BA profits head for high altitude

City Talk
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The Independent Online
THIS week should get off to a bright start with British Airways announcing profits for the year to March up from pounds 306m to a possible pounds 470m. Mike Powell, of NatWest Markets, reports: "Traffic growth has been the real driver behind BA's success, with total revenue tonne kilometres up 7.8 per cent." The recent dollar weakness will have done the group no harm and it should be flying towards pounds 550m for the current year, putting the shares on a prospective p/e ratio of 10.7 at 428p. Buy.

HAWTIN, the spas-to-wetsuits leisure equipment group, gave its fans a fright with a fall in the share price from 32p to 25p in the first quarter. But it has recovered to 31p with the takeovers of E&E Pools and Garden Leisure Products. Confusingly, GLP makes swimming pools, while E&E distributes spas, saunas, steamrooms and swimming pool equipment. Broker Bell Lawrie White reckons both have potential and predicts profits will rise from pounds 2.9m to pounds 3.6m in the year to September. At 31p the shares carry a prospective earnings multiple of 9.3 and a 5.2 per cent yield. Good value.

FRIDAY's doom-laden statement from WH Smith put the whole retail sector into a tailspin, but that should provide a selective buying opportunity. That should be confirmed this week, when Marks & Spencer and Storehouse reveal final profits which should both be impressively up. M&S, as ever, looks expensive on a p/e ratio of 18.5 at 426p on the assumption that profits for the year to March have risen from pounds 869m to pounds 950m. It is simply a question of joining the queue of investors.

Storehouse, the BhS group, at last looks to be turning round under the management of Keith Edelman. The question is whether, on a likely p/e ratio not far short of M&S at 244p, the best has already been had. M&S is the safe bet.

THE MOMENT when a company returns from several years of losses to making profits again can often signal a rush into the shares. Such is in prospect for Prestwick Holdings, one of Europe's largest makers of printed circuit boards. Financial doctors have applied hot poultices to the group's affected areas, and broker Charles Stanley predicts it will make pounds 1.75m in the year to July, against a pounds 1.25m loss last year. The shares are also a currency play, as many sales are in France and Germany. Economies of scale should take next year's profits to pounds 3.4m. But even this year's profit will leave the shares on a p/e ratio of 10, and a celebratory 1p dividend will amount to a 4.8 per cent yield. Buy.

BRAVE punters should take a look at Queens Moat Houses shares, requoted last week at a rock-bottom 6p. As, according to NatWest Markets, interest payments will make it hard for the group to avoid losses as far out as 2000, the shares are a gamble. But, once the initial sellers have unloaded, it may be worth picking up a few. The group's hotels have a steady middle- market business and are believed to be trading soundly. By Friday night the shares had bounced to 9p, but that still leaves plenty of upside if things go well.

A STRONG surge forward is expected from Carlton Communications, the London weekday and Birmingham television franchisee, when it reports interim figures on Wednesday. Central TV will contribute a full six months, while Carlton's rights in the Disney film The Lion King will provide an extra boost. All eyes will be fixed on the latest pronouncement from the chairman, Michael Green, on cross-media ownership: Carlton is a candidate to buy a newspaper group. On a prospective p/e ratio of 15 at 968p, the shares are a buy.