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GCI highlighted the investment attractions of Broker Network last October at 189.5p and we’re delighted to see shares in the business now priced at 370.5p. Under chief executive Grant Ellis, we see the business worthy of re-investigation, ahead of September’s annual results to April and on the strength of a growing institutional fan club. In a recent update, management revealed strong trading during the 12 months in question and broker Cenkos upgraded its 2007 forecast to pre-tax profits of £6.3 million from £22.6 million sales, giving 29.9p of earnings and a modest p/e of 12.4.

Broker Network recently improved terms with its insurers for the premium it buys in bulk for its network of brokers and its own ‘retail’ division. This means that from each 100p of premium, the brokers now get 15.3p instead of 15p and Broker Network takes 2.9p rather than 2.5p. With the insurance sector experiencing a ‘soft market’, Ellis has secured long three-to-five-year contracts with insurers on improved terms.

More problematic have been acquisitions for the Broker Network stable – there have been none since July last year. But, after a period of stalling in the market, brokers are becoming increasingly sold on the excellent terms the group offers. Ellis’ expectations are for around ‘four, five or six’ acquisitions a year, and discussions are afoot with a number of parties in a market ripe for consolidation.

Broker Network continues to look good value and key investors are becoming ever-more interested in the business, with BlackRock and Fidelity having joined the shareholder register and JPMorgan and Hargreave Hale having topped up existing holdings. Keep buying.

ASOS still in the ascendant
Internet fashion phenomenon ASOS livened up the summer months by issuing strong final figures to March, delivering ‘adjusted’ pre-tax profits of £3.6 million from revenues lifted 116 per cent to £42.6 million, and also declaring a 44 per cent rise in cash to £5.4 million, ahead of forecasts following a year of good cash generation.

AIM-traded since 2001, ASOS is now the country’s largest independent online fashion and beauty retailer with its site aimed at ‘internet-savvy’ 18 to 34 year olds. ASOS.com attracts more than two million unique visitors every month and has around 1.3 million registered users. The popularity of its offering (celebrity-inspired clothing) remains undimmed and chief executive Nick Robertson plans continued investment to broaden the product offering and keep online buyers returning in droves.

With trading remaining strong and the company continuing to outperform peers, analysts are looking for 2008 profits of £4.6 million, giving earnings of 4.3p, ahead of £7.8 million and 7.2p of earnings the following year. The market believes Robertson can grow sales to at least £90 million by 2010, from which it will generate operating margins above ten per cent.

At 118p, the shares, recommended here at 7p back in 2004, trade on a pricey forward p/e of 27.4. However, considering earnings growth rates, that’s a palatable multiple for investors. Top slice nevertheless.

Another stock looking strong is Prime People, the recruitment group servicing the global real estate, commercial property and infrastructure sectors. In an upbeat AGM missive, chairman Robert Macdonald commented on a strong start to 2007 in which first-quarter net fee income was substantially ahead of last year on account of market buoyancy and a 31 per cent rise in consultant numbers to 81 during the year to March.
A similar percentage increase in fee earners is earmarked for the current year to capitalise on strong demand both in the UK, driven by major infrastructure projects, and abroad as a result of the commercial property boom, for the qualified professionals the group provides on an international scale.

Last year new offices were opened in Hong Kong, Australia and South Africa, while Dubai is proving a particular international demand hot spot for Prime People candidates. The long-term nature of many international infrastructure projects adds to this stock’s allure.

Recent preliminary figures made interesting reading with Prime People reporting 22 per cent growth in gross fee income to £20.2 million and 14.2 per cent pre-tax profits growth to a shade over £2 million. From diluted earnings of 10.93p, a final dividend of 2.25p was declared, taking the year’s total payout to 3.5p.

Trading on a modest 11.3 times historic earnings and yielding almost three per cent, the 124p shares, recommended here at 105p a year ago, merit more attention from the market. Add.

Fluid handler still riding high
Highlighted here at 204.5p in 2005, marine and offshore fluid handling systems specialist Hamworthy cheered followers with a Greek order worth more than £17 million and a positive AGM update. The shares are riding high at 620p.

A world leader in its field, the group has secured an order from Korean group Hyundai Heavy Industries to supply cargo handling engineering and equipment packages for six ‘mid-sized’ liquid petroleum gas (LPG) carriers. The ships, which will be built at Hyundai’s Ulsan yard in Korea, are to be delivered to Athens-based Prime Marine and Naftomar between August 2008 and January 2010. The deal is worth more than £17 million to Hamworthy, which increased profits 56 per cent to £13.6 million last year to March and the contract brings the number of ships for which Hyundai has asked Hamworthy to provide LPG re-liquefaction systems to 19.

Demand for Hamworthy products remains strong and order intake for the quarter to June was buoyant at £47 million. The shares have enjoyed a stellar run and, although analysts see growth ahead, cautious investors should lock-in profits given stock market volatility. Reduce.

We also urge a spot of profit taking at mobile phone content services provider Velti, a recent recommendation at 136p that surged above 240p before settling at 188.5p. This is still well north of its 100p AIM issue price, with the pull-back caused by director selling at an average of 228p. Do likewise, but stay exposed, because a bullish first half update from the Greece-based group has excited the market.

Velti, which has built strong market positions in neighbouring Balkan countries and is expanding in the UK and the US, said its financial performance for the seasonally quieter first half to June was at the ‘top end’ of expectations, with sales apparently burgeoning 80 per cent to €7.25 million (£4.9 million) and margins maintained throughout.

Fast establishing itself as a technology leader in the field of mobile marketing and advertising, the company enjoyed growth from mobile operator projects in the UK and south-east Europe, where contracts were renewed with the likes of Vodafone and WIND, as well as advertising agency and consumer brands work in the US and the UK (where a strategic co-operation is now in place with Orange).

The creation of a 50/50 joint venture called Ansible alongside advertising and marketing services giant Interpublic was also announced. Interpublic looks an ideal partner, since the market for mobile advertising and marketing is predicted to grow exponentially with advertising agencies set to play a pivotal role in the growth.

Profits more than doubled from £750,000 to £1.84 million in 2006 on £7.37 million sales. This year, the market expects pre-tax profits growth to £3.2 million from revenues of £11.5 million, leaving Velti well placed to hit its numbers.

Sovereign enters new realms
Equity release specialist Sovereign Reversions, tipped here at 295p, trades healthily higher at 367.5p and is expanding into lifetime mortgage advice, having made an annual £7.2 million pre-tax.

Sovereign, which buys homes cheaply from old people who stay on in them and then sells them at the market price when they die or otherwise have to leave, increased earnings by an impressive 248 per cent to 63.6p in the year to April, with net assets accreting 8.8 per cent to 342.3p.

The company, which raised £3.5 million last August at 352.5p, acquired fellow equity release concern Home & Capital and, says chief executive Graeme Marshall, is now in a position to expand its activities both in home reversions and as an adviser on ‘a full range of equity release products’. He says Sovereign now either owns or administers £280 million of assets and can charge ‘back-end fees of sometimes five per cent of the proceeds’.

Marshall complains the reversion market has been ‘flat for three years’, but suggests elderly clients will be happier initially taking out lifetime mortgages and then perhaps switching to equity release later on. Lifetime mortgages have always been officially regulated, which makes independent advisers happier to promote them, but regulation has only recently come to equity release.

Sovereign, whose share price reached 420p last January before a move back to present levels, should move forward again if new directions being explored prove lucrative. Trading on a modest multiple and dividend paying, investors should sit tight.

Cut losses at Carter
Exceptionally tough times have hit erstwhile company profile star Carter & Carter, whose inexorable share price collapse has been caused by a slew of woeful disappointments – contracts and profit warnings – that followed the sad and untimely death of chief executive Philip Carter.

Originally backed here at 754p (and close to £13 a share earlier this year), the vocational training group now trades at a decimated 77.75p and in its most recent update, Carter & Carter warned it had been unsuccessful in tenders for Phase 1 of the Government employment drive Pathways To Work.

Though successes in other areas were highlighted, the market focused on the Pathways to Work disappointment (bid costs are necessarily expensed through the P&L) as well as disappointing trading in its construction training business and lower than expected numbers of achievers across its apprenticeship programmes.

These factors combined dragged ‘adjusted’ pre-tax profits for the year to July back to just £10.5 million, well short of prior market forecasts of more than £23 million.
Investors who failed to book profits as the shares gained dramatic altitude will be justifiably angry and disappointed at the savage collapse in the company’s value and would be forgiven at this stage for cutting losses. With some regret, we urge newcomers to avoid the company for now, even though there’s a good (still profitable) business here operating in Government-backed markets. Avoid.