Highlights from this week’s Investors Chronicle

Buy: St Ives (SIV)

There’s a decent dividend yield and St Ives’ refocusing efforts are delivering results, writes Mark Robinson. The group’s shares trade on 10 times forecast earnings, which is cheap compared with the share price ratings of media companies with similar offerings to St Ives’ marketing arm

Full-year figures revealed that efforts to move away from low-margin printing and towards higher-margin consultancy-style marketing services are paying off.

Underlying pre-tax profit grew by 10.7 per cent year on year to £26.8m although the disposal of businesses like St Ives Direct Bradford meant that revenue remained flat.

The group achieved its target of generating over 30 per cent of group operating profit from marketing services a year ahead of schedule, while restructuring efforts have led to a 150 basis point increase in the group’s gross margin to 28.9 per cent.

After spending £22.3m on acquisitions in the year, the group’s net debt rose by 13 per cent. But a rise in corporate bond yields has allowed St Ives to eliminate a £20m deficit in its pension scheme.

Broker Numis Securities expects adjusted pre-tax profit of £28.5m for 2014, giving adjusted earnings per share of 17.8p (from £26.8m and 16.9p in 2013).

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Buy: Strategic Minerals (SML)

We do not expect the company to be able to turn around its operations and our earlier buy advice is now heavily in the red, writes Matthew Allan. With the company running low on cash, investors should sell the shares

Shares in Strategic Minerals plunged by 23 per cent following the release of its first-half financial results. They provided the first look at how the company’s iron ore mining operations in New Mexico are faring: not well.

Strategic Minerals produced and sold 247,000 tonnes of magnetite ore in the six months to June 30, generating £14m in revenues. But higher-than-expected costs and lower-than-expected prices almost wiped out profits.

This was supposed to be a low-cost operation, but third-party mining contractors are proving more expensive than anticipated, as are freight costs and royalties owed to Freeport-McMoRan.

As a result, Strategic Minerals now has just £1.3m in the kitty, despite a £4.2m share placing earlier in the year.

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Hold: James Halstead (JHD)

James Halstead is a resilient performer, combining product innovation with tight cost controls, writes Jonas Crosland. But while some growth is likely over the coming year, the current tough trading climate in the group’s core markets suggests this will be modest at best – and at 19 times forecast earnings, there’s little room for a re-rating

For the first time in over a decade, the Aim-traded floorcoverings group reported a fall in full-year pre-tax profits, but due to a lower tax charge, earnings per share were marginally higher and – yet again – the dividend payout increased.

Sales fell, reflecting exchange rate fluctuations and the closure of motorcycle accessories business Phoenix Distribution. In the core flooring business, sales fell in Australia, but rose in Hong Kong and Asia, the UK, Norway, Sweden and central Europe.

Tough competition resulted in a slight erosion in profit margins, but the company’s finances remain in good shape and cash flow from operations grew by 13 per cent to £42.1m.

Broker Arden Partners expects a pre-tax profit for 2014 of £42m, giving earnings per share of 15.2p (from 14.8p in 2013).

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Stock screen: Best of British

The prevailing wisdom in the aftermath of the credit crunch was to buy companies with globally diversified revenue streams, writes Algy Hall. But the reverse approach – buying UK-focused shares – resulted in handsome profits.

The “Best of British” screen is a simplistic momentum screen for FTSE 350 stocks that make most of their sales (75 per cent or more) in the UK. The full screening criteria also take account of some broad measures of quality, risk and balance sheet strength:

● At least three-quarters of revenue from UK;

● Three-month share price momentum better than FTSE 350;

● Return on equity of more than 10 per cent;

● One-year beta of less than one;

● Forecast earnings per share growth in this and the next financial year;

● Better-than-average five-year compound annual growth rate (shorter periods used where a full five-year record is unavailable);

● Net debt of less than 2.5 times cash profits.

The screen generated 12 shares, the top five of which are detailed below (in decreasing order of share price strength):

The strong three-month performance of Sports Direct’s shares has been helped by its elevation into the FTSE 100. But the recent enthusiasm for the company comes down to a lot more than its recently acquired blue-chip status. First-quarter results last month underline how well the group is doing from a trading perspective and the company has also been pursuing growth, with a push into Europe.

Programme maker and broadcaster ITV has proved to be quite a turnround story since its 17.5p share price nadir in March 2009. The key to the City’s recent enthusiasm for the shares has been the success of the group’s production business, ITV Studios, which is starting to internationalise ITV’s revenues and reduce ITV’s reliance on highly cyclical ad revenues.

Howden Joinery looks a likely beneficiary of the government’s contentious Help to Buy scheme. The company makes and sells kitchens, and broker Numis reckons the market remains 20 per cent below its 2008 peak. That suggests some attractive cyclical upside as transaction levels pick up. Howden has also invested heavily in increasing capacity.

Legal & General is still a “British” stock but its managers’ ambitions are increasingly thought to lie beyond these shores. The UK is a highly competitive market for life assurers and the company is keen to pursue overseas acquisition opportunities, especially in the US. International business is already making an impressive contribution to growth, with £7.5bn of the £8bn first-half net inflows into L&G’s asset management business coming from overseas.

Half-year results from N Brown, due on October 9, will be the first presented by new chief executive Angela Spindler. The broad strategic approach of the catalogue retailer, which has its roots in selling clothes to larger and older people, look unlikely to change given N Brown’s success over recent years. But it is moving into new non-clothing product lines, and has been launching new titles to appeal to a broader range of consumers. It has also been increasing its geographic reach. Investments have also been made in customer recruitment and efficiency improvements are being pushed through.

The other companies picked out by the screen were estate agents’ portal Rightmove, financial services group Hargreaves Lansdown, support services firm Interserve, wholesaler Booker, fashion chain Next, supermarket J Sainsbury and Garfunkels owner Restaurant Group.