The Week In Review: An enterprising pub company faces its problems

Enterprise Inns does seem to be one of the good guys in the pubs industry. Its 8,727-strong estate (at the end of September) is unbranded. It relies on the ingenuity of its licensees to know their local market and to create a pub that is appealing for its location. For many who are fed up with the ever-onward march of the chain on the high street and in the pubs sector, this must be the right strategy.

Earlier this year, Enterprise bought the Unique Pub Company for £609m, adding some 4,000 pubs to its estate. The underlying operating profit growth seen for the year to the end of September was 8 per cent, while the dividend was raised 40 per cent.

There is no getting away from the shadow of the smoking ban: the Government has proposed that establishments where food is served must not permit smoking.

Ted Tuppen, the chief executive at Enterprise, argues that in the long run, smoke-free pubs may actually attract more people. Also, he hopes that the consultation period will achieve some change in the proposal. He'd like to see pubs segregated into smoking and non-smoking areas. As it stands, the Government wants pubs to choose to be one or the other.

A good company but the issue of whether tenants are being "squeezed" and the smoking ban make Enterprise, at 683p, a hold.

PATIENTLINE

Patientline is getting to some important milestones which should provide comfort for investors. The loss-making (though fast-growing) business provides bedside terminals for patients in hospitals, providing entertainment and communication services, including TV and e-mail. This is a new market and Patientline has nearly two-thirds of it. The group has been putting in the machines at a rate of 20,000 a year. It now has some 65,000 in place. On "mature" machines (installed for nine to 12 months), it is making £2.10 a day, a 55 per cent operating margin, before depreciation. The company also has great potential overseas, especially in the US. Patientline shares remain attractive.

EXPRO

Expro International Group provides technology to the booming oil-production sector. The trouble is that the company was not very slickly run - it has taken on a new chief executive and finance director over the past year - and its business lies towards the end of the exploration production process.

So, while oil companies are swimming in billions of dollars of cash, as a result of soaring oil prices, Expro has not benefited. In fact, its results have been going backwards for two or three years and last year it issued two profits warnings. Things now look better. Oil groups are beginning to react to the high price of oil with greater levels of investment in new production. However, Expro shares are too highly rated. Avoid.

OASIS HEALTHCARE

Ouch! It's hard to know what shareholders in Oasis Healthcare find more painful: a visit to one of its dental surgeries or the collapse in the company's share price. The group floated four years ago to raise money to create the country's first national chain of dental practices. So far, it has 125; it needs at least double that to reap any kind of advantages of scale. The cavity in its plan is a whopping lack of dentists. Oasis has had a terrible few months. Its former chief executive was sacked after making a mess of the group's biggest acquisitions to date. The company reported an interim loss of £490,000. Hold on for better times.

BSS

The British housing market is slowing, but the heating and plumbing firm BSS is still going strong. That's partly because bathrooms are increasingly seen as fashion items that people have more of in their houses and change more frequently than in the past. BSS, which serves domestic and industrial markets, unveiled bumper first-half profits and said demand remained strong.

The company is sanguine about the cooling housing market: Peter Wood, the chief executive, believes that people will spend more on renovating their existing properties. The only dark spot on the horizon is the commercial market, which has been sluggish.

With the group estimated to grow at 20 per cent a year for the next couple of years - more than its peers - the shares are a buy.

CRESTON

A growing number of listed companies is ploughing the market research, PR and marketing services (such as direct mail) furrow. Incepta, Chime, Media Square and Aegis are just some of those involved in some, or all, of these markets.

One of the newcomers is Creston, which is taking a "buy and build" approach, with the aim of rapidly becoming a mid-size player. The company has made five acquisitions in its three-and-a-half years of existence, using a mixture of cash, debt and equity.

With a market value of £38m now, Creston wants to buy more in existing areas, plus new sectors such as advertising. Creston only has a tiny market share, so there's a huge amount of growth to go for, even organically. Buy.

TOPPS TILES

Topps Tiles said that this was a blockbuster year. The company reported record numbers: full-year turnover up 32.5 per cent to £157.6m; pre-tax profits up 78 per cent to £33.8m; an increase in the final dividend of 146 per cent to 8p.

Topps wants to grow at its current rate for another six years, by which time it aims to have 350 stores in the UK. Most competition tends to come from relatively small, local shops which struggle to keep up with the pricing power that Topps has.

Savings are passed on to customers - so even trade users are beginning to convert to Topps. So long as management keeps hitting targets there is plenty of upside left in these shares. Buy.

BELHAVEN

The share price of Scotland's largest independent brewer, Belhaven, has had something of a hangover of late. The main reason? A blanket ban on smoking in public buildings in Scotland, scheduled to start in March 2006.

The company posted half-year numbers yesterday which, even by the high standards it has set in recent years, were above expectations. Turnover was up by 20 per cent, pre-tax profits rose 27 per cent. These are truly champagne results on a beer budget, in anybody's book.

Nothing goes up in a straight line forever, and while the track record of Belhaven's management is outstanding, improving on these numbers is going to be a mighty task in the short-to-medium term. Sell.

An appetite at Shaftesbury

McDonald's, Next and Pizza Hut are not welcome at the "villages" owned in London's West End by Shaftesbury.

The lazy property companies that make up most of the listed sector, simply sign up chains as tenants - producing homogeneous high streets. Shaftesbury actually thinks about what sort of environment it wants to create.

In the West End, there is really no point in reproducing what is found everywhere else in the country. What is required is a creative and, to some extent, risk-taking approach. Shaftesbury does take brands as tenants but only "concept" stores from the likes of adidas and Diesel. While it has no appetite for a pizza chain, it is taking a new restaurant from Alan Yau, the man behind Wagamama, Busaba Eathai and Hakkasan.

Net property revenue was up 9 per cent while profits before disposals and tax were almost 20 per cent higher at £14.7m. Net asset value per share was also 20 per cent better at 352p.

Shaftesbury's estate is comprised of clusters of streets, which it calls villages, in three West End locations: around Carnaby Street, the Seven Dials in Covent Garden and Chinatown. It also has small holdings in the West End's Charlotte Street. It has 275 shops, 133 restaurants and 459,000-square feet of office space in these areas and continues to develop the Carnaby Street area.

After two "challenging" years, business is now thriving. Global events, such as the threat of terrorism and the Sars virus, had hit the take-up of tenancies.

Ultimately growth lies in the success of the capital. It is a bet on London. And who would bet against Europe's biggest, most powerful and most vibrant metropolis? Definitely buy.

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