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Luxury fashion clothes counter Marchpole has failed to set the market alight – thus far. Tipped as a strong buy at 24.5p in July, the price waned almost 20 per cent to 19.8p, meaning it breached our stop-loss mark. The price has now come down even further to 13.5p. Nevertheless, we still see a growth story in play here at this well-run business, re-vamped under chief executive Greg Tufnell.

Figures for the half to September, revealing lower turnover of £14.9 million (£15.7 million) and a drop in profits from £2.6 million to £1 million, underwhelmed the City.
The profits slide reflected one-off brand development costs and the re-positioning of the business for future growth. Seasonality issues were at play as well. Furthermore, the acquisition of Moda America (which licenses the Emanuel Ungaro ‘diffusion’ label in the US), offers further expansion opportunities.

For the year to March, Marchpole should beat last year’s £4.9 million net profit. Shop broker Shore Capital suggests £5 million at the pre-tax line from £35.7 million sales, giving earnings of 2.5p and a budget multiple of 7.9. If you bought on our advice, stay on board for a long-overdue re-rating.

Staffline assures with ‘05 update

AIM recruiter Staffline, recommended here at 122p last April, has assured calendar 2005 sales and profits will be ‘significantly ahead’ of last year’s in a well-received update. OnSite, the division that manages the temporary recruitment needs of clients on their own site, now makes up 60 per cent of sales, and enjoyed strong year-on-year growth thanks to new client wins and a rising number of sites managed for existing customers.

Managing director Andy Hogarth claims 2006 will benefit from the ‘full annualised effect’ of OnSite contracts won during the year, and affirms that the pipeline of OnSite prospects is ‘stronger than it has ever been’.

Following the statement, house broker Oriel Securities retained its ‘buy’ stance on the stock. When the figures emerge, investors can expect pre-tax profits of £2.3 million from £58 million sales, and earnings of 8.2p a share. For December 2006, a move to £3 million on revenues of £61.3 million is on the cards, all of which should conjure up 10p of earnings.

This places Staffline, currently priced at 107.5p, trading on undemanding forward multiples of 13.1 and 10.75. Buy

Vantis victorious

Acquisitive accountancy concern Vantis has enjoyed an exceptional run since last May’s canny deal to buy Numerica, with the shares surging to 237.5p (against our recommended buy price of 111p in 2004), placing a £113 million price tag on the business. Vantis splashed out £15.8 million for its AIM-listed rival, but immediately sold certain unwanted assets on to BDO Stoy Hayward for £12.1 million. The net cost of acquiring £27 million of revenues was £3.7 million.

Recent interims to October showed the group has already completed most of the integration process, and is still scoring strong underlying growth. Turnover rose 79 per cent to £32.9 million with Vantis’ organic growth hitting 27 per cent. After stripping out an exceptional charge of £2.1 million relating to the deal, profits before amortisation, interest and tax sparked up by 83 per cent to £5.5 million.

Vantis has more than doubled from our original recommendation price and, for the full year, house broker Charles Stanley forecasts an impressive 54 per cent earnings leap to 16.6p a share. With the higher-margin business recovery and tax consultancy arms trading strongly, the shares should not be sold.

Ben Bailey – time to move on

Ben Bailey, originally recommended on these pages at 129.5p back in 2002 and currently priced at 458.5p, has been an obvious strong performer.

Ahead of the close of the financial year to December, the group reported that second-half trading met expectations, and the full year £12.4 million pre-tax profit forecast would be met from £101 million sales. That profit figure is lower than last year’s £16.5 million, posted from £81.5 million sales, and the £12.9 million made in 2003, due to margin pressure in line with the sector.

House prices have not been as firm, and Ben Bailey has been hit by higher selling costs. Westhouse Securities predicts a lower than average selling price for the year compared with 2004 – Ben Bailey has had to increase incentives to buyers at the expense of margin and has seen an increase in the number of affordable houses, where it again makes lower margins, as a proportion of its annual completions. Analysts envisage a drop in gross margins from over 30 per cent to less than 22 per cent this year.

The good news is that sales have consistently tracked north – 2005 housing unit completions should be well up on 2004 – which bodes well should prices recover, as expected, next year. Like its housebuilding peers, Ben Bailey trades off a lowly p/e, and the shares offer a decent yield. But we think it’s time now to take the rest of your profits. Sell.