Investment Column: Direct approach benefits St Ives

St Ives, the printing group, believes in managing its businesses, rather than doing endless deals, which is a bit surprising since its chairman, Miles Emley, is a former deal-maker at the Rothschilds merchant bank. By sticking to its last, the group has built market-leading positions in printing markets ranging from Bibles to the sleeves for CD-Rom discs by running a tight and well-invested ship.

That formula continued to deliver the goods in the latest half year to January when profits jumped by a fifth to pounds 23.5m, more than the group made in the whole of 1992. The figures were muddied by exchange factors and a pounds 1.68m maiden contribution from Perlmuter, the US direct response and commercial printer acquired in September, but underlying growth was still probably into double figures.

As ever, some of St Ives' cylinders fired better than others. Books was a flat market, with Bible exports hit by the strong pound and paperbacks showing little sign that the end of the net book agreement is boosting sales. Work printing the reams of documentation associated with City bids and deals has also gone quiet in the run- up to the general election, even if St Ives did pick up the massive Halifax Building Society conversion and the British Gas demerger. It is warning that the hiatus could continue for a while after May.

However, the cuts in pagination and delayed launch of titles which hit last year's results from the magazines division have reversed in the wake the 20 per cent cut in paper prices over the past year. The Christmas decision by RR Donnelley of the US to close its York plant, one of the top five or six magazine printers in the UK, also brought a windfall in the shape of contracts for Vogue, Top Gear and in-house mags for Marks & Spencer and Sainsbury's Homebase. The troublesome new presses at the Caerphilly works are now nearly fixed - some two years after the first was commissioned.

But the real growth areas, where St Ives is concentrating its sales efforts, are in direct response, multimedia such as CD-Roms and so-called international corporate finance. It also continues actively to look abroad to extend all its interests. Perlmuter, picked up last year in the US, and Johler Druck of Germany, in for a full six months this time after its acquisition in 1995, are both in direct marketing. The former seems to be dovetailing well with St Ives' Florida operation, while plans to increase capacity by up to 12.5 per cent in Johler is indicative of the health of the German company and its markets.

Prodigious cash flow, equivalent to after-tax profits in the half year, should leave the company with net cash at the year-end. Profits of pounds 47.5m would put the shares, up 3.5p to 545p, on a forward multiple of 17. Booming consumer expenditure looks set to make up for thinner times in financial markets, but Mr Emley may need to work up another foreign deal to get the shares on the move again.