Computacenter worries remain

"This is not a profit warning." Computacenter's chief executive, Mike Norris, greeted analysts and shareholders at its investor day yesterday with the uncompromising message that the group is capable of meeting market expectations for its interim results.

But half-year figures are only half the worry. The shares fell 20p to 330p because Computacenter's very brief trading statement laid bare what the market has feared: that interim profit forecasts will be met only because of a stonking first quarter, while April and May, traditionally weak months, were even worse than feared. Several analysts came away considering shaving their profit figures for the rest of the year. The consensus forecast of £68.6m, from £55.6m in 2000, looks increasingly ambitious.

Computacenter is a major European reseller of hardware from the likes of Sun Microsystems, Nortel and Cisco ­ a list of partners that reads like a who's who of recent telecoms sector profit warnings. Inside yesterday's meeting, Mr Norris was able to hint that June trading looks likely to be a bit better, but it remains too early to say.

And that is the problem. Investors would be wise to steer clear of a company with such little visibility as to future sales. Government IT spending looks sure to remain buoyant, but Computacenter revenue from that area is dwarfed by its exposure to the faltering telecoms and investment banking industries. The likes of Sun have only recently begun to warn that the US slowdown in hardware sales has spread, suddenly, to Europe.

Computacenter shares trade on a prospective price/earnings ratio of about 13, on forecasts from its house broker, HSBC. That low rating is a legacy of last year's profit warnings, which were blamed on the Y2K hangover and which wiped out all the gains since its 1998 flotation. But the stock is unlikely to make any significant progress until there are clear signs of an upturn in the industry. In the meantime, the risks are heavily on the downside.

Halma

Halma launched in the region of 200 new products last year. The company makes a vast array of niche safety products, from fire and gas detectors to water testing kits and emergency phones in lifts. The business likes to characterise itself as something of a federation of entrepreneurs.

And it is a business that is throwing off cash. As governments around the globe pushed through tougher safety rules, profits last year ­ before goodwill from its acquisition spree ­ were up 14 per cent to £49.7m. The company reckons that organic growth was 8 per cent. The figures came in at the top of analysts' expectations.

There are pockets of very strong growth, particularly providing transistors to the US electricity generators, who are desperate to expand capacity. And Stephen O'Shea, the effusive chief executive, has been talking up elevators in China.

The company has a good track record in acquisitions but is upping research and development spending in the hunt for new inventions.

But a 25 per cent rise in the share price in the last three weeks has sent it to a giddy rating. Up 13p to 158p yesterday, Halma is on a forward p/e of 15, which represents a big premium to both its engineering and its electronics peers. It is almost certain to come under pressure as the world economy slows this year, but long-term investors should pick up the stock when it weakens.

InTechnology

InTechnology, which provides computer data storage, is one of a select few technology businesses whose shares have held up well over the past year.

The firm is headed by Peter Wilkinson, the man behind Freeserve and Sports Internet, which was sold to BSkyB. But the board also boasts Joe McNally, chairman of Compaq, as a non-executive director.

Yesterday, InTechnology reported prelims showing underlying profits of £6.5m, up from £4.9m last year. Sales were £165m, up from £102m.

The company's storage business remains its main revenue generator. But it is the online data services division, which launched its first data back-up product called VBak earlier this year, which could prove the jewel in the crown, thanks to a deal with Compaq.

That partnership makes the US giant the exclusive distributor of VBak in the UK. The uplift that could bring has not been factored into analysts' sales forecasts of about £200m for this year.

This will be a crunch year for InTechnology, but its experienced management and solid finances make it a good bet in the sector. Yesterday's dip in the shares, by 34p to 320p, puts the stock on a forward sales multiple of just over two times. A speculative buy.

Scipher: Yesterday's graphic squeezed two years' share price movement into one. Scipher was floated at 380p in February 2000.