Carlton offers Green pastures; The Investment Column

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Carlton's Michael Green has delivered 27 consecutive dividend increases and steadily improving profits, based on a balanced mix of businesses in fast-growing sectors. He oversees the leading commercial TV company, owner of the London weekday and Central franchises, and the biggest contributor to ITV's peak viewing schedule with its slate of populist programming. And he has carefully expanded into cable TV without betting the bank account.

So why does poor old Carlton trade at a discount to the shares of the media darlings? One argument, of course, is that he angered investors in the late 1980s by selling shares - bailing out when others were willing to stay the course. Others don't like his aloof, often scornful style, and his highly secretive ways, and wonder why he hasn't made a big acquisition in anticipation of the relaxation of media ownership rules in the Broadcasting Bill.

Even yesterday's stellar interim profits - well ahead of forecasts - managed to put only 3p on the share price by the end of the day.

Pre-tax profits ahead 19 per cent at pounds 143.3m were all the more impressive given that broadcasting, representing by far the biggest slice of operating profits, was flat year on year.

Solid growth came from the Technicolor operations, often criticised by analysts because they see it as a business stuck in a mature market. In the event, Hollywood's output of films has been on the increase, with more prints of big movies being made to feed wide release patterns in the US and, increasingly, elsewhere. Even the videocassette market - which is meant one day to disappear with the advent of video-on-demand - is showing very robust growth. Profits rose 46 per cent in the video and sound products division, featuring Carlton's Quantel "tapeless" editing technology.

Further good news is provided by the advertising market, which is sure to improve this year. Procter & Gamble, which abandoned Carlton, will be back again in the summer, while revenues will be boosted by big sporting events and relatively robust economic growth.

With most of the trends pointing in the right direction, Carlton's promise to grow organically looks sensible, unless it can find an ITV company (perhaps HTV) at the right price.

Looking out, the shares at 481p are trading on an undemanding 16 times current year earnings of 30p, on the basis of pounds 300m pre-tax profits, and 14.5 times on next year's pounds 340m. While there are question marks about the loss of the levy from Channel 4 paid to ITV companies and growing competition from pay-TV, Carlton is set to do as well as any commercial TV group, and looks attractive at this price.

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