2016 was a seismic year for politics, but the FTSE 100 outperformed expectations. So how did The Yorkshire Post’s business team’s share tips perform and which firms do they think will do well in 2017?
Mark Casci - Business Editor
This column represents my debut when it comes to predictions as to where readers of The Yorkshire Post should invest their hard-earned cash and as such the task at hand fills me with trepidation, with the prospect of humiliation 12 months down the line filling me with dread.
Accordingly I am going to very much play it safe and at the same take something of a calculated risk with a firm that is highly successful yet has endured a frustrating year for its share price.
My tip for 2017 lies with Tracsis.
The Leeds-based transport software provider is one of Yorkshire’s most impressive business success stories in recent years.
Tracsis products allow transport operators to computerise their staff and rolling stock schedules, so they can run their trains more efficiently.
It has grown quickly, but organically, since being set up as a spin out from the University of Leeds.
During 2016 it increased its pre-tax profits by 18 per cent to £7.6m, with revenues up by 29 per cent to £32.6m for the year ending July 31, from £25.4m in the previous period.
All of these numbers point towards a well-run business that has exceeded original market expectations.
At at its last set of results its fully diluted adjusted earnings per share increased 22 per cent to 22.37p.
Moreover, Tracsis has been a winner several times this year, picking up trophies at The Yorkshire Post’s Excellence in Business Awards and Variety’s Yorkshire Business Awards.
Perhaps most importantly of all, it was the share tip price from my colleague Greg Wright, Deputy Business Editor of The Yorkshire Post, a man who knows a thing or two about these matters.
So, what could go wrong?
The question is can they follow up their success with an increase in stock market value?
Like so many Plcs the firm’s price took a battering post Brexit and has only just recovered to its January level, meaning that on paper their price has looked fairly static for 2016.
Had it not been for the shock waves sent through the stock market over the summer, shareholders would have more than likely been eyeing a return on their investment.
The business is likely to start seeing the benefits of the some savvy acquisitions and deals.
It is set to receive a boost from a large order with a North American Class 1 railroad operator for its Remote Condition Monitoring hardware and software.
And it has also recently acquired Gateshead-based Ontrac a company which includes Network Rail among its clients, meaning Tracsis can now service both the pubic and private sector. .
The business has contracts with every major train operating company in the UK and is expanding to Sweden, Australia and New Zealand.
Its remote condition monitoring technology is allowing it to seriously punch above its weight and shows the success a small company can achieve if it has the guts and determination to go after and secure large contracts.
So that’s my well-reasoned if unimaginative tip for 2017.
Here’s hoping for a more stable year on the markets which will allow our public companies to grow and thrive.
Tracsis closed 2016 at 507.5p.
Greg Wright - Deputy Business Editor
NEVER underestimate the persuasive power of wonky carrots.
I’ve endured a roller-coaster decade of share tipping, with periods of feast and famine. The share charts of many of my chosen companies have resembled particularly hazardous ski slopes.
This year, I’m plumping for a Yorkshire stalwart which has seen its fair share of setbacks, but now seems set for a period of growth under an experienced boss who really knows his onions, and carrots and pumpkins.
But before I reveal its identity, I must take a glance over my shoulder at Tracsis, the Leeds-based firm which I chose as my share tip last year. Tracsis is a clever, fast-moving company which produces software that can prevent train delays and derailments.
On the whole, it escaped the curse of the Greg Wright share tip to record a solid year’s trading, although the vote in favour of Brexit dimmed the fortunes of its share price. My colleague Mark has chosen it as his share tip for this year, and I feel his faith will be handsomely rewarded. Tracsis closed 2015 at 534p. It closed 2016 at 507.5p. I believe the company’s share price at the year end does not reflect its true value.
This year I’m tipping Bradford-based supermarket chain Morrisons, which has been on a headline-grabbing public relations offensive in recent months.
You probably heard that Morrisons pledged to give away 200,000 wonky carrots in the run-up to Christmas, to support the tradition of leaving out refreshments for Father Christmas.
Earlier in the year, the supermarket chain held pumpkin carving classes for parents who wanted to brush up their Jack-o-Lantern making skills before Halloween.
This was all very entertaining and made great copy, but there are solid business reasons for believing that Morrisons will be a strong investment in 2017.
In David Potts, Morrisons’ has a canny CEO who has done much to restore the brand’s credibility, and reach new customers. In November this year, Morrisons launched a new one-hour delivery service through internet giant Amazon. The move allows Amazon Prime customers to order a full Morrisons shop online via the Amazon Prime app, with the choice of paying £6.99 for a one-hour delivery or taking a two-hour delivery slot for free.
While the service will only be available in certain areas of London and Hertfordshire, Bradford-based Morrisons said it could help boost profits by between £50m and £100m.
Neil Wilson, markets analyst at ETX Capital, said the move was “pure profit” for Morrisons and another “feather in the cap” for its chief executive.
“This is a big money-spinner for Morrisons and gives it a massive edge over Tesco and Sainsbury’s in the home delivery market. With prices being slashed and competition fierce, this is the kind of deal that will make a big difference to the bottom line.
“Morrisons’ stock has surged this year as a result of the efforts to strip out negative like-for-like sales and lowering costs. Morrisons has just delivered four straight quarters of sales growth – this form looks set to continue.”
Morrisons’ newly launched premium line, The Best, is also proving a hit with affluent shoppers. My money is on Mr Potts staying ahead of the game. Morrisons’ share price closed 2016 at 230.7p.
Following a safe, if unspectacular, start with my first ever share tip with Servelec in 2015, this year I plumped for Sirius Minerals.
The thought of Sirius making strides with its York Potash Project was an enticing one.
The £1.7bn project proposes to mine large volumes of polyhalite – a multi-nutrient fertiliser, helping contribute to global food security.
After bagging approval for the project, Sirius had one major hurdle left – financing. My tip was partly based on Chris Fraser’s background. The managing director and CEO of Sirius has over 16 years of finance expertise in the mining industry.
The company’s £370m open offer for Stage 1 financing was “modestly oversubscribed”.
The company also named contractors for key components.
Even Australia’s richest woman, billionaire iron ore magnate, Gina Rinehart pumped £245m in to Sirius Minerals. A ringing endorsement of the company.
Yuen Low, analyst at Shore Capita, described the polyhalite project as “paradigm-shifting”.
The results were a massive spike in share price during the warm summer months as the sun truly shone on Sirius. The price hit a heady 48.33p at its peak. Unfortunately with the changing of season came a normalisation in the price, finishing at 19.25p having started the year at 14.75p.
This year I’m hoping that Filtronic will provide the tonic to really propel me into the big leagues.
Rob Smith, CEO of the Leeds-based firm, seems to have really turned things around after a bumpy few years.
In fact in 2016 Filtronic’s share price more than doubled and I can see it continuing an upward trend.
The main reason why I believe this to be a good bet is the demand for mobile data. More and more we find ourselves using vast amounts of data. Last year we saw a glimpse into just what mobile data can provide in the mobile gaming arena with Pokemon Go.
People are also accessing videos on the move thanks to the likes of Netflix and BBC iPlayer. Changes in the way mobile phone tariffs are structured also point to this mobile data drive continuing.
Non-traditional tele-communications companies are expected to come into the industry – driving up demand for Filtronic’s products.
All in all 2016 was a safe bet but I’m confident 2017 will be even better.
Filtronic closed 2016 at 12.12p.
Ros Snowden - City Editor
Anyone following my share tip for 2016 would
have enjoyed a 30 per cent increase on their investment. Phew.
My 2016 tip was Clipper Logistics, the firm that distributes goods for blue chip retailers such as Asda, Morrisons, John Lewis and ASOS.
Profits have soared at the Leeds-based group as it signed contracts with big name clients such as Harvey Nichols, New Look, Tesco and Zara.
As companies become more reliant on the internet for future sales, Clipper is in pole position to benefit.
Clipper said that all returned goods needs to be checked, reprocessed, repacked and sent back as stock for the next customer in a very timely fashion to ensure the goods can sell at full margin and in the right season.
Clipper’s shares started 2016 at 293.5p and closed it at 380p.
For 2017, I’m going for keyhole surgery instruments maker Surgical Innovations, which has had a torrid time in the past but is now well into its recovery.
The Leeds-based firm is seeing healthy export-led growth with half year revenue up 17 per cent to £3.04m.
The business has returned to profit, repaid £3m of debt since “the bad old days” and is now cash positive.
Its past difficulties were due to unrealistic expectations of stock sales, which led to excess inventory of £5m on the books.
These have now been sold through and regularised to £1.2m – a much more sensible level.
Surgical’s management is confident because the business model has an inherently high return on revenues if managed conservatively.
Its future opportunities look good as it operates in growth markets – minimally invasive surgery has become the main surgical procedure for many conditions.
An entirely new management team is now in place, which has brought much better commercial and operational focus to the business.
Surgical is export led so the collapse in the pound should provide a big boost to profits over the coming year.
In addition, barriers to entry in this niche field are high and getting higher owing to regulatory changes which are aimed discouraging “resellers” by enforcing compliance on them.
Meanwhile, its latest new products are gaining favourable clinical feedback and commercial traction, for example, YelloPort Elite.
Last, but not least, the business is a great, high valueniche manufacturing business based in Leeds and run properly should so something Yorkshire should be proud of.
Analyst at WH Ireland are looking to see further improvements in revenue and profitability in 2017. Surgical’s shares closed 2016 at 4.25p.
My pick for 2016 was Emis Group, a Leeds-based company founded in 1987 by two GPs who wanted to computerise medical records to improve patient care.
Choosing it seemed like a good idea at the time. The company’s stock in trade – pharmacy management systems, surgery management software, retinal scanning and medical IT services – is big business these days, and, with no shortage of ill people, or healthcare providers seeking to streamline operations, it’s a sector that looks set to grow.
What’s more, my colleague Greg Wright had picked the stock the previous year, and revelled in a 31 per cent share price hike.
Yes, I know, past performance is no guarantee, etc – but still, finding out the price had fallen from 1,138p to 964.5p by the year end was disheartening, especially after my performance last year (my pick fell in price then too).
So what went wrong? Well, the share price fell sharply twice over the year, once just prior to its January trading update and a second time around the time of the EU referendum. Both times it recovered, but never for long enough to look convincing, and even fell to a year low of 805.74 in early November.
Then again, had I been investing for real I might have been cheered by the improved interim dividend, which in June was up 10 per cent on the year to 11.7p.
Perhaps I just chose the wrong year; Greg clearly profited – virtually – last year and several brokers are now giving it a ‘Strong Buy’ rating for 2017.
Over the coming year I’ll be attempting to break my duck with Town Centre Securities. The Leeds-based property development company has a strong track record and follows a policy of extracting maximum returns on its investments, flogging them on when they start to tail off.
It also concentrates on strong regional cities like Leeds, Manchester, Glasgow and Edinburgh – all commercial property hotspots – as well as suburban London. Interestingly, it has long since invested in car-parking, building up a large portfolio in the 1990s and has said it intends to do the same again.
It has delivered a dividend per share above 10p since 2010, and after a four-year plateau of 10.44p last year upped it to 11.0p.
The share price started 2016 around the 330p mark but has sustained a couple of sharp drops in the interim, including a June Brexit dive, and finished 2016 at 277p.
In my book that makes now a good time to buy, and the analysts appear to agree. I’ll be keeping my fingers crossed, but after the last couple of years, perhaps I shouldn’t hold my breath