<preform>Investment Column: Speedy gains unlikely at new T&F</preform>

Worth coming back for more at Center Parcs; QXL Ricardo far from finding a fairytale ending
Click to follow
The Independent Online

The merger of Taylor & Francis with Informa has brought the fusty academic publishing business of the former together with the racier trade journals and events business of the latter. The hope is that Informa's skills can be used to push T&F's lighter titles (the International Journal of Remote Sensing perhaps, Ferroelectrics maybe, or Phophorus Sulfur & Silicon) to new commercial customers or extend their brands into conference organising.

The merger of Taylor & Francis with Informa has brought the fusty academic publishing business of the former together with the racier trade journals and events business of the latter. The hope is that Informa's skills can be used to push T&F's lighter titles (the International Journal of Remote Sensing perhaps, Ferroelectrics maybe, or Phophorus Sulfur & Silicon) to new commercial customers or extend their brands into conference organising.

The first annual shareholder meeting as a combined company was held yesterday, with T&F's chairman, David Smith, promising that the integration is proceeding smoothly, "with a number of internal teams working on opportunities to enhance revenues and also save costs".

Further details will emerge in September, and progress will certainly be made, but this is not suddenly going to turn into a growth stock. The size of the combined group, though, should make substantial further acquisitions possible.

The merger reduced T&F's dependence on subscriptions to its academic journals, which account for well below half of the combined group's revenues. This could be important as the debate over "open access" to such journals hots up. Rather than readers paying for access to scientific research, some organisations are experimenting with free access, with the cost of publishing instead being shouldered by the researcher, which pays for his or her article to appear. A committee of MPs reports on the issue next week, but the real test will be whether the open-access model proves commercially viable, and that could take much longer to establish. The threat to profits may not be as great as some in the City fear, but the fact that there is a debate at all reflects years of irritating subscription price rises. These are at an end.

The valuation of T&F shares, 17 times this year's earnings, looks toppy, and the dividend yield is a derisory 2 per cent, so the stock looks a hold at best.

Worth coming back for more at Center Parcs

Visitors are clearly happy with the experience they get at Center Parcs - nearly 60 per cent come back each year for more of its family-based, sports and leisure holiday villages.

Reporting its maiden results since floating in December, Center Parcs yesterday said villa rents had gone up 7.4 per cent over the past year. It has also, by adding extra services such as spas and better restaurants, persuaded guests to increase their spend on additional activities by 6.5 per cent.

Occupancy rates have been at 93 per cent for the whole year, proving that it is not dependent on the summer months, and 59 per cent of its capacity for the current year has already been booked. Customers tend to book 19 weeks in advance, giving strong visibility on earnings.

The stock has slipped since we tipped it at flotation. There has been an outbreak of gastroenteritis at one Center Parc, and delays in announcing a fifth site. Management says that a deal is close, although it will take three years to open for business. Next years' figures, though, will get a boost from the reopening of Elveden, its Suffolk site that was destroyed by fire in 2002.

The company will move its shares up to the main market this year, hopefully increasing institutional investor interest. Now at 90p, they are trading at around 12 times 2005 earnings.

They are still worth backing for the company's long-term expansion plan.

QXL Ricardo far from finding a fairytale ending

Are you still here? QXL Ricardo, the UK copycat of eBay, was launched with fanfare amid the internet mania of the Nineties and almost immediately squashed by its US inspiration and rival. But it is still around, and posted its latest quarterly losses yesterday.

While eBay dominates internet auctioneering across the globe, QXL has been forced into local niches. It is big in Denmark and Norway, and is level pegging with eBay in Switzerland (QXL's biggest market), but it has virtually given up in the UK. The situation is made all the more miserable because in Poland, which until last year accounted for half the revenues, it has had its business "stolen". The local managers took control by issuing themselves with lots of new shares, an action QXL says is illegal and will be reversed by the Polish courts ... in a couple of years. Meanwhile, the lawyers' fees are stacking up, another drain on a company that can barely afford to market itself, let alone develop new revenue streams that might turn it into a decent investment proposition.

In the short term, there is the dilutive effect of bonds convertible into shares and the traditionally weak trading of the summer months for investors to worry about. The long-term is no fairy tale, either. Avoid.

Comments