the FTSE-100 index reflected closely the advance of United States troops towards the Battle of Baghdad and, as confidence in a quick resolution returned, shares staged a partial recovery.
In such uncertain times, some degree of comfort, not to mention profits, can be gained by looking closer to home. And there are some well-known Scottish companies that are worth your attention right now.
Despite having hit a sticky patch of late,
Edinburgh-based Forth Ports’ property business has undoubted potential, with the group actively developing brownfield sites for housing and commercial purposes.
Of some concern, though, is the situation at Ocean Terminal in Leith, which is 50 per cent-owned by Forth Ports. While it had been anticipated that the centre would be 90 per cent let at this stage, the recent withdrawal of bar operator JD Wetherspoon means only three-quarters of the development’s space is presently occupied.
The property has consequently been revalued downwards by £14 million. But it’s not all bad news, as Ocean Terminal has recently signed up high-street favourites Marks & Spencer, Boots and French Connection, while Forth’s ports business continues to perform well, with grain exports and plywood volumes having recovered at its Tilbury dock.
Analysts forecast full-year pre-tax profits of £47.5m, giving earnings per share of 74p. The ports business looks solid and, despite some setbacks, the long-term potential for the property business remains sound. Buy.
It may not have been an easy time of late for Glasgow-based pump and valve producer Weir, in what has been a difficult marketplace, but an emphasis placed on raising operating margins of six to seven per cent should ensure progress this year, provided there is no further significant deterioration in economic conditions.
Of no small concern, however, is the fact that Weir’s pension fund deficit has soared from £19.4m to £102.1m, which has led to one analyst lowering its adjusted pre-tax profit forecast from £61m to £58.1m, with earnings per share of 22.1p. Nevertheless, compared with the collapse in profitability endured by most other UK engineers, Weir appears to have sailed through the industrial downturn almost unscathed. A sector average forward price-earnings ratio of 9.5 fails to do this resilient performance justice, making Weir good value. Maybe worth a punt.
Meanwhile, shareholders have yet to reap any benefits from Scottish packaging company Macfarlane’s transformation into a "packaging service provider" and they may have to wait for some time before they do. In the year and a half since the group announced its intention to quit the plastic packaging business, its shares have fallen by almost 60 per cent.
Macfarlane may be able to do little about the downturn in demand for its products, particularly from electronics and manufacturing customers, but it has not made it any easier for itself by underestimating the time and expense involved in its restructuring programme, with considerable disruption the inevitable result.
While Macfarlane proposes to use funds from forthcoming property disposals to meet future dividend pay-outs, investors should exercise caution.
Regional newspaper publisher Johnston Press has proved its reliability through acquisitions, hence the strong performance of its share price .
A substantial leap in reported figures (a 42 per cent increase in turnover to £428m and a 35 per cent increase in pre-tax profit to £92.7m) came from last April's £555m acquisition of Regional Independent Media (RIM) which contributed £34m to operating profits, while organic profit growth maintained a respectable seven per cent.
Johnston has thus far managed to avoid much of the costly restructuring that has been undertaken by many operators in this sector as a direct consequence of its heavy weighting towards local advertising markets . And, although debt has hit £503m following the acquisition of RIM, the group says it has effectively paid £87m of debt during the year.
Johnston cautions that this year is still at risk from a consumer recession, though profits should be helped by falling newsprint prices. Analysts predict pre-tax profits of £118m this year, giving earnings per share of 29.1p. The shares, on a price-earnings ratio of 12, should provide some modest upside. Buy.
Drew Johnston is a business writer and managing director of Blueprint Media
