The Investment Column: Take profits at DIY group Travis

Avoid Carter & Carter for a little while longer; Tune in to Autonomy's new software for TV

The shareholders of Travis Perkins, the builders' merchant, voted to approve its £950m purchase of Wickes yesterday. The deal moves Travis from its traditional focus on sales to the tradesman, into the bigger and faster growing DIY market. Will the acquisition prove a piece of successful craftsmanship or a bodged job?

The shareholders of Travis Perkins, the builders' merchant, voted to approve its £950m purchase of Wickes yesterday. The deal moves Travis from its traditional focus on sales to the tradesman, into the bigger and faster growing DIY market. Will the acquisition prove a piece of successful craftsmanship or a bodged job?

Buying Wickes is a decent next step for a company that was close to meeting its target of winning a 20 per cent share of the builders' merchant market and on an operational level, you wouldn't bet against it being a success. Travis has an awesome reputation for integrating its acquisitions, doubling earnings per share in the last five years by snapping up smaller players and squeezing the benefits that come from being able to buy supplies such as timber, bricks, tools and everything else in bulk. It has promised £35m in annual savings from the Wickes deal, mostly in purchasing.

Yet the deal has increased the risk profile of Travis shares. The company has previously fought shy of the DIY enthusiast, who takes up more time and spends less. Different management skills are required. And the deal comes just at the moment that Frank McKay, the chief executive for five years, heads into retirement. Geoff Cooper, his replacement, was respected as a director of Alliance UniChem but has no form in this industry.

Then there are the risks attached to the DIY market Travis is entering. The proliferation of Changing Rooms-style programmes on TV tempts one to believe this market will grow forever, but it is highly correlated to the housing market. If stagnant house prices mean fewer people moving home, then DIY retailers could struggle. As a relatively small player, Wickes will suffer if its rivals launch a price war to compensate.

And finally there is the question of the share price, which has sky-rocketed since the Wickes deal was unveiled. It can't all be justified by the extra earnings that Wickes will bring in, and the stock has now passed all but one analyst's target price. This looks a good point for shareholders to lock in profits.

Avoid Carter & Carter for a little while longer

Take your car for its service back to your local Audi, Volvo, Citroen or Peugeot dealership, and the mechanic who does the work may well be an employee of Carter & Carter, the car industry training and sales support company that began trading on AIM yesterday.

C&C is paid by the Government and car manufacturers to train car technicians through 42-month apprenticeships. They are popular courses. Some 17,000 applied for its 2,200 places last year. The long-term nature of the programmes give the company a reliable income stream and there is room for more manufacturer-branded training schemes.

C&C also supplies salesmen to car manufacturers who can sell spare parts and accident repair services. These kind of after-sales services are becoming increasingly important in a rather flat new car market.

The company is promising bolt-on acquisitions and an aggressive dividend from its high cash generation. But Philip Carter, founder of the business, sold £7m in the flotation, which never inspires confidence. At 295p, up from the float price of 235p, they appear to be on a forward earnings multiple of around 16 times, which looks expensive for now. Wait for a few more miles on the clock before taking a ride.

Tune in to Autonomy's new software for TV

We are getting close to an age in which viewers will be able to create their own TV channel. The advent of broadband means telecoms and cable companies can offer programmes and clips on demand, but much work is still to be done in the behind-the-scenes technology. How will the viewers' request for, say, all the latest Michael Jackson news clips, be sorted? Autonomy, the software company, has one answer, unveiling a new version of its complex search engine software yesterday which, thanks to speech recognition and other skills, can recognise and categorise programmes and clips. It is already working with some cable firms and third generation mobile operators, and sales could start to come through from next year.

The company's search software is used across government agencies and multi- national companies to access information across e-mails, computer desktops and documents. Last year, sales were $64.8m, up from $54.9m in 2003. Software spending has snapped back after the post-Millennium downturn. Autonomy was first in and first out of that downturn, since it simply sells licences to its customers - there are no ongoing service revenues to cushion the blow when times are hard. Now, though, those additional sales are feeding through immediately into profits, and pre-tax profit was up 12 per cent to $8.6m.

Even before the TV software kicks in, prospects for this year are strong. Corporate IT spending continues to grow, existing blue-chip customers are likely to order additional licences as Autonomy software proves its use, and product upgrades are being launched. The shares are worth holding.