The Investment Column: French woe takes spark out of Kesa

De Vere looks cheap, but price reflects risks; Press the interactive button, bet on YooMedia
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The Independent Online

Kesa Electricals, the owner of Comet, may sell the very latest electrical goodies but unless you know your MP3 player from your elbow, it isn't a business to set the pulse racing.

Kesa (that's pronounced Kayzer, not Keezer) has been a pretty low-voltage performer since it was spun out of Kingfisher last summer. Its priority has been paying down the debt it was saddled with, but soon it will be able to get on with the sparkier business of expanding its European store network and raising its dividend.

Yesterday's announcement that it plans to expand its French electricals business, Darty, into Italy from next summer suggests it is comfortable with its £300m-odd borrowings.

Although Kesa is best known here for Comet, its fortunes hinge less on how many flat screen tellies us Brits are buying and more on whether our French cousins are in the mood for le shopping. The group generates four-fifths of its retail profit on the Continent, where as well as Darty and the French furniture chain BUT it also owns Vanden Borre in Belgium and outfits in Eastern Europe.

And the news from France yesterday was not good. Not only has consumer confidence stubbornly refused to pick up, but Kesa's furniture business is going backwards. It blames a lack of contemporary furniture for the near 21 per cent fall in BUT's retail profit to £18.2m but promises to start building funkier ranges. A move to centralise the business has also increased short-term costs.

Comet fared better, with retail profit soaring to £5.9m from £1m last year, on a 4.6 per cent increase in like-for-like sales thanks to new digital ranges.

Group pre-tax profit for the six months to the end of July was £42.8m against a windfall-assisted £46.7m.

Investors weren't excited yesterday, and with so much uncertainty, now is no time to buy.

Only a hold.

De Vere looks cheap, but price reflects risks

De Vere, the hotels group which owns the Belfry, the home of the Ryder Cup, and the Grand Hotel in Brighton, had to spend the spring fighting off a new challenge from its rebel shareholder Guinness Peat, which wants it to sell off these posh hotel assets and concentrate on the new, mid-market Village Hotels brand. Guinness Peat didn't get the backing of shareholders, but it has ensured that management is under pressure to improve shareholder returns.

If the company can reach the financial targets set by the management, then its shares look cheap. Given the risks, they look about right.

Trading is improving at the 13 Village Hotels, a new type of venue which combines a choice of restaurants with giant health clubs as well as rooms for the business traveller. The creeping return of business confidence has meant more guests and, one hopes, the opportunity to raise prices a little this autumn.

The recovery in the corporate conference market at the posher De Vere branded hotels does not seem to be coming through as fast as had been hoped earlier this year. But it ought to in 2005, and that should feed through nicely to profits.

Yesterday's trading update showed De Vere getting slightly disappointing prices from the disposal of four venues, but otherwise the business is on track. At 424.5p, hold.

Press the interactive button, bet on YooMedia

To find a boyfriend/bet on the next Rooney hat-trick/play shoot-'em-ups with friends elsewhere in the country: press the red button your remote now. The rise of interactive TV means that people increasingly have the option of dating, gambling and gaming without leaving the couch.

YooMedia, which owns Dateline and a string of other services in these areas, is expert at expanding them as offerings on interactive TV platforms such as Sky. It has also positioned itself to win government contracts to put health advice on interactive television if the technology really catches on.

YooMedia might well find people don't take to interactive TV as fast as it hopes, or that, if they do, competition will suddenly flare up.

But it is also possible that some or all of its services, most of which are already profitable, will take off.

Gamble.

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