Investment Column: Take a ride on bullish Carpetright

Parkdean Holidays is worth holding on to; AIM debut makes Palandri a tempting tipple

Shares in Carpetright, the UK's largest carpet retailer, continued their seemingly unstoppable run yesterday, climbing another 5.4 per cent on the back of a strong set of full-year results.

Shares in Carpetright, the UK's largest carpet retailer, continued their seemingly unstoppable run yesterday, climbing another 5.4 per cent on the back of a strong set of full-year results.

Six months ago, as fears of a slowdown in consumer spending were beginning to feature more prominently on the market's agenda, this column advised investors to take profits. At that stage, the shares had increased by about a third in just six months. However, the stock has raced on.

Yesterday's results were indeed promising. Not only did they come in ahead of analysts' expectations, but the group was also quick to brief on a list of new strategies which it claims will sustain its record growth over the coming months.

A new focus on opening smaller stores in smaller towns will help to quickly increase its profile and profitability, it says. Certainly, the few smaller outlets which it has opened so far have rapidly begun to bring in profits. The group also has plans to seek out new department store partners after the success of its tie-up with Allders. Lord Harris, the chairman, reckons the group will have as many as 100 of these new outlets in three years' time.

The big worry, of course, remains whether consumer spending is set to abate. But the management remains confident. Although the company's product mix has evolved to include more higher price carpet, it still has an average customer spend of just £98. That means that its carpets are relatively low-ticket items - unlike, say, buying a new sofa - and the company believes it will need another percentage point rise in interest rates before it sees any kind of effect on demand.

While the share price may not be able to repeat the 70 per cent growth seen over the past year, the rug does not look as though it will be pulled from under investors' feet just yet. With sector peers, such as Headlam and Topps Tiles, trading on much higher price/earnings ratios than Carpetright's 14.5, this stock is a buy for those who can afford to take a medium-term view.

Parkdean Holidays is worth holding on to

Parkdean Holidays provides the sort of caravan holidays that many of us remember from childhood but may have assumed were no longer able to compete against the attraction of sun and sea abroad.

Graham Wilson, chairman of the caravan park operator, insists that the attractions of the great British outdoors have never gone out of fashion. The company is in expansion mode, with £25m to spend on acquisitions, and bookings are up 5 per cent on 2003.

There was some concern yesterday over the revelation that Parkdean still has some peak period capacity to sell but Mr Wilson says that this is deliberate, with the company having sold out too quickly last year. Prices have been raised some 7 per cent this year.

The impact of past acquisitions was evident in the interim results yesterday, with the seasonal loss increasing to £3.8m from £2.5m. The reason for this is simple. The parks are closed during the winter and the bigger the estate gets, the larger the losses that are sustained during the fallow winter period.

The company offers 7,200 pitches on 15 sites in South-west England, Scotland and Wales. Some 2,000 of these are the company's caravans which consumers rent by the week. Most (3,800) have privately owned carvans, where the owners pay an annual fee. The rest are for people who bring their own caravans or tents.

The company provides facilities including swimming pools plus nightly entertainment, for those who want it. Half the customers are either returning for another visit or have followed a recommendation from friends.

Backed by ownership of land or long leases, the shares, at 220p, trade on a forward multiple of 14, making this a solid hold.

AIM debut makes Palandri a tempting tipple

Wine consumption is on the up, certainly in the UK, where the Australian wine producer Palandri saw its shares debut on AIM yesterday.

The company's wines sell in the £4.99 to £8.99 range, which is not at the real premium end of the market but is still well above the average selling price of less than £4 a bottle. As consumers are willing to spend more on a bottle of wine, producers such as Palandri will get more business.

For the first time this year, the company will sell more than half its produce overseas. In this country its wine is available in a number of smaller food chains but it is not in any of the big three supermarkets - Palandri is working on breaking into this market. The group's red and white wines are sold under the Palandri name and it offers pretty standard grape varieties, such as a Merlot and Chardonnay.

Some questions were raised in Australia about the company's financial position but these appear to have been addressed with the money raised from the float plus a cash injection from its co-founder, Darrel Jarvis. The shares, at 33.5p, trade on a forward multiple of 10 times, which makes this a tempting prospect for those attracted to the Australian wine success story.