Sunday tips round-up: Croda, WPP, Axis-Shield

1st May 2011 16:50

This past week saw Croda International report a quarterly record in terms of sales, but it was for margins, too. Its profit margins before interest and tax hit a record of 21.9pc. The above thanks to the specialty chemical maker´s ability to pass raw material price increases to its customers. Also, net debt fell by £5.3m since the year-end to £215.1m, so the balance sheet is strong. Importantly as well, the company owns the patents for several of its formulae. The sector has seen some merger and acquisition activity of late. Warren Buffett's Berkshire Hathaway announced the acquisition of Lubrizol this year and BASF has bought Croda's main competitor, Cognis. The shares remain a Buy, in the opinion of Questor, although after any share-price spike on good news, it adds, it may be best to wait and see if the shares edge lower before a purchase is made. Mature markets for WPP, the world's largest advertising agency, such as Germany and the US, are recovering at a greater pace than forecast. Management now expects that like-for-like sales will rise this year by 6pc, compared with its earlier expectations of 5pc. It also said that margins will probably meet or surpass its target of growth of 0.5 percentage points. Net debt has been reduced again, with average net debt going down £574m to £2.2bn in the quarter. Next year should be a good year for the group, with the US presidential elections, the London Olympics and the UEFA football tournament adding 1pc to 2pc to global advertising spend. However, Martin Sorrell, chief executive, reiterated his view that 2013 will be a tough year. The US deficit will need to be tackled and that will mean tough times across the Atlantic. For Questor, the rating on the shares remains Buy.In Britain, medical tests are rarely straightforward. Most blood samples taken at doctors' surgeries are sent away to be analysed and even those taken at hospitals seldom deliver instant results. But in other parts of the world, immediate results for some conditions are either taken for granted or gaining in popularity, even at the local surgery. Axis-Shield is at the forefront of instant testing. Midas verdict: Developing Afinion took longer and cost more than Axis-Shield expected and bringing it to market has been challenging. But the company is heading in the right direction. Testing in the surgery is more efficient for doctors and more appealing to patients so there is every reason to suppose Afinion sales will soar in the next five years. At 312p, the shares are a buy.abPlease 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.