Five stocks to watch in July


In full-year results to January 2015, chief executive Mark Briffa described 'a year of two very different halves', but they didn't really add up to a whole at Air Partner. Revenue was 9% below 2014 and adjusted profit fell 36%.

But its shareholders are used to turbulence. The company derives much of its income from ad hoc contracts for commercial jet charters, which are unpredictable.

It did well in the second half, supplying aircraft to German car makers and Italian tour operators, sectors it is targeting due to reduced spending on government and military transportation since the credit crunch. Revenues from oil and gas producers held up, and the company says reduced demand from French tour operators was a temporary setback.

An upturn in demand for airfreight - also subdued since 2008 - and growing demand for JetCard, a pre-paid service that provides smaller executive jets at 12 hours' notice, also helped.

Air Partner has entered the new year with a 'degree of optimism'. The company plans to reveal a 'Customer First' programme in its half-year results, enabled by new computer systems that address 'historical underinvestment in technology'.

The shares look expensive, but they may not be if profit is depressed. A share price of 360p values the enterprise at £43 million, about 19 times adjusted 2015 profit. The earnings yield is just 5%. Based on average profitability, though, the earnings yield is more like 9%.


In full-year results for the year to January 2015, food wholesaler Booker raised revenue 1% and adjusted profit 11% over the previous year. The company has no debt and is planning to return cash to shareholders later this year, over and above the dividend for the second year running.

Booker will have repaid most of the money it raised from shareholders to acquire struggling cash-and-carry Makro in 2012, a business it is now turning around. So well are things going that Booker plans to return even more cash to shareholders in 2016, despite the impending acquisition of the loss-making parent company of Londis and Budgens.

Booker is still following its decade-old three-point strategy: to focus on business efficiency, drive choice, value and service, and broaden its base by selling new products and services to new customers. It plans to lift revenue from less than £5 billion in 2015 to £6 billion in the next few years.

The company wholesales food to convenience stores and caterers through branches nationwide, and it owns and supplies Premier, Britain's biggest 'symbol group'. Members of symbol groups are tied into buying a minimum amount of stock, in this case Booker's brands Happy Shopper and Euroshopper, in return for benefits that include store design, a fascia and marketing support.

Convenience stores have been a largely unheralded retail success story over the past decade. Booker is also in the early stages of developing a local discount symbol format, Family Shopper, and it has launched 190 Happy Shopper symbol retailers supplied by Booker Wholesale in India, although revenues are not yet significant.

A share price of 178p values the enterprise at £3.6 billion or about 28 times adjusted earnings in 2015. The earnings yield is 4%.


For the year ending in December 2014, mini-conglomerate Camellia's revenue fell 5%. Adjusted profit fell 60%. Negative cash flows mean the company's cash balance (excluding the cash held by its private bank) fell 31%. The company described its profit outcome as 'particularly disappointing' – the result of very poor prices for tea from plantations,losses associated with onerous contracts at AKD, an engineering company based in Lowestoft, and regulatory and compliance costs at private bank Duncan Lawrie.

While the agricultural setbacks may be temporary, a second successive year of heavy losses at AKD is terminal. Orders from the offshore oil and gas industry, upon which AKD is dependent, have completely dried up.

Camellia will close it by mid 2015. Until then, AKD will continue to lose money and low oil prices will reduce the profitability of some of Camellia's other engineering companies.

Duncan Lawrie may experience a shake-up too. It has struggled to profit due to low interest rates and a conservative approach to risk, but it's 'reviewing its options' after losses in 2014.

Dramatic change must be difficult for a company with Camellia's long-term culture. Camellia's cash surplus and disregard for the short term means it can stick by subsidiaries experiencing hard times, and even invest in them so they emerge stronger. Last year shows such resilience is not limitless, even though the strategy is determined by majority shareholder the Camellia Foundation, a private trust with two non-executives on the board.

A share price of £96.12 values the enter- prise at £227 million, or 22 times adjusted 2014 profit. The earnings yield is 5%. Earnings are probably depressed though. Agriculture, Camellia's most significant source of revenue by far, should recover, and it's dealing with the problems in the other businesses. Based on average profitability in recent years, the share price looks more attractive and Camellia trades at a discount to net asset value.


In full-year results to March 2015, pork producer Cranswick reported a 1% increase in revenue and broke the £1 billion barrier for the first time. Re%venues were flat, excluding those from cooked poultry producer Benson Park, which Cranswick acquired during the year.

Declining fresh pork sales – partly because of a fall in the average pig price, which the company passed on to customers – was offset by growth in all other divisions: sausage, bacon, cooked meat, pastry, continental products and sandwiches. Adjusted profit increased 10% and return on capital remained stable at 18%.

For a businesses vulnerable to fluctuating pig prices and pricing pressure from its main customers, a handful of supermarkets, Cranswick's profitability has been remark- ably consistent for years, and the company is sanguine about the future. Net debt was up marginally in 2015, due to the cash acquisition of Benson Park, but total debt remains low.

The acquisition of a poultry business is consistent with Cranswick's strategy of diversifying the products it supplies and the customers it serves. Although Cranswick has made its name supplying supermarket premium brands such as Sainsbury's Taste the Difference and Tesco Finest, Benson Park will also bolster revenues from convenience store and foodser vice customers.

Throughout Cranswick's remorseless growth, the company has acquired and established businesses all the way up the supply chain for meat products, wherever it has found a way of profiting. Originally Cranswick was an animal feed co-operative, then it acquired farms, and then it became a meat producer. In more recent years it has moved back into pork farming and established a pastry factory, where it makes sausage rolls, pies, quiches and tarts.

Perhaps Cranswick, like its sausages, is worth a premium price. A share price approaching £15.92 values the enterprise at £867 million, equivalent to about 18 times adjusted 2014 earnings. The earnings yield is 5%.


Despite adverse exchange rates, the designer and distributor of smoke alarms and carbon monoxide detectors raised revenue 36% and adjusted profit 82% in the year to December 2014. Sprue's cash position improved consider- ably, due to better cash flow and £8 million raised in a placing a year ago.

Although UK sales waned, the company reported unexpectedly high sales of its AngelEye brand in France, where household smoke alarms recently became mandatory.

Despite being a leading supplier to many big UK retailers and the Fire Service, the company only earns 36% of revenue in the UK, Aerospace & defence explaining its sensitivity to exchange rates.

But one aspect of the Sprue story is unnerving. Last year, Sprue renewed its relationship with BRK, the supplier or Sprue's own brand and BRK-branded smoke alarms and other safety products. The terms of the agreement were improved in Sprue's favour, but BRK's failed attempt to acquire Sprue a couple of years ago show the relationship is sometimes adversarial.

A share price of 280p values the enterprise at £124 million or about 13 times adjusted profit. The earnings yield is tempting for a company with good growth credentials, at 7%.