The Investment Column: Thian's turnaround makes Whatman a hold

Nearly 250 years ago, Whatman was busy making drawing paper for the likes of Turner and Constable. Since then the group has been through its fair share of ups and downs, and today is focused on producing filters, throwaway blotters and membranes used in laboratory and factor tests.

If readers had bought into Whatman three years ago they would be sitting on a 350 per cent capital gain. Over this period, under the chairmanship of Bob Thian, the group has achieved a impressive turnaround, going from the red to an annual pre-tax profit of £21m, unveiled yesterday. Cost savings and efficiency gains have been behind this. For example, when Mr Thian took over, Whatman operated out of 21 sites across the globe. Today this figure stands at just four. It has rationalised its product range from 16,000 lines to a more manageable 4,000.

The purchase in 2004 of the German rival Schleicher & Schuell gave its profit line an added boost. It has produced synergies far greater than anyone in the City had expected. And there could well be more such deals in the future. The group certainly has the firepower, while there are plenty of targets for it to go after, given how fragmented its industry is outside the top three players.

Now the focus is on Whatman's ability to grow its top line. If the first-quarter sales figures it posted yesterday are anything to go by, it should have little trouble. The group had promised to deliver a rise in revenues of 6-8 per cent for 2006. For the quarter just passed it unveiled 11 per cent growth and a strong order book.

The story so far makes Whatman shares clearly worth holding on to, despite their strong run. The fact that the company is the only one in the world which has the technology to store DNA at room temperature makes the stock a buy. Whatman's innovation does away with the need for the cumbersome and expensive fridges currently required and opens the door to what is likely to be a very lucrative market for the company. So far it is already being used by the French police, the FBI and the CIA.

IFX Group

The recovery at IFX Group, enacted by its chief executive Edmond Warner, is finally bearing fruit. Yesterday, the foreign exchange trading and spread-betting firm said its profits for the year ending 31 March would come in at £3.4m, more than the £3.1m forecast by analysts. This performance represents a near doubling on the profits achieved by IFX in 2005.

Since Mr Warner took over in 2003 he has focused it on providing equity products, through Finspreads, and on foreign exchange. More recently he has opened an office in Shanghai offering spread-betting. Given the Chinese love of gambling, the potential market is huge.

Spread betting allows investors to take positions in the stock or foreign exchange markets. It enables punters to gear up their bets - that is, cash in on movements in valuations with only a small outlay of capital - and avoid paying tax on any profits they may make. The recent boom in the UK stock market has been particularly good news for Finspreads.

The IFX boss believes his work is now done and plans to quit this year. He will leave it with £19.5m of cash on its balance sheet, up from £16.8m last year, which accounts for about half the group's market capitalisation. Strip this out and the shares trade at just nine times forecast earnings for this year. This is a significant discount to the rating enjoyed by the quoted rivals IG Group and London Capital, which is unwarranted. Buy.