With shares having doubled in the previous two years, the going had been very good. It transpired that the funds were raised as part of a divorce settlement, yet the doubt created by the sale put skids under the Hill share price last summer. News that Hill, in common with most bookmakers, ran into a patch of bad luck later last year on the racing track and football pitch did more damage, however. Fear that the company would have its wings clipped by new gambling legislation created more drag.

Mr Harding, it is important to appreciate, could not have known how luck would change after he sold his stock. And while Hill shares came under pressure the decline was far from disastrous. In percentage terms, the share price fall barely reached double figures.

The gradual realisation that Mr Harding’s share sale was a personal financial matter rather than augury of an impending corporate gloom helped to resuscitate the stock. Fear that new legislation would divert gamblers’ cash away from bookmaking and into a number of super casinos, meanwhile, also looked overwrought.

The run of bad luck that Hill subsequently encountered put the company in a brief period of shade rather than casting it into serious gloom. Yesterday’s trading statement confirmed that the horses, dogs and football players performed for the punters rather than the bookmakers in the second half of last year. But with it came the assurance that Hill will still record a 20 per cent increase in profitability. Shares, performing better than any FTSE 100 stock yesterday, rose above their level when Mr Harding set the hares running in June.

Sports results go against bookmakers from time to time. Good operators like Hill, however, ensure that the odds are stacked in their favour over the long run. The increased use of predictable games machines, coupled with the rising appetite for gambling in this country, set a fair weather picture and shares, trading on a forward p/e of 12, are inexpensive. Buy.

Taylor Woodrow

TAYLOR WOODROW yesterday became the latest housebuilder to signal harder times ahead with a warning that profits would come in at the lower end of forecasts. Softer house prices meant it completed fewer homes last year than previously expected. As a result, it seems that Taylor Woodrow will simply tread water this year and attempt to repeat the record profit levels achieved last year.

This would be tricky if Taylor Woodrow had simply to rely on the weakening UK market. But its efforts will be aided by its American division which last year accounted for about a quarter of profits. This year the group plans to expand the US division and, with the UK arm stagnating, profits from across the pond could contribute as much as a third of the total.

The company concentrates on housing in areas such as California where there is a strong incoming population as well as cash buyers wanting retirement homes. In the next few months the chances are that interest rates in the US will continue to rise, but since they are rising from a very low base there is no reason to be concerned by US pricing weakness.

In the UK the company has already taken action to adapt to the slowdown. It is delaying most new development launches until later in the year and offering an increasing number of incentives to persuade buyers to part with their cash. The company has also raised the financial hurdle rates it imposes on itself for land purchases. That reduces the risk that Taylor Woodrow will get burnt by a downturn.

Meanwhile £25 million of annual cost savings from the Wilson Connolly takeover will kick in this year and that will help the company to maintain margins in spite of pricing worries. The company has also reduced debt from £743 million to less than £600 million in the past 12 months.

But shares remain vulnerable to the adverse sentiment swinging the way of housing and consumer-related stocks. The 4 per cent dividend yield, five times covered by earnings, may gives no more than adequate compensation for the risks. Avoid.

Antisoma

IF BIG PHARMA, by virtue of the mounting difficulties companies face in bringing new drugs to the market, is becoming an increasingly risky bet, then what should investors make of the truly speculative end of the sector?

Yesterday Antisoma, the battered biotech, plugged a gaping hole in its drug pipeline with the acquisition of Aptamera, a private American company which is developing a new cancer-busting antiobody. The outlay is modest. For £11.5 million, the company will acquire the rights to a science that has already been tested in other parts of medicine and which could move almost immediately into second-phase development as a treatment for a wide range of cancers. The all-share acquisition gives the company the chance to complement the three other very different formulations that it already has in trial. It also adds length to a pipeline that has been missing since the company’s previous best hope, an unnamed treatment for ovarian cancer, proved to be a dud last summer.

Pharma’s recent trials and tribulations in late-stage drug development highlight only too clearly the downside risks of failure. But if the risks at the safe end of the sector have increased there is an argument to be made for meeting the dangers full square and to look further down the food chain for opportunities. The returns from big pharma are likely to be muted at best. One success in little pharma could fuel returns that make up for the added risk encountered. Antisoma deserves a place in a newly diversified pharma portfolio. Buy.

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