City File: Extel auction leaves United under hammer

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The Independent Online
RUMOURS are rife that Standard & Poor's has dropped out of the race to buy Extel, the financial information service put up for sale by United Newspapers. This would be a massive blow as S&P has been expected to lead the bidding.

The remaining contenders also look as though they may not stay the distance. VNU, the Dutch publisher, has been unsettled by rumours of a bid from the German group Bertelsmann, and Pearson may be ruled out on competition grounds because it owns the Profile database.

It all looks pretty bleak for United, which will be lucky to get a fifth of the pounds 250m it paid for Extel in 1987. Its shares, at 521p, also look pricey given the increasing likelihood of VAT on newspapers.

AN UNNAMED institutional buyer waded into the market to pay 10p over the ruling price on Friday for a block of shares in Rexmore, the Liverpool furniture coverings importer.

This follows the recovery from pounds 143,000 losses to pounds 688,000 pre-tax profits for the six months to October. The bulls are looking for profits of pounds 1.5m in the year to next April. That would put the shares, up 7p to 82p on Friday, on a prospective earnings multiple of eight. Not demanding.

FRIDAY'S announcement by Stanhope Properties of a net asset deficiency of pounds 15.8m should dampen the wilder bullish excesses of the property sector - even though the shares barely budged. But it is a bad omen for another fallen idol of the 1980s, Regalian, which reports next week. Although the company is managing to shift its stock of residential properties, the prices will do very little to help the share price, strictly a gamble at 22p. Better to stick with the sector's only blue-chip, Land Securities, also reporting next week: the value of its properties is soaring. Although the shares have nearly doubled to 711p in the past year, they are still not expensive.

BRITISH Airways has hit some turbulence over the past year or so, what with the argy-bargy over Virgin, the loss of Lord King as chairman and the worries that come from increasing capacity in the midst of recession. But over the past few months, things have started to look up. Aggressive pricing has won BA market share and its planes are flying with much fuller loads. Air fares have stopped falling, though there is little sign they are edging upwards yet.

The City is fairly sure that BA's second-quarter results, out tomorrow, will show a 30 per cent rise to about pounds 175m, making nearly pounds 240m for the half. However, Ian Wild at BZW points out that the dividend yield is now below the market average for the first time in BA's history, so this will inhibit the future performance of the shares.

WHITBREAD is still under something of a cloud. The shares, at 482p, are an eighth below the high they reached in the summer when the share structure was tidied up.

But James Capel, the company's joint broker, makes a strong bull case. Whitbread has avoided 'the heavily competitive areas in beer' and is well placed to benefit from the increased emphasis on home entertainment - through its highly rated off-licences - and good-value nights out - through its restaurant chains and the food offered in its managed pubs.

Given Bass's problems with hotels, Grand Met's Inntrepreneur disaster, and the unpromising outlook for the international drinks business causing gloom at Allied-Lyons, Whitbread looks the best of the bunch in drinks.

FIVE years after taking over at Norcros, Michael Docherty can finally show results at a conglomerate that had been directionless for a generation.

After selling off fringe businesses, coping with exposure to property, and enduring a savage recession in construction, he was able to announce underlying profit growth of 14 per cent at the halfway stage.

The market promptly showed its appreciation, but the shares, at 163p, still yield 5.3 per cent and there is considerable scope for recovery from some of the fittings, kitchen and bathroom businesses that have been the group's backbone for decades. Still a buy.

INVESTORS were puzzled on Friday by the small share placing made by Heritage, the east London importer of knives, forks and tableware - especially as the chairman Jeffrey Lampert took the opportunity to sell 100,000 of his own 3 million shares.

Sources close to the company suggested that this is a mere taster for a rights issue next year, in the wake of hoped-for annual profits up from pounds 100,000 to pounds 200,000.

That might be enough to stop the shares in their tracks, if they have not already been halted by the possible impact of the supermarket price war. The bulk of Heritage's sales go to the likes of J Sainsbury and Tesco. They are big customers in a mean mood - not to be tangled with lightly. Hold off buying the shares until the dust settles.

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