On the open road at last

STAGECOACH

181.25p +9.75p

N ROCK

834p -113.5p

WHEN Scottish transport group Stagecoach was brought low in 2002 by its wounded-buffalo Coach USA acquisition and associated management-haemorrhaging, its shares were bumping along below 20p.

The turnaround has been vivid on both the trading and share price fronts as the company streamlined and exited businesses for all it was worth to focus on the basics again.

Yesterday the stock was one of the market's biggest positive movers, closing up 6 per cent at 181.25p, as Stagecoach announced further improvement, with full-year profits up nearly 40 per cent at 162 million.

The share price reaction was due to three factors: strong organic performance in all the main businesses of UK buses, UK rail and North American buses; a decent 10 per cent rise in the divi (of which founder chief executive Brian Souter and his sister Anne Gloag get more than 9m for their combined 28 per cent stake); and no plans to go back on the risky major acquisition track that caused all the problems in the first place.

It is a potent combination again, with Souter believing environmental concerns and a big housebuilding programme under Gordon Brown, plus inward migration, will continue to provide strong support for the UK rail and bus industry generally.

Stagecoach's revitalised template is a mix of increased volumes of passengers, but not at the expense of profit margins.

Although profits at its wholly owned rail division, predominantly South West Trains out of London Waterloo, were flat at 58m, this was only because of 13m of franchise bidding costs in the period.

Virgin's Pendolino trains on the West Coast Mainline, where Stagecoach is a 49 per cent joint venture with Sir Richard Branson's group, have transformed performance there as well. The Virgin business reported an 11 per cent jump in passengers on its services that run between Glasgow and London, and a 130 per cent leap in profits to 25m, of which Stagecoach gets a little over 12m.

The wreckage in the group's rearview mirror looks distant, and the view ahead looks pretty clear.

TYNESIDE-BASED bank Northern Rock's management were hardly looking canny lads with the City yesterday, when a profits warning unnerved the whole mortgage sector.

Northern Rock's shares plunged 12 per cent when it said the string of interest rate rises over the past year had escalated its funding costs.

The problem is that many banks have customers on fixed-rate mortgages and so cannot pass on the Bank of England's monetary tightening.

In Northern Rock's wake came Halifax-owning HBOS, whose shares closed down 2.5 per cent, Alliance & Leicester, down 2.6 per cent, and Bradford & Bingley, off 3.8 per cent.

It is hardly a banking crisis of sub-prime lending proportions, but Northern's comments cast a shadow over the coming bank reporting season where mortgage operations are concerned.

IT IS quite right that the European Union has warned France, Sweden and Greece about their stitched-up betting and gambling markets.

As major UK bookmaking group Ladbrokes says, how can it be right that it has to compete tooth-and-claw against the French monopoly-run Euro Millions lottery in the UK, when Ladbrokes is banned from operating betting and gaming services in France?

Too often in Europe, British bookmakers are playing with a deck rigged in favour of the house.

Countries like France tend to argue that they should be allowed their state-run gambling monopolies because EU law sanctions them if governments have social objectives for doing so, such as keeping a lid on problem gambling.

But, as Ladbrokes says, the argument is undercut by the fact that state gambling monopolies in many EU countries throw money at promoting their services, sometimes more aggressively than licensed and regulated bookmakers in countries where there is an undistorted, competitive playing field.

Bookmaking should not be ring-fenced from the cross-border competition the EU says it wants to promote.

We might be getting closer to seeing some fairer play, however. Yesterday's warning from the European Commission is a final one before France and Sweden become the subject of a legal action in the European Court of Justice.

Toyota boost for flat panel speaker group NXT

SMALL BUT BEAUTIFUL

NXT shares rose 8.8 per cent yesterday as the flat panel speaker group said car giant Toyota's new compact minivans would feature an NXT-equipped roof liner speaker system as standard.

The Voxy and Noah go on sale in Japan and will be equipped with NXT's SurfaceSound technology, enabling the entire roof liner to be transformed into a loudspeaker.

"Our development partner, FujitsuTen, continues to promote and enhance the NXT roof liner speaker system and we are actively supporting them in developing the next generation product," said NXT chief commercial officer Graham Ryan.

Put simply, NXT says its vision is to "take sound where it's never been before". What does that mean?

NXT, the Company, was set up specifically to develop the Distributed Mode Loudspeaker, the core technology at the heart of everything it does. NXT evolved out of Verity Labs, a dedicated research centre established to push audio boundaries.

On Tuesday the firm announced a major deal with backpack maker Quiksilver, whereby three out of the six new Quiksilver premium backpacks will feature an NXT-enabled stereo speaker module.

NORTHERN ROCK

834p -113.5p

Broker says HOLD

NORTHERN Rock slumped yesterday following a statement that full-year underlying attributable profits were expected to increase by about 15 per cent on the previous year - below the average forecast.

The news moved ABN Amro to cut its rating on the mortgage lender to "hold" from "buy" with price target of 900p. It is worried about a lower growth outlook and increased uncertainty of earnings sustainability.

EXPERIAN

606p +6p

Broker says BUY

CREDIT-CHECKING firm Experian has been upgraded by UBS to "buy" from "neutral" with the price target up to 710p from 680p.

The Swiss broker said Tuesday's acquisition of a 65 per cent stake in Brazilian credit bureau Serasa for $1.2 billion would aid growth at the group's Credit Services unit.

Last week the agency was given a "buy" rating by Deutsche Bank and a 701p price target.

POWERLEAGUE

93.50p -0.25p

Broker says Buy

ALTIUM Securities upgraded its target price to 110p and reiterated its "buy" rating on Paisley-based Powerleague, saying it believed changes to the group's reporting methods for depreciation charges and an acceleration of its site refurbishments should act as a catalyst for shares.

The broker said that while its growth would not match its Scottish rival Goals Soccer Centres, the discount between the companies was not warranted.

ONE TO WATCH

COMPANY NAME

155.50p -4.5p

Scotsman says BUY

ASHTEAD Group operates mainly in the US and the UK. Its principal activity is the rental of equipment to industrial and commercial users in the non-residential construction sectors.

In the US, it operates under the brand name Sunbelt, while in the UK as A-Plant. Ashtead also has a specialised business that rents mainly electronic survey and testing equipment in the UK, the US, Singapore and Canada under the brand name Ashtead Technology Rentals. It is the second largest equipment rental business in the US, with 445 outlets, and the third largest equipment business in the UK, with 201 locations. The technology division services principally the offshore oil and gas sectors in the environmental training and testing industries, with 13 locations throughout the world.

The US division is the largest, representing about three-quarters of the company's turnover, with the UK only a fifth. As a result, it is, of course, heftily exposed to the dollar. This may explain why the shares have been extremely dreary over the past 12 months.

Like its large peer Aggreko, Ashtead has an excellent network of outlets, critical to the company's operations, incorporating a broad range of services from sites accessible to its customer base. The recent results were encouraging, with progress on both sides of the Atlantic confirming that its markets, particularly in the US, remain robust.

Ashtead is acquisitive. In August 2006, it bought NationsRent in the US and Lux Traffic Controls in the UK, both operations complementing Ashtead's existing structure. Unless western economies seize up completely, Ashtead's prospects look encouraging.

• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

Fed to keep interest rates on hold

RUMOUR OF THE DAY

THE US Federal Reserve is expected to keep interest rates at their current level of 5.25 per cent at the end of its June meeting, which starts today.

As the Fed's rate-setting open market committee sits down for two days of talks, many analysts say rates will remain unchanged.

More important will be the comments that accompany the Fed's decision, which could help predict its next move.

Inflation concerns have fanned fears that rates could still move higher. This is a marked shift from the consensus until recently that rates were likely to be cut by the end of the year.

The change in expectation comes on fresh predictions of a rebound in economic growth, despite almost flat growth of 0.6 per cent for the first three months of the year and the continued housing market weakness.

Wood Group falls on industry fears despite Scots firm's rosy forecast

SCOTS STOCKS

OIL services company Wood Group released yet another positive trading statement but fell on a day that oil continued to fall on expectations of large stockpiles in the US. Wood said it was increasingly confident of strong growth for the year, benefiting from increasing oil and gas spending and improving power markets round the world. However, shares fell 6.25p to 320p while oil tanker provider Abbot was hit harder, down 8.5p to 267.25p.

Mortgage lender HBOS also suffered despite continuing a share buyback programme, as a knock-on from Northern Rock's profit warning and the chance of another rate rise. The Edinburgh-based blue-chip dropped 25p to 978p, a ten-month low, while RBS fell 12p to 629p.

Forth Ports lost recent gains on bid speculation as traders took profits. Shares fell 47p to 1,832p. SMG was the largest full list Scottish faller despite revealing it had received bids for Virgin Radio. On a new profit warning, SMG fell 8.25 to 52.25p.

On AIM, debt solutions provider Invocas rose 8 per cent to 112.5p as it revealed maiden profits and a confident outlook. IT company Glen Group recovered some of yesterday's losses to gain 12 per cent to 0.43p. The company said its shares had been admitted to Plus Markets, which would improve liquidity, though AIM would remain its primary listing.