The Investment column: Sykes shares in from the cold

Shareholders in heating and ventilation company Andrews Sykes must be feeling a very warm glow. Three years ago, the business was losing pounds 5m a year and was valued at 50p a share. Yesterday, Jacques Murray, chairman of the company, unveiled a 48 per cent jump in pre-tax profits to pounds 5m for the six months to June. The shares closed 22.5p higher at 662.5p.

Stern French millionaire Mr Murray took the helm at Sykes in 1994 following a boardroom coup. He and the chief executive, Eric Hook, embarked on a radical restructuring programme. In 1996, the company moved out of the red for the first time in three years.

But after recovery comes growth and Mr Murray must now prove he has more to offer than crisis management skills.

His answer is an ambitious acquisition spree, targeting struggling businesses which should benefit from both Andrews Sykes' well-established distribution systems and Mr Murray's managerial skills.

Acquisitions are likely to be bolt-ons to strengthen its three core activities of heating, air-conditioning and pumps, as well as to grow a fourth, though yet undefined, leg.

All in all, the company's plans appear sensible. The highly experienced Mr Murray looks like a good bet to inject life into ailing acquisitions. The risks are that he rushes and overpays.

A fourth division should help smooth out the fluctuating profits associated with supplying heating and air-conditioning in the changeable British climate. And Sykes, with strong cash flow, minimal gearing and plenty of borrowing capacity, should also be able to lay its hands on the cash it needs to finance expansion.

The house broker Charterhouse Tilney forecasts pounds 10.5m for the full year, revised upwards from pounds 10m. That puts the company on a prospective price- earnings ratio of 16, about average for the sector. Given prospects, that looks too low.