Friday tips round-up: Capita, Reed Elsevier, Unilever

26th Jul 2013 06:38

FTSE 100 outsourcing group Capita has been able to see the silver lining during this age of austerity, according to The Telegraph's Questor column. As public and private sector companies try to cut costs, they turn to outsourcing firms such as Capita. This demand for its services was reflected in its half-year results on Thursday, as it announced revenues for the first six months of 2013 were up 13% at 1.8bn pounds. Capita secured a "record" 2.0bn pounds worth of contracts, including a deal to take on customer management for Carphone Warehouse. One downside though was a drop in operating profit margins, largely due to the impact of the new business it had secured. Margins come under pressure when the company is making strides here, since new contracts require a start-up phase which comes with costs. "Recognising the long-term driving force behind the group's growth, this column keeps Capita as a hold," Questor added. Reed Elsevier has been more bullish than most about change, The Times' Tempus column notes. The Anglo-Dutch group, which publishes trade magazines from New Scientist to Farmers' Weekly and sells access to research databases including LexisNexis, decided early on that data was the future and print advertising revenue the past. It decided it was best for many of its titles to either get rid of them or shape them into mini-digital data businesses. Now 83% of Reed's business is digital, far more than that of its peers. Growth improved across all divisions for the half-year with underlying adjusted operating profit up 6.0% and revenues up 2.0%. However, its great digital transition is nearing the end. It will soon be leveraging its research databases with new analytics tools, a move that it expects to prompt further growth. "There is a solid foundation for capital growth and the prospect of increasingly healthy dividends. 'Buy'," Tempus said.Unilever is winning against its competitors in the global consumer goods market with its returns over the past five and 10 years well above those of Colgate-Palmolive or Procter & Gamble, the Financial Times' Lex column muses. However, Unilever's results for the first half raise worries. The company, which has consistently delivered organic sales growth of more than 6.0% over the past two years, saw that growth fall 5.0% in the first six months. In emerging markets - Unilever's particular strength - organic growth slipped to 10%, from 11% a year ago. Organic revenue growth at Colgate, which also reported results on Thursday, was ahead of Unilever's at 6.0%. Yet, Unilever's revenue is not the only factor to take into account. New products and a healthier trend in raw material prices helped it to boost its gross margin by 120 basis points from a year earlier. "Growth and valuations are important. But it pays to keep thinking long-term," Lex thinks.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.RD