ELECO - 90p

Eleco is a niche player in the construction industry. It manufactures products such as precast concrete, secret fix metal roofing, cladding and interior panels and boards.

It supplies full timber roof truss systems and also develops integrated software solutions and designs multimedia solutions.

In its recently released figures, the group confirmed that turnover and profits are firmly on an upward trend and this has been matched by strong cash flow, which means that the company has a healthy balance sheet.

The group has two distinct divisions. Building Systems generates 88 per cent of the group's turnover and, due to the losses suffered in Construction Software, contributes all of the operating profit.

Building Systems focuses on the design and supply of engineered building components which are manufactured offsite in concrete, metal and timber in the UK. It also provides timber engineering systems in Germany and Sweden.

The precast business provides FastBuild rooms for hotels and student accommodation, as well as other products such as retaining walls and stadia terracing. This division is going from strength to strength as new products are introduced and further efficiencies made.

Construction Software contributes only 12 per cent of the turnover, and is loss-making. This business develops and distributes software used in the construction process. This may include design and engineering, estimating and contract management, and 3D visualisation.

The financial performance of this division has been disappointing but organisational changes have been implemented, the benefits of which should start to feed through in the current financial year.

In the year to June 30, Eleco's turnover increased by 15 per cent to £55.2m, with pre-tax profit (before exceptional items and goodwill amortisation) increasing by 88 per cent to £5.01m.

Earnings per share on the same basis were up 57 per cent to 7.7p. The group's total dividend for the year was raised by 50 per cent to 2.1p.

The business is highly cash generative and the strong cash flow combined with tight control over working capital resulting in netcash at the year end of £4.68m.

We rate the shares a BUY. Next week we shall all choose our Stocks of the Year 2007.

WARNING: Opinions expressed are the writers' judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.