Sunday newspaper share tips
We round up the Sunday share tips from Financial Mail and The Sunday Telegraph.
Sunday Telegraph
Last week, engineering group IMI (675.5p) posted impressive interim results.
The company delivered record operating margins in the wake of its restructuring efforts through the downturn.
The company, that makes specialist items such as air conditioning units, valves systems for moulding machines and drinks dispensers, reported pre-tax profits in the six months to June of £133.5m, a 68% rise.
Management expect further margin improvement in the second half - which is also traditionally the stronger period for the company.
The movement of its manufacturing base to low-cost countries continues, with the firm expecting about half of the group's manufacturing bases to be in China and India by the end of 2012.
Net debt was cut to £157m from £172m in December. The interim dividend rose 13% to 9p and it will be paid on October 15. New investors can buy the shares before September 8 to qualify for this payment.
The company is expected to post record earnings this year - and grow them next year too, and a recovery in its late-cycle business should boost revenues and volumes. The shares remain a buy.
Melrose (243.6p) is another engineering-related group that posted a good set of numbers last week.
The company is an investment vehicle that buys industrial assets that are underperforming before improving their efficiency and selling them on for a profit.
Most of the group's management worked together at Wassall in the 1990s, which was turned from a shoe retailer into an industrial holding company.
The most high-profile business it has bought was engineering group FKI in 2008, but it also owns a manufacturer of turbo-generators, Hawker Siddeley Switchgear and die-cast group Dynocast.
The interims were ahead of market expectations. Pre-tax profits rose to £60.4m from £38.4m, on sales that fell 1.3% to £675.7m. This is also a story of margin expansion, which rose to 13.6% from 10.2%.
The company also increased its dividend by 38% to 4p a share. It will be paid on October 1 and the shares go ex-dividend for new investors on September 10.
The group is continuing to actively seek acquisitions and notes that there are signs the market for disposals is gradually returning.
The shares are trading on a December 2010 earnings multiple of 11 times, falling to 9.7 next year. Buy.
Mail on Sunday
Like-for-like sales for Mothercare (511p) stores in the UK were down by more than 4% in its last trading update in July.
But while the shops may be stalling, the baby clothing retailer's other lines of business, which include wholesaling, international and direct sales are performing excellently.
Figures from the group's trading statement in July also showed that international sales were up by 20%. International business accounts for 45% of Mothercare's revenues and almost the same proportion of its profits.
Wholesaling is a smaller part of the business, but next month a range of clothing from Mothercare goes on sale in 400 Boots stores.
So unease over the British stores should not be allowed to overshadow the real engine of growth in the group.
Investors should look past the British sales figures at the real growth prospects on the international stage and to Mothercare's direct and wholesale operations. Buy.
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