Cash in at Greene King

First Technology is good value; Hold Photo-Me and hope for a bid

No one could accuse Greene King of being all froth and no substance. The regional brewer and pubs operator packs a powerful punch – to boozers and investors alike. Since the peak of the dot.com years, when brewing was one of the stock market untouchables, shares in the group have more than doubled.

Led by an able management team, Greene King has shown that it has the head for delivering steady earnings growth and yesterday's numbers were no exception. Pre-tax profits before goodwill and exceptionals rose 9 per cent to £35m while turnover soared 17 per cent to £249m. Both were helped by the group's recent acquisitions of two pub companies: Old English Inns and Morrells.

Given the backdrop of an industry showing the wear and tear of too much competition among pub-goers up and down the country's high streets, Greene King's crowning glory was perhaps the good news it had on like-for-like sales trends. On an uninvested basis across the group's 585 managed pubs, they have turned positive after being down by 0.4 per cent in the six months to 19 October. That less than a quarter of these pubs (and less than one in 10 of its 1,700-strong estate) are actually located on high streets could prove a blessing if the trading woes highlighted by rivals in the sector worsen.

For its part, Greene King, which is well represented in the university towns of Oxford and Cambridge, signalled that students seemed to be spending even less on beer than has been flagged by other pub groups.

Greene King's healthy balance sheet leaves it well placed to swoop on future potential pub casualties, which could prove the best way to sustain earnings momentum.

Despite the group's relative resilience, its shares, up 30p to 712.5p, are unlikely to remain unscathed if rivals falter and now could be a good time to lock in some profits.

First Technology is good value

Shares in First Technology, a maker of automotive and gas sensors as well as crash-test dummies, are now trading at around half the level they stood at just three months ago.

Judging by yesterday's figures, the market reaction to its September statement (when it warned of tough conditions in its main market of the United States) seems to have been a little harsh.

Not that the company hasn't felt the heat. In the six months to 31 October, pre-exceptional pre-tax profits were £12.4m, down from £13.7m.

But considering around half the company's revenue comes from the US and around 60 per cent of its business is supplying automotive sensors, it could have been much worse.

Debt has fallen to £9m from £12.3m and the company expects to be debt free at the end of the year. It also expects to see a better second half than first half.

First Technology has a good share of its markets as well as defensive qualities as around 45 per cent of turnover is generated by new safety legislation, which is increasing.

The shares jumped 10 per cent to 222.5p yesterday, but they still trade on a lowly forward p/e of 9, assuming full-year profits of £26m. They look oversold, despite yesterday's rise. Good value.

Hold Photo-Me and hope for a bid

Photo-Me International, the troubled photo-booth operator and manufacturer, has a chequered history with profits warnings, missed product launches and an abandoned dividend. The fact that the chief executive sold £28m of shares at £4 each compared with the current share price of 18.25p hardly helps sentiment either.

The latest problem is with the company's apparently whizz-bang new mini-lab (the machines that retailers buy to develop prints). The DKS1500 digital machine is ready for launch but technical difficulties have made it six months late. Photo-Me has signed a supply deal with Kodak but is uncertain it can produce enough of the machines to satisfy the demand it is so bullish about.

What shareholders are left looking at is a company that saw profits fall to £1.3m from £8.2m last year and will make a loss this year. There is no half-year dividend and won't be any sort of payout until trading improves and net debt of £14.6m (down from £37m) is paid off.

There are 200,000 analogue mini-labs worldwide that will eventually need to convert to digital technology. But whether customers will buy from a little outfit such as Photo-Me, or an international rival such as Fuji, is open to question. It is too late for shareholders to sell now. But a bid is possible. Hold on.