Companies: ASC    ASO    HVX    IDS    JSG    TMN    WHY   

Johnson Service, the main board-quoted support services outfit we backed in February 2004, is on a roll. Under the stewardship of CEO Stuart Graham, the business is now exposed to growing, rather than slowing, markets following Graham's successful repositioning of the group as a focused textile related services and facilities management outfit.

The changes showed through in the recent annual figures to 25 December, with profits edging up by ten per cent to £25.4 million and sales soaring 60 per cent higher to £364 million.

After spending £31.2 million on acquisitions (corporate wear outfit Dewhirst was bought for £23.8 million post-year end), debt has grown to £74.1 million (£43.4 million), but given the level of profitability, this is hardly a concern.

Already the UK market leader in renting and laundering garments, as well as dry cleaning, Johnson Service has also become the largest supplier of clothing for people at work in the UK, through acquisitions. It's not sexy, but it seems to be very lucrative. According to Graham 'we've cobbled together a £100 million corporate wear business making ten per cent, and we could even take it abroad.'

Johnson's newer businesses in facilities management, specialist supplies and hospitality services are others areas going great guns while the dry cleaning division enjoyed six per cent like-for-like sales growth in a tough high street market (an impressive feat considering it was actually integrating recent acquisition Sketchley).

Despite all of this, Paul Jones at Numis downgraded his profit forecast for the year from £31 million to £30 million, knocking earnings back to 36.9p (37.3p). 'In overall terms these figures are fine,' Jones mused, 'though we see little spice in these numbers to push the shares higher.' You could read this as a 'sell' comment, but we're a little more bullish, given the undemanding forward multiple of 12.8, Graham's acquisition-led growth and the longer term expansion possibilities abroad. If you bought on our recommendation at 385p last February, hold tight at the current 473.5p.

Avesco to smash forecasts

Avesco shareholders were treated to welcome news in March when Ian Martin, chairman, delivered a bullish update for the year. In his address he said full year numbers to March from the corporate presentation and broadcasting services provider will comfortably beat revenue and profit forecasts, as 'virtually all' businesses have grown ahead of expectations in the second half.

Martin boasted of further progress in the US business, which performed strongly with good underlying revenues in the second half, and said the UK outfits performed well despite his earlier caution. The rest of Europe put in a 'generally good performance'.

When the numbers are unveiled, KBC Peel Hunt's Dominic Convey will be looking for profits of £1.4 million (losses reached £1.6 million in 2004) from a beefier top line of £56 million (£54 million).

For 2006, investors might expect a pre-tax jump to £1.7 million from £60 million sales and growth in earnings to 8p (7.2p), leaving the 103.5p shares on a multiple of 12.9 times 2006 earnings. That is a lowly rating for the media sector, mostly reflecting Avesco's dollar exposure. That said, having recommened the group at 52.5p last July, we think it's time to take some profits. Sell half.

Huveaux still looks over-sold

Investors pushed Huveaux, John van Kuffeler's buy-and-build media venture, up from 41.5p to 43p on receipt of the full year figures for 2004, which highlighted profits doubled to £2.45 million.

The market was unnecessarily spooked by its February profit warning and had marked the shares down considerably (circa 33 per cent) after van Kuffeler said profits would not triple to £3.3 million. Sales, however, did triple – to £14.4 million – and the year-end cash pile was a healthy £3.1 million. Investors were also treated to a 14 per cent rise in the dividend.

In terms of this year, Huveaux's numbers for January and February 'encouraged' van Kuffeler – especially as a full 12 month's contribution from last year's acquisitions should boost the overall performance.

City analysts are going for profits of £3.5 million from sales of £20.8 million, and earnings of 2.5p a share, leaving the 43.5p shares on a forward rating of 17.4. Again, that's inexpensive for a media play with great growth prospects. Our medium term target is 70p.

Take profits at Ideal Shopping

AIM-quoted TV shopping channel operator Ideal Shopping Direct announced a superb set of results for 2004. House broker Teather & Greenwood had upgraded its pre-tax forecast for the year to £4 million, but IDS even managed to beat that by £100,000. Turnover rose 42 per cent to £60.4 million and gross margins improved 40 per cent to 43.5 per cent.

IDS, whose customers tend to be married homeowners with older children who are interested in clothing, jewellery, health and beauty products, operates three shopping channels. But the launch of its flagship channel, Ideal World, on the ubiquitous Freeview platform, really propelled sales, as uptake of its offerings increased far faster than expected.

The company also benefited from the reorganisation of its buying, warehousing and distribution facilities, and from cutting its overheads (its call centre operations are now in India).

With bumper net cash of £8.2 million, IDS is well positioned to launch new initiatives both on TV and the web. The market expects pre-tax profits to increase to £5 million in 2005, moving up to £6 million in 2006. As we have mentioned previously, the shares have sparked up from our original buy price of 39.5p to 240p. And (as we highlight on page 15) key directors have been offloading shares. If you haven't yet done so, take your profits.

Growth yet again at WYG

If only all smaller cap companies on the Official List could be as impressive as fast-growing engineering consultant WYG. If you followed us and backed the company at 193.5p, you'll be sitting on impressive gains, as the shares are riding much higher at 279.5p.

The interims to December were nothing less than excellent – pre-tax profit perked up 32 per cent to £3.3 million as turnover surged 64 per cent to £65.8 million.

The Leeds-based group benefited from a first full half contribution from £10 million acquisition IMC Consulting, its biggest ever acquisition, which took WYG into the international arena. John Purvis, chief executive, said the results marked a 'step change' in the group's expansion and the total order book has increased 52 per cent to a record £220 million.

WYG also announced two further deals: one adding waste management engineering skills to its portfolio of services, the other boosting its town planning expertise. Forecasts in the market for the year to June suggest profits of £9.6 million and earnings of 17.3p, for a forward p/e of 16.1. Again, we still feel the shares are attractive, but banking a bit of profit is an option for the overtly cautious.

Warehouse woes hit ASOS profits

Warehousing problems will put a dent in ASOS' profits for the year to March. House broker Seymour Pierce had upgraded its profit forecast for the online fashion retailer to £1.55 million but chief executive Nick Robertson admitted profits are only likely to reach between £1.05 million and £1.2 million.

This problem is not new for the group as it has been on the lookout for larger warehousing facilities to accommodate its fast growth. The current set-up consists of four separate warehouses, an arrangement which contributed to delays in stock appearing on its website and therefore delays in stock being sold. The upshot is that stock that should have been sold at full price pre-Christmas was sold at a heavy discount in January and February.

The good news for all associated with this venture is that ASOS has now located a 70,000 sq ft warehouse and expects to move in by mid-May.

The other positive is that ASOS is flourishing, with 1,600 product lines now launched and registered users increasing to 515,000, making it the second largest apparel and accessories website in the UK. The broker predicts pre-tax profits for 2006 will double again to £2.25 million. We have consistently urged readers (four times in total) to top-slice at this venture as the shares soared. As for your remaining stake, we suggest you sit tight. The forward p/e for the year to March 2005 is 36, but this falls to 18 for 2006.

Mutually disappointing

Shares in online marketing company themutual.net fell 13.5 per cent to 32p on news that it is unlikely to reach the £1 million pre-tax profit its broker Durlacher had forecast for the year to April. A GCI recommendation in January, the company blamed high software and development costs at its new MutualShop offering, a price comparative site that enables searches and drives customers to retailers, as well as the expense and disruption caused by moving premises to cope with its rapid expansion.

The forecast revenue of £3.1 million is expected to be achieved, most of which is derived from its direct marketing products such as Mutual Points, an email and website offering that includes incentive points for members.

Moreover, pre-tax profits could still hit £850,000-£900,000 thanks in part to a £100,000 potential profitable realisation of an investment.

The shares are still up by 2p since our recommendation and, considering that it has already put in place its platform for growth, they are not to be sold. But monitor events closely.