Watch List 2
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Watch List 2
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Watch List 2Please use the links to jump to the required company.Carpetright PLC
Company Website: carpetright.co.ukThe ManagementChairman & CEO: Lord Harris of Peckham. Founder in 1988. 40+ years experience, previously at Harris Queensway PLC, currently director at Harveys Furnishing PLC and Great Universal Stores PLC. Managing Director: Mr. John Kitching. Joined in 1988. 33 years experience, previously at Harris Queensway. CFO: Mrs. Shena Winning. Joined 1997. 25 years experience, previously at several retail outlets as a senior financial officer also is a qualified chartered accountant. Sales Director: Mr. Christian Sollesse. Joined 1995. 20 years experience, previously at Harris Queensway and Harris Interiors. The BusinessIt is impossible to not mention Carpetright without having the utmost respect and admiration for the business acumen of Lord Harris. He built up Harris Queensway and sold it off in the 1980's only to start it all over again in 1988 with Carpetright, it is also no accident that some of the best management followed him as well. Carpetright has three divisions which all retail floor coverings to the UK mass market. The main brand is Carpetright and the other two brands are Carpet Depot and Harris Carpets. Each retail format is carefully targeted to suit the demographic groups in each location. The management have an excellent record in exploiting the maximum benefit from their marketing techniques. They claim to have a highly motivated and enthusiastic workforce but from my own experience it would appear that this doesn't apply to the Cheltenham branch. The group has launched an internet based service and a new "harris carpets at home" concept. The company certainly scores in respect of focusing on shareholder value. Lord harris was very active in purchasing the shares when the market saw problems for retailers and once again he was proved vindicated in his view of the group's prospects. Last year the company spent £8m on repurchasing a further 1.9m shares for cancellation. The balance sheet is very robust with over £8m cash in the bank, positive cash flow of over £11m and retained profits of £7.6m. Carpetright is a well managed, focused group in a very competitive mass market. There is still plenty of room for expansion in the floor coverings market and if the company can maintain the 12% net margin on sales then continued profits growth should be maintained. Also, Lord Harris has the ability to produce reasonable returns in poor trading conditions when the competition become even more fierce. I intend to wait until the share price falls below £6. Medisys PLC
Company Website: Hypoguard.comThe ManagementNon-executive Chairman: Mr. William Bruce. Joined at foundation. Industry experience, not known. Currently also at Bruce and Partners property and business consultants, Scotia Homes Ltd, Gordon Enterprise Ltd and Aberdeen Assured Tenancies Ltd. CEO: Mr. David Wong. Joined 1998. 25 years experience. Previously at Pacific Corporate consultants Ltd, Medical consultant and management Ltd, Guy's Hospital Medical school. CFO: Mr. Michael Barry. Joined 1999. 13 years experience. Previously at Fountainhead Holdings Ltd, Elan Corporation PLC. The BusinessMedisys has two divisions, Medical and Safety Products division and the Diagnostics Division. The Diagnostics Division, Hypoguard, is the more established division but it is the Medical and Safety Products Division, Futura, that contains the real opportunity for significant growth in the years to come. Futura has developed a range of retractable syringes for use by the medical profession. Now that it has become mandatory for Hospitals in 16 States of the US to use this type of syringe, to protect personnel from injury and infection, the market has ballooned and the race is on to become the industry standard. Medisys are not alone in this race but they do have an FDA approved product, a 3ml syringe, that can be produced at very economical levels. Progress is being made for 5 & 10ml versions of this design that the company hope will not need further approval due to it being of the same construction. They also have a 1ml syringe under development that will need FDA approval because of its difference in design. The groundwork for distributing the syringes in the US has already begun with the first appointment of a distributor in the shape of McKessonHBOC. The company plans more agreements to get as much market penetration as possible. A key appointment was the signing up of Joe Costa as Vice-President, Strategic Operations. He was previously at Becton Dickinson who are a large supplier of safety syringes. Futura were hoping to ramp-up production as early as mid-2001 but technical difficulties has delayed this until the end of 2001. To help in the production process, Futura has signed a deal with Nypro Inc to use their injection moulding technology. Hypoguard develops and distributes diagnostic kits to the medical industry. It has enjoyed a reasonable amount of success with its Supreme range of products but these are now nearing the end of their life cycle and the division is looking to replace this with the Dart and Flight ranges. The Dart bio-sensor meter and strip is due to be ready for FDA filing in the first half of 2001 and plans are already in motion to set up manufacturing capacity in both Europe and the Far East. Hypoguard is looking at entering the glucose monitoring market via a partnership with an as yet unknown Global player. The idea is to utilise the bio-sensor based systems developed by Hypoguard. This system is also being scrutinised by Drew Scientific PLC for possible use in detecting Alzheimer's disease and by Medical House PLC for detecting Helicobacter pylori. Hypoguard is to acquire the diagnostics business of MEDgenesis Inc who manufacture and distribute a range of blood glucose monitoring products for diabetics and a number of other products. The company has a nationwide sales infrastructure in the US and the plan is to use this to distribute Hypoguard's Dart and Flight ranges to the long term care market. The Futura business is still in the very early stages of creation and carries a risk premium. The projections put about by analysts vary too much to be of any real use and could so easily be missed by product delays or competition. That said, if the safety syringes capture anything over 20% of the new market then Medisys should be making very healthy profits. The Hypoguard business is working well and should provide long term income from the diagnostic systems it has developed, the purchase of MEDgenesis is a wise move and provides access to a growing market. The balance sheet was bolstered by a placing and open offer in April 2000 that raised £43.4m but this is now down to just over £38m. The company has great potential and has done the right things so far, with the exception of missing the planned date for mass production of the safety syringe. I am looking to get in at anything under 70p. Bank of Scotland PLC
Company Website: Bank of Scotland.co.ukThe ManagementGroup CEO: Mr. Peter A. Burt. Joined 1975. 36 years experience. Previously was Treasurer and General Chief Manager since 1988. Treasurer & MD: Mr. Gavin G. Masterton. Joined 1957. 44 years experience. Previously General Manager and Deputy Treasurer. The BusinessAlways the Bridesmaid and never the Bride could be used when describing what has happened at BoS in the last two years. The consolidation process that is taking place in the banking sector has seen BoS lose out to the Royal Bank of Scotland in the race to takeover National Westminster Bank and more recently the ending of merger talks with Abbey National when they were approached by LloydsTSB. All this has done a great job in overshadowing what is a very good, soundly run, growing business. BoS has set about restructuring itself to provide increased efficiency and better customer service. This is born out in the all important cost:income ratio that is used to measure the efficiency of Banks, BoS has reduced this figure year on year to stand at a sector beating 46%. The operating profit per employee has also improved to stand at £34,820 in 2000. On the negative side, bad debt provision has increased 14% to £172m. BoS also has a more conservative General provisioning policy than most banks which has a larger drag factor on profits. BoS has six divisions; Personal, Business and Corporate Banking, Services Division, Treasury Services and Bank West. The Personal Banking division is the largest, contributing £168m in profits on £19.1bn lent. The cost:income ratio is at 50.9% and has been reduced by 2.2% in the last two years. Business Banking provides services for the small to medium sized business and made £138m profit on £16.4bn lent. The cost:income ratio stands at 51.9% and has risen 0.5% in the same period. Corporate Banking provides banking services for large businesses and specialist structures and produced £155m profits on £19.3bn lent. The cost:income ratio is at an excellent 20.5% which has been almost static. The Treasury Division handles deposits, derivatives, fx trading, multi currency funding, liquidity and market risk management services, it made £32m profit with a cost:income ratio of 28.9%. Bank West is the Australian arm of BoS and made A$106m profit on A$15.5bn lent. The cost:income ratio came in at a bulky 62% which has risen by 2% in the last two years. The Services Division provides support for the Group and contributes no income. The Group is a well run, efficient business with a management team that has increased profits whilst maintaining standards of service to its customers. The bad debt provisions could rise further if the UK suffers a knock-on recession from the US slowdown. There is always the possibility of another bid/merger but I will wait to see if the price falls to under £6 before buying. ARM Holdings PLC
Company Website: arm.comThe ManagementThe BusinessSavills PLC
Company Website: FPDSavills.co.ukThe ManagementChairman: Mr. Richard Jewson. Joined 1994. 30 years experience. Also is Chairman of InterX PLC, Eastern Counties Newspapers Group Ltd, Octagon Healthcare Ltd and Deputy Chairman of Anglian Water PLC. CEO: Mr. Aubrey Adams. Joined 1990. 25 years experience. Also is non-executive director at Associated British Ports PLC and Grosvenor Waterside Group PLC. CFO: Mr. Robert McKellar. Joined 1994. 18 years experience. I have no record of his career record prior to joining FPDSavills Commercial Ltd as Finance Director. The BusinessThe company is a leading player in the property services sector. It advises clients when dealing with commercial, agricultural, residential and leisure property. The Group also provides corporate finance advice; property and venture capital funding and property related financial services. The Group has grown to become an international property services provider that now trades in the UK, US, Europe and the Far East including Australia. This has been achieved by organic growth, strategic alliances and by acquisition. As a result of this activity, cash flow has been negative for the last two years and borrowings have increased by £34m but the Group has increased net assets to £70m. The Group has seen profits grow by 500% in the last five years but this has to be seen against a long period of economic growth and a buoyant property market. The test will be how the management steers the business through the coming recession in both the UK and the US. The possibilities for cross selling of services through the enlarged Group, the re-branding of the Asian acquisition and the US tie-up combined with the highly motivated team provide a reasonable case for assuming decent profits growth.
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