The Week In Review: Regus overcomes a torrid time to make a promising recovery

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The Independent Online

Investors may be forgiven for believing that we had more or less seen the end of Regus, the once high-flying serviced offices provider.

Investors may be forgiven for believing that we had more or less seen the end of Regus, the once high-flying serviced offices provider.

The company has been through a torrid time, including having to sell off a majority stake in its UK business, a £55m rights issue and filing for bankruptcy protection in the United States.

The company has bounced back, with this week's full-year results providing fresh evidence of a revival. Regus saw a "marked" improvement in trading in the fourth quarter of 2003, and those trends have continued this year. Inquiry levels rose 28 per cent in January and February this year, compared with the same months last year.

Prices for new workstation sales and renewals were up 6.1 per cent on the average for the fourth quarter of 2003. Revenues in February were up 5.4 per cent on January and further growth is expected in March. The pre-tax loss was £29.2m for 2003, an improvement on the £119m loss in 2002.

Regus expanded too far, too fast, only to come unstuck when the stock market's technology bubble burst in 2000, causing rents and occupancy rates to plummet. Now that the economy is returning, Regus is geared to the recovery, making this a speculative buy.


AG Barr, the soft drinks business, has relied on the appetite of its native Scots population for its Irn Bru, the fizzy beverage, for more than 100 years. But the growing health trend in the UK is away from fizzy drinks. The branded drinks sector is an extremely competitive market, and AG Barr, with its years of experience, appears to be doing well. It has a brand of mineral water and diet versions of its carbonated drinks. It is a solid business but there is not much fizz in its growth potential. Hold.


Business-to-business publishing has seen a strong recovery and Metal Bulletin became the latest player to confirm a rebound. An 8 per cent fall in revenues in the first half was followed by a 4 per cent increase in the second half of 2003. In metals, booming demand conditions for the likes of steel and aluminium, driven partly by demand from China, has helped advertising revenues and brought new entrants to the metals industry - which then boosts subscriptions. The shares trade on a forward multiple of 20, which is high enough.


The irrepressible Kelvin MacKenzie has even more to crow about. His Wireless Group radio company broke into the black for the first time - a £2.3m profit for 2003 at the operating level (£2.3m), although there was still a sizeable, if much reduced, loss for the pre-tax figure (£10.7m, down from £19.0m). Wireless seems unlikely to be part of the major consolidation that is predicted for the sector but it is quite likely to be bought by Rupert Murdoch's News International, which has an 18 per cent stake. Hold.


Moss Bros, the men's suits specialist, has smartened up its act since fighting off a takeover bid two years ago. The company, still controlled by the Moss and Gee families, almost lost its head during the "casual dressing" revolution but came back by slimming down from 16 different chains to just three. Historically, the shares have relied more on speculation about why Shami Ahmed, who mounted the abortive bid, holds a 20 per cent-plus stake. But with earnings surging ahead, they look undervalued. Buy.


The discount clothing chain Peacock has been through a makeover of its down-at-heel Peacocks' store estate, transforming the group - now it is more likely to be revered than mocked by its peers. Its core Peacock chain saw sales rise 5.5 per cent in the fourth quarter but its bonmarché suffered a 13.6 per cent shortfall. The group's move to jazz up the clothes at its 400-strong chain has paid off in spades - not least because more fashionable clothes means it can charge more for them. Buy.


Outdoor advertising and radio were the only sectors of the media industry that saw growth in 2003. Even so, it was a tricky year for both sectors, as full-year results from Maiden Group, the billboards company, showed. The outdoor sector continues to wrestle share from other media sectors, taking an estimated 9.0 per cent of the display media market in 2003. In 2004, outdoor is expected to exceed 10 per cent market share for the first time. So the prospects for this sector of the media industry are healthy but Maiden Group shares are already high enough.


Carphone Warehouse has benefited from the intense rivalry between handset manufacturers and among networks. The fourth-quarter of its financial year saw total connections growing by almost one third to 1.44 million. Its fledgling fixed line business TalkTalk, should cushion Carphone Warehouse from any slowdown on the high street, with optimistic projections seeing it more than doubling its current customer base to 1 million by this time next year. Hold.


Durlacher has spent the past six months trying to start its new life as just another ordinary investment bank, having cleansed itself of all evidence that, four years ago, its business was dominated by the boom. It has the largest sales team in London focused on smaller companies, which are neglected by the big investment banks. Durlacher is upbeat, saying that it has 10 deals in the pipeline for the next few months. Given the leanness of the business now, they should have a healthy impact on Durlacher's bottom line. Buy.


Capital Radio still has to prove that it can fix the problems at its flagship 95.8FM station in London. The company has great assets and is arguably the market leader in the United Kingdom. However, quarterly trading figures, for the January to March period (the second quarter of its financial year) showed that the company is continuing to underperform the radio sector. Hold.

It's proving a capital time for Capita

This year is turning out to a bumper one for contract wins for Capita, the outsourcing specialist. This week, the company announced a deal worth £430m, over 20 years, to provide administration services for The Children's Mutual, which provides savings services for children.

It was the third major contract win in as many months, taking the total value of business won in the first quarter of 2004 to £625m. That compares with the £615m won in the whole of 2003. Capita's record for a year's contract awards is about £1bn.

The company provides "business process outsourcing" (BPO) services, which means everything from admin to information technology, to the private and public sectors. Capita has established itself as the leader in this country, with a 24 per cent market share. Its competitors, such as Accenture and EDS, tend not to be able to provide as wide a range of services.

The company's 2003 results, published in February, were healthy, with margins of 12.3 per cent and turnover growing 20 per cent. Capita does not see a threat from growing evidence of companies outsourcing services to countries such as India, saying it does not compete for contracts that are being tendered mainly on the basis of cutting costs. Given the growth prospects, it's a buy.

The above are a selection of recommendations from the daily Investment Column

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