Alpha Airports proves a low-flyer disappoints investors

The investment column

Investors who piled into Alpha Airports at its massively over- subscribed flotation last year have been sorely disappointed. After hitting a high of 177p soon after the February sale at 140p, the shares have been on a down slope almost ever since. Yesterday they fell a further 20p to an all-time low of 109p as interim results failed to match expectations.

Pre-tax profits slipped from pounds 11.3m to pounds 11.2m in the six months to July, although Alpha has honoured its intention to pay a 1.75p half-way dividend, up from 1.6p before. Briefing the City yesterday, Paul Harrison, chief executive, convincingly argued that Alpha's results were depressed largely by several one-off items, particularly the loss of a British Airways contract at New York's JFK airport.

But he failed to convince sceptics that a short-term solution to the company's problems was in sight. The loss of the British Airways contract speaks volumes for the difficulties facing Alpha. For behind the decision by British Airways to switch alleg- iance lies one of the swiftest worldwide industrial consolidations ever seen.

This time last year there were 15 in-flight catering groups around the world. Today there are just seven, a league presided over by the recently merged forces of CaterAir, LSG and Sky Chef which undercut Alpha in the retendering process for the hand of British Airways at JFK.

The short-term effect of the industrial consolidation will unquestionably lead to further cut-price bids on contracts that come up for renewal. After that, however, the process should reverse as the suppliers use their increased market power to squeeze extra money out of the airlines. Between times, Alpha faces an uphill task in recouping the lost income at JFK.

Back home, a number of question marks hang over the UK operation, which provides the lion's share of group profits. Of most concern is the cut in the number of overseas holidays by the tour operators, many of whom, including Airtours, are customers of Alpha.

The problems of the in-flight catering division - which saw operating profits slip from pounds 9.2m to pounds 8.1m - masked the advance in Alpha's retail trading operations at airports. Operating profits there moved up smartly from pounds 4.3m to pounds 5.5m, after a revamped management beefed up ranges, leading to a higher spend per customer.

But the strength of retailing is not sufficient to recommend buying the shares. A prospective yield of 5.8 per cent, assuming dividends rise from 4.6p to 5.1p, looks attractive but the City's negative view is clearly reflected in a forward p/e of 11, assuming full-year profits rise from last year's pounds 21.4m to pounds 24m. The 25 per cent stake held by Forte, Alpha's erstwhile parent, may further overhang the share price.

PROMOTED VIDEO
Arts and Entertainment
tv
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Your picture is everything in the shallow world of online dating
i100
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

HR Business Partner (Maternity Cover 12 Months)

£30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...

Business Analyst - London - Banking - £400-£450

£400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...

Project Manager,Conduct Risk,London,£5-600pd

£500 - £600 per day + competitive: Orgtel: My client, a leading bank, is curre...

Senior Fund Administrator - Edinburgh - £22 p/hr

£20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on