The Week In Review: Yellow Pages looking tattered

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The Independent Online

Investors in Yell, the Yellow Pages directories group, were shouting from the rooftops that stock belonging to Yell's private equity backers, Apax Partners and Hick, Muse Tate & Furst, had been placed successfully on Tuesday. The stock overhang issue has lifted.

In the UK, its Yellow Pages business faces a tough regulatory environment. About 48 per cent of group revenues come from the US, where dollar weakness is an issue. The bulls reckon US growth, where advertisers are deserting the incumbent publishers for independents such as Yell, will be more than enough to overcome future dollar weakness with rapid margin expansion on its way.

In the UK, despite its size, Yell is still seeing 3 to 4 per cent top-line growth to help maintain profitability. Cash generation is good and the dividend yield of 3 per cent might be attractive but the prospective price-earnings ratio of 13 leaves the stock fully priced. Steer clear.


Bovis Homes said the second half of 2003 had been strong and, at the start of this year, prices were 10 per cent ahead of January 2003, and reservations were also 10 per cent up. The company told us to expect an improvement in operating margin for the second half of 2003, when it reports full-year results. Bovis has an excellent land bank for future development (equivalent to four years' output) which easily underpins the present share price. There is also considerable bid speculation surrounding Bovis. The shares, which closed yesterday at 455p, are on a forward multiple of 6.5 times and are worth holding.

Inventive Leisure

Inventive Leisure is going to have to concoct something pretty special if it is to reverse its dismal trading performance. A November profits warning left both its shares and investors with a nasty hangover; both suffered a relapse after yesterday's trading statement. The group, which shot to fame with its chain of Revolution vodka bars, said like-for-like sales were 7 per cent lower over the three-week Christmas period. The shares trade on a price-earnings multiple for 2004 of about five times, which looks fair given its trading hiccups. Avoid.

Topps Tiles

A trading statement from Topps yesterday confirmed a good Christmas, with like-for-like sales in the first 14 weeks of the financial year up an impressive 16 per cent. The company has 201 stores in Britain and eight in the Netherlands. The stated target is 250 Topps outlets. The only snag is the doubling of the share price, which closed yesterday at 599.5p, over the past year. That puts the stock on a demanding multiple of 16 times prospective earnings, making Topps a hold.


Alexon, the owner of Dolcis shoe shops and the Bay Trading clothing chain, said sales were 1 per cent down in the crucial six weeks to 3 January. It admitted cash flowing into its coffers had been "sluggish", although it said the sales period had got off to a stronger start. Alexon is priced at a discount to the sector. But its shares have gained strongly in the past year and are no longer akin to one of the bargains to be found in its chains. Avoid.

Ultimate Leisure

With the high street bar and club market generally continuing to have such a rough ride, Ultimate Leisure seems to be one business that is escaping the worst. Perhaps this is because of its North-east of England bias or perhaps it has more to do with the style of its bars, many of which are themed, such as its rodeo "Coyote Wild" bars in Derby and Mansfield. Ultimate Leisure's high shareprice rating is doing well in a competitive market is commendable. The rating makes it a hold.


Aegis, the advertising buying and market research group, brought good news for the media sector with its trading update yesterday. This year, the media industry is facing recovery from a three-year downturn and Aegis confirmed a decent bounce-back can be expected. Ad spend, globally, should grow by nearly 5 per cent this year, it said. Aegis shares have doubled since March 2003, putting the stock on a fairly chunky multiple of 21 times. Hold.

Tadpole Technology

Tadpole Technology, arguably among the most-hyped technology stocks during the internet bubble, never really managed to live up to all the talk. These days, the company is a pure software play. Its Cartesia business, which is now in the black, makes software to transmit maps and other information to engineers in the field. It is used by utilities including ScottishPower and United Utilities. Renewed City interest in the story makes the stock a speculative buy.


Ricardo is a consultancy that advises most car manufacturers about how to design better engines, particularly those that are environment friendly. As a company almost entirely dependent on the motor trade, Ricardo is suffering as stalwarts from DaimlerChrysler to Ford scale back. With consumers tipped to apply the brakes to their spending, car makers and Ricardo could be in for another tough 12 months. Steer clear of the shares.

City Centre Restaurants

With the tie-up of City Centre Restaurants and ASK Central, slated to complete around the end of the month, it is a relief to see both companies trading well over Christmas. The deal marries City Centre's Caffé Uno's, Est Est Est and Garfunkel's with ASK's 167 pizza and pasta restaurants under the ASK and Zizzi brands. The new group - which will be renamed The Restaurant Group - will have over 400 sites. The merger will clearly produce savings and synergies, although they remain unquantified and, in any case, are unlikely to be felt until 2005. But given the strong present trading, City Centre looks appetising.

The above is a selection of recommendations from this week's daily investment columns

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