That the shares of Morgan Crucible sit at the same level they did eight months ago – when Tempus last caught up with the FTSE 250 maker of carbon and ceramic components – might be considered something of a coup. Over that period, the FTSE all-share index has fallen by 15 per cent.

This is not to say that the stock market has not treated Morgan with circumspection in the interim. Last December, the company gave the first indication of a slowdown in sales that appeared to jeopardise the growth targets on which its turnaround had been based.

Yet as yesterday’s first-half figures show, Morgan remains very much on track. Revenues were up 15 per cent to £401 million – or 5 per cent on an underlying basis – which, combined with a modest improvement in operating margins, lifted earnings per share by nearly 12 per cent. The dividend was increased in line.

For the first time in recent years, Morgan’s numbers have been helped by currency movements: with about one third of sales drawn from continental Europe, the appreciation of the euro against sterling has added £3 million to operating profits and should continue to bolster the bottom line if rates stay unchanged.

The less ephemeral comfort is that Morgan’s restructuring under Mark Robertshaw, the chief executive, appears to have had the desired effect on its pricing power. The company has steadily sold its more cyclical and commoditised businesses, such as those serving the consumer goods and automotive sectors, to concentrate on higher growth and higher-margin end-markets: notably petrochemicals, aerospace and medical equipment.

Combined with a stronger market position – about 80 per cent of sales are drawn from markets where it is either the No 1 or No 2 supplier – it has been able to increase its prices steadily to more than offset higher costs, especially energy and raw materials. Net debt remains manageable – £227 million after this year’s £77 million acquisition of the technical ceramics business of Carpenter, of the United States – and provides scope for further bolt-on acquisitions. Meanwhile, Morgan Crucible’s order book, which is short by its nature – is higher than at the start of the year.

Yesterday’s rise of more than 5 per cent to 210p suggests that the company is being accorded more credit for its resilience. Even so, a foward multiple of nine times seems too low for an engineer delivering solid earnings growth and a 4 per cent dividend yield, raising the possibility that former predators, such as SGL Carbon, may return. Buy on weakness.

Old Mutual

South Africa may remain Old Mutual’s biggest market, but difficulties outside its home turf have undermined the FTSE 100 life insurer. More specifically, the profitability of variable annuities based on Asian stock markets sold through Old Mutual’s offshore operation in Bermuda has been destroyed by inadequate hedging in the United States. Old Mutual is only 60 per cent covered for recent falls in Asian indices, such that it must set aside $212 million (£109 million) to meet these products’ guaranteed rates of return – three times more than it indicated six weeks ago. If Asian markets continue their decline, the loss could be even greater.

That setback is unfortunate, given the woes already suffered by Old Mutual in the US this year – one of its American investment boutiques has taken a $900 million hit on a stake in Bear Stearns – and helps to explain why its shares tumbled by more than 11 per cent yesterday, down 44 per cent on the year.

That should not obscure the fact that, outside America, Old Mutual remains in reasonable shape. Yesterday’s first-half adjusted operating profits of £773 million were in line with consensus forecasts, helped by the resilience of Skandia – the Swedish insurer bought two years ago for £3.3 billion – in the face of weak European stock markets. That business is on track to make £300 million of full-year profits. In South Africa, new business sales rose by 12 per cent, despite the drag of higher interest rates. At 94.3p, or less than five times next year’s forecast adjusted profits, and yielding nearly 8 per cent, Old Mutual appears anomalously cheap. Even so, the shares are best avoided ahead of evidence the US is getting no worse.

Spring Group

Shares in Spring Group, the IT recruitment specialist, rose more than 9 per cent yesterday, not merely because of the merits of its first-half figures. Equal credit must go to Switzerland’s Adecco which, in confirming its bid interest in Michael Page International on Tuesday, helped to shift investors’ attention away from the exposure of the notoriously cyclical staffing sector to a weakening UK economy and towards its potential for oft-predicted consolidation.

All the same, Spring’s figures were sprightly, providing further evidence that the gloom that the stock market has priced into its shares – off 39 per cent this year – has yet to show through in its trading performance.

Net fee income was up 46 per cent – or a still healthy 11 per cent once effects of last year’s acquisition of the rival Glotel is stripped out – with gross margins up 1.3 points to 13.6 per cent. Glotel’s contribution should become more significant in coming months. A strong overseas presence has taken Spring’s nonUK revenues from near-zero to a quarter of the total, which is useful protection against domestic weakness. So, too, is Spring’s skew towards less cyclical contract positions, which account for 80 per cent of fees, as opposed to permanent positions.

Spring is sitting on £26 million of cash and the shares, at 45p, or eight times next year’s earnings, look inexpensive. However, the risk that a weakening permanent market puts 2009 forecasts under threat counsels caution for now. Avoid.

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